Investor Update

Aug 10, 2021

Slides

Good afternoon, everyone, and welcome to our capital markets event, where today we're going to be looking at the supply chain at ASOS. This is the second in our series of capital markets events, and again, we're doing it in a power hour format. Aside from today's event, we'll also be hosting a sustainability capital markets event next month, on the 16th September. A full capital markets day on the 14th of October. Turning our attention to the focus of today's event. This is the first time we are hosting an in-depth look at our world-class supply chain, as well as the development of it, and I hope to give you a better understanding of our supply chain. The ASOS supply chain team has a huge depth of experience, and from an executive perspective, is now managed by Mat Dunn. The supply chain team are responsible for inbound logistics, managing our fulfillment network, and the development of future capability. The team are also responsible for the delivery of our propositions and our return processes. We won't be covering anything relating to sourcing today, which would include factories and suppliers. This will of course, be covered in our Sustainability Capital Markets Event next month. We won't be covering anything relating to our current trading. You'll have heard us refer to the supply chain as a critical element of e-commerce, to deliver the customer proposition and service. We've developed our supply chain with the customer in mind, to deliver a friction-free and compelling customer proposition in all our key markets, through targeted investment in automation and in tech, to improve efficiency and velocity of handling products through our supply chain. Internally, we assess these investments to deliver the productivity of lower cost of handling, and therefore, improve customer service, which drives greater sales. Before we start, I'd like to remind you of how we view the world. We're not just a retailer. We're not just a platform. At ASOS, we are a destination. A destination at ASOS. A destination that's got 20-something covered for all their fashion needs, with all their favorite products and all their favorite brands. A cool place to simply hang out with the best edit of fashion, the best experiences, and experiences that are aspirational, authentic, inspiring, sometimes irrelevant, and often playful. Our vision remains the same, to be the number 1 destination for fashion-loving 20-somethings worldwide, focusing on our 5 key strategic pillars. We aim to become a truly global retailer, offering design that can't be found anywhere else, in the form of our own unique and exclusive ASOS brands, which now includes ASOS Design, of course, Collusion, Topshop, and Topman. All on one platform, with a relevant product flow all the time. Through our inspiring and engaging and exciting, friction-free, and personalized ASOS experience, all underpinned by effective, efficient, and sustainable model. Today, we'll be honing in on the supply chain that delivers this experience and builds on our effective, efficient, and sustainable model. As you remember, we announced back in April that Mat would be taking over supply chain as part of his remit. You've all met Mat before, so I won't go through a full introduction of Mat. I'd now like to hand you over to Mat, who will introduce the rest of the team and give an introduction to the rest of the event. Thank you very much. I hope you all enjoy it. Thanks, Nick, good afternoon, everyone. Firstly today, I'm really pleased to be introducing you to two people we haven't seen before, two key members of the supply chain team, Matt Rogers and Gary Beveridge. Matt is our global supply chain director. Prior to joining ASOS, he was a general manager at DHL and head of inbound logistics at House of Fraser. He joined ASOS back in 2013 as head of delivery solutions and inbound supply chain. He subsequently progressed through several supply chain roles, most recently as director of supply chain for U.K. and rest of world, before being promoted to group supply chain director in May of this year. Matt runs all the operational aspects of our supply chain, including inbound logistics, our fulfillment center operations in the U.K., Europe, and U.S., as well as returns and outbound logistics. He'll spend some time today taking you through our world-class supply chain in a bit more depth. Gary is our Supply Chain Development Director. He has exceptionally strong project management experience, having worked as a project manager across the Carp Group, adidas, Sainsbury's, and Asda, prior to joining ASOS in 2015 as supply chain development director. In his role, he leads the strategy for building out our fulfillment network from the initial decision on location, right through to fit-out and deployment of the fulfillment center. Today, Gary will talk you through some of our development principles for our fulfillment centers, along with an overview of our development approach. In essence, across the presentation today, we'll be taking you through our end-to-end supply chain, from the point of product entering our supply chain via inbound logistics, through our fulfillment network, and into our delivery proposition for consumers. We'll also briefly cover how we handle returns, as well as how we are building out our infrastructure for the future. As Matt and Gary take you through our supply chain, there are a few points I'd like you to bear in mind which underpin what you're about to see. The first and perhaps most crucial point is that we have a well-invested infrastructure that we are continuing to build out ahead of our requirements. You'll recall that we announced the new build of our Lichfield facility, which will be online early next year and automated by the end of FY23, with U.S. automation also projected to come online at the back end of FY23. These capacity expansion projects, in addition to our existing fulfillment center network, provide a strong runway for continued growth in all our markets. This can only be delivered by a strong team, and as you're about to see, the team is a high-performing one that works collaboratively with industry leading partners across each area of our supply chain. As Nick just mentioned, our supply chain is clearly a key pillar of our overall customer experience, as well as being a significant area of investment. The teams have a relentless focus on continuous improvement across this to improve our proposition for consumers and to drive improvements in productivity and cost efficiency. We've achieved a lot already, and we have a clear focus on continuing to drive further benefits into the future. Gary will highlight a couple of those as we go through his section of the presentation. As part of this approach to continuous improvement, we leverage learnings across our facilities, both from the perspective of day-to-day operations, but also with respect to new builds. We are always looking for innovative ways to improve and a proven approach to this innovation, constantly trialing new opportunities to unlock proposition or cost improvements. Let me now turn to how we are building the right scale for the future with the current build-out to more than GBP 6 billion of global capacity in the next couple of years. That journey is the next phase of a program of work that has been ongoing over the past 10 years to build that additional capacity across our key markets of the U.K., U.S., and Europe. We opened Barnsley in 2011 and automated it in 2015. This provided us with a playbook for our capacity expansion plans, with fulfillment centers following in Berlin, in Germany, and Atlanta in the U.S. Each of these sites has brought a dramatic improvement to our delivery proposition, with automation further improving efficiencies. Our Lichfield build is on track. Gary will show you a video a bit later on that highlights the progress we are making on site, with the build on track to be online early in the new year. With the addition of our Lichfield site, this will bring circa GBP 0.5 billion worth of additional three-foot capacity online next year. With the full automation of both Lichfield and the U.S., we will build our capacity out to above 6 billion net sales three-foot capacity by the end of FY 2023. I'm now going to hand over to Mat, who will cover our fulfillment center operations, delivery proposition, inbound logistics, and returns. Thank you, Matt. Good afternoon, everyone. I'd like to start with giving you an overview of our logistics network. Here, you can see our regional fulfillment locations in Barnsley, U.K., Berlin in Europe, and Atlanta within the U.S. You can also see our returns operation locations, which include 2 sites in Europe and 2 sites in the U.K. In the U.S., our returns operations sit within our Atlanta facility. The addition of our new site in Lichfield further supports our capability and ensures we continue to support business growth while maintaining a leading delivery proposition in the U.K. and rest of world markets. We continue to develop infrastructure ahead of requirement, and we've also got plans in place to expand our capacity in the U.S. and U.K., as you've heard, and we are in the early planning stages of our fifth fulfillment center location, which will most likely be located within Europe. Now we will take a closer look at where we source our product from over the world. You will have seen this slide in the retail capital markets event earlier this year. This is an overview of our sourcing locations with a balance between short lead and long lead capability. The supply chain team work closely with our commercial teams to understand any targeted shift in sourcing mix or location to build out our inbound supply chain capability ahead of orders being placed with our manufacturing partners. We consolidate volume in 75 origins to ensure efficiency through our ship. The introduction of a sea-air service in 2020, which combines the use of both modes, has reduced our reliance on premium air freight year on year. This drives both sustainability and cost efficiencies. 60% of our overall intake is purchased under Free on Board terms. This means that we are in control of the costs. We pay for insurance and inbound transport, amongst other costs. This gives us better price transparency and control over the overall value chain. We continue to work with our branded suppliers to deliver direct to each of our fulfillment centers to reduce any unnecessary transport legs and drive speed to market. Today, over 84% of all intake is delivered direct. This is up from 63% in 2019. The remaining 16% that is not currently delivered direct is as a result of ASOS stock balancing activity, third-party brand capability, and low quantity orders that we consolidate for overall efficiencies. It's fair to say, within inbound freight, we are used to a fast-moving dynamic market, and this year has certainly been no exception. I'm sure many of you are aware of the challenges in both air and sea freight markets as a result of the pandemic. Equipment shortages and reduced capacity have led to high levels of disruption, longer lead times, as well as heightened pricing. Ocean freight spot rates are up to 10 times higher than pre-pandemic levels, and air freight spot rate levels have doubled. Lead time impacts have also been experienced between U.K. and E.U. as a result of Brexit, with the additional customs requirements and checks. Pre-Brexit, end-to-end lead times averaged four days. At its height post-Brexit, this peaked at 20 days. This is reducing and is now averaging eight days. We continue to work extremely closely with EU customs as everyone gets used to the new processes and have introduced multiple ports of entry into Europe with an absolute aim to get this back to four days. In response to some of the above dynamics, we have worked on various ways to mitigate these impacts to ASOS. This includes entering into long-term ocean freight contract directly with a major shipping line, with rates secured that represent a significant reduction against today's market levels. We haven't stopped there. The introduction of the CRA service I described ensures flexibility exists with transit time on longer lead source product. Furthermore, our regimented intake planning process factors in these delays within the forward order book. Our ability to mix into more short lead sourcing if required, means we continue to be well-positioned to navigate through these current market dynamics. Finally, it is well-publicized that the U.K. has experienced a HGV driver shortage. As we do not operate our own fleet and we work with multiple third-party contractors, we are not currently experiencing issues with this. However, we're keeping a close eye on this with our partners to ensure that this doesn't start to have an impact on our U.K. operations in the near and medium term future. Going back to the network, my slide earlier gave an overview of the current logistics network. This slide depicts which markets are currently fulfilled by each location. Developing out these regional fulfillment centers has been a major part of how we've evolved our supply chain over the years. With our key principles of being closer to the customer, working with locally relevant third parties, and developing automated facilities. With this, we are able to offer market-leading delivery solutions to our customers in our key markets, along with reducing our carbon footprint associated with final mile delivery. By adopting this approach, we have been able to reduce our emissions by 45% over the past five years, and we've been able to introduce improved delivery services into the market, such as next-day delivery in the U.S. and a seven-day standard service to Russia. Our network enables us to offer next-day delivery services to over 85% of our global customer base, and the fully automated facilities enable us to achieve market-leading cutoffs in many of our key markets. Available. I'm now going to give you an overview of our delivery capability. Once orders are dispatched, it's over to our delivery solutions team. Delivery solutions purely focus on the customer with speed, choice, convenience and sustainability at the heart of what we do. We aim to ensure we have next-day delivery services with market-leading cutoffs supported by our Premier delivery model. For those of you who aren't aware, Premier is our delivery subscription proposition. For example, in the U.K., this is charged at GBP 9.95 and gives you free next-day delivery for one year. Our Premier customers in the U.K. account for 60% of our U.K. revenue. We also aim to offer fast standard services. This ensures competitiveness to local brands. We avoid offering a delivery range at checkout and advise customers on the specific day their delivery will arrive. Ultimately, we believe this is more convenient for our customers. Where you can see ranges on the slide, we utilize our in-house zoning technology to pinpoint the specific delivery date based upon your location as a customer. For example, in Russia, customers in Moscow and St. Petersburg will receive a promise and delivery on day 7 versus the rest of Russia on day 9. On average, we achieve over 97% delivery on time against the quoted promise. As previously mentioned, we have developed click and collect services in nearly all key markets and continue to add locations across many markets. This gives our customers ultimate choice and convenience and enables them to pick up their delivery at the time that suits them. In addition to the services on the slide, we also offer other services. For example, ASOS Instant, which is a same-day service that we deliver to select post codes within the London area. We are currently reviewing our ability to highlight a green delivery option at checkout in selected markets. Just to point out, this slide represents our business as usual propositions. Clearly, through the COVID pandemic, some of these propositions have needed to be extended due to freight availability and reduced warehouse outputs driven by social distancing measures. We have, and we continue to work closely with our supply chain partners to reduce these impacts, and we have a defined process to ensure all services revert back to business as usual at the earliest possible time. It's fair to say that it's not only our delivery proposition that leads the way for customers, but also our sophisticated returns proposition and processes. Over 97% of all items returned to ASOS are repatriated to our fulfillment centers and resold to customers. All returns go through a very rigorous inspection process with any item that is not deemed as pristine graded. The issue is then highlighted and passed over to our salvage operations. Our salvage capability includes spot cleaning, ozoning, steaming, seamstress processes, to name just a few. Of the 3% of stock that is not deemed suitable for resale to our customers, we work closely with various partners to ensure these products are resold, recycled or repurposed, avoiding any unnecessary disposal and sending product to landfill. Our colleagues undertaking core processing achieve an average KPI of 45 units per hour. This has improved by over 20% since 2019, driven by the deployment of new technology across the network and our focus on continuous improvement across all of our operations. In late 2019, we launched the ASOS My Account Returns experience. Effectively, this enables customers to initiate their return in the ASOS app. In many markets, customers have a completely mobile experience using QR codes instead of paperwork when dropping off their returns to our returns locations. All of these operations require meaningful relationships with our third-party partners. Therefore, it is essential that our partners are aligned to our approach and our desire to be the best. The way we approach this is to form close relationships and work with a partnership approach with long-term agreements in place with all key third-party logistics providers. Partners are selected based on regional expertise and the core services they offer. We intentionally operate with a multi third-party logistics provider strategy. This drives greater levels of innovation and shared learnings across our network. These partnerships allow ASOS to focus our resources on our data, technology, and mechanization capability to further enhance customer-facing solutions. All third-party logistics providers are aligned to the ASOS supply chain objectives, with site-specific objectives and improvement targets agreed annually. Over the past 18 months, we have developed the ASOS Lean framework. This drives consistency through operation and tracks progress against efficiency targets, site objectives, and agreed service level agreements. We also work closely with our partners to ensure our warehouse colleagues feel part of the ASOS team and offer first-class welfare facilities across all of our locations, with gyms, breakout rooms, pool tables, canteens, and even our own basketball courts in Atlanta. Based upon our experience, we believe this level of welfare and colleague engagement bolsters overall productivity levels in each site and makes ASOS a great place to work. As you will have heard throughout the presentation, we have a clear non-negotiable focus on sustainability across the end-to-end supply chain. In 2020, our carbon footprint reduced by 13%, predominantly driven by U.S. fulfillment, reduced air freight, and the use of renewable energy across our fulfillment centers. Further energy efficiency targets have been agreed for the next three years across all ASOS owned facilities. Our net zero strategy is underway, aligned to our commitments to the British Retail Consortium Climate Action Roadmap. We've also completed a full carbon footprint analysis by delivery service and delivery partner to support us with our aspiration to advise customers of our greenest delivery option. We have implemented outbound order consolidation within our warehouses for when customers place more than one order over a given period of time. The My Account Returns experience I referred to earlier means that over 87% of all the orders dispatched no longer require paperwork to be inserted inside the parcel. We continue to work closely with our delivery partners to push final mile deliveries via more sustainable methods, such as the use of electric vehicles and consolidated drop-off locations. You will hear more of our commitment to sustainability in the Fashion with Integrity Capital Markets event next month. To summarize the key takeaways from the operational overview, we have a well-invested network which we develop ahead of time to support business growth. We are well positioned against the current dynamics and headwinds within the freight market. From location analysis for future warehouses to the delivery and returns experience, we put the customer at the heart of everything we do. We focus on our people, investing in welfare and engagement. We have an obsession for continuous improvement to generate enhanced capability and cost efficiencies. We operate with integrity, and we are relentless with our focus to reduce our environmental impacts across the end-to-end supply chain. This concludes the brief overview of our operations. We would, of course, love to have hosted today's event in one of our fulfillment centers to really make this come to life for you all. Unfortunately, due to the ongoing restrictions, this wasn't possible. Instead, I'm going to play a short video of our fully automated facilities in Barnsley and Berlin to give you a flavor of what we do and the scale of our facilities. Gary is going to take you through our playbook and how we develop these world-class facilities. Thank you. Thanks, Matt, and good afternoon, everyone. As Matt mentioned, we are really proud of our facilities, which are world-class, and we would love to show you around sometime. While it isn't possible at the moment, I hope that the video has at least highlighted the scale of automation that we have in both Barnsley and Berlin. Our approach is to own the tech, own the data, and own the automation, and then to outsource the other aspects of our sites. At both Barnsley and Berlin, we have implemented proven technology and solutions that allow us to standardize our processes. With each new installation, we take learnings and knowledge into the next site, and in parallel, we are relentless in looking at new and emerging technology to continuously improve our processes. However, any new technology needs to be the right fit for us, and it needs to have the right level of maturity. The pictures on this slide highlight some good examples of how we have deployed tech to enhance our efficiencies. On the top row, we have the individual cranes and the aisles at Barnsley versus individual shuttles per level in Berlin, which has increased the speed of movement from reserve storage to the pick and face 8-fold. Secondly, on the bottom left-hand side of the slide, we have recently added picking robots in Atlanta, and with these we expect to increase our picking rate by 25%-30%. Lastly, on the bottom right-hand side, we have the robotic arm that we are trialing in Berlin. Rather than looking at these to increase productivity, these will allow us to flex and increase the utilization of resources across the site, which in turn provides greater flexibility to the operations team. From an implementation perspective, with each new installation, we increment the level of automation, which results in an improved return on investment. One of the significant benefits of automation are the improvements in efficiency. As you can see from the charts on this slide, the implementation of automation at both sites has increased both the picking and packing rates. For example, in terms of pick rates, Barnsley has seen a 100% increase and Berlin had a 47% increase. From a packing perspective, Barnsley increased by 32% and Berlin increased by 35%. Next up, we're going to take a look at the Atlanta operation. What you'll see in the next video is a manual operation, and this will give you a good idea of how Barnsley and Berlin looked prior to automation. It is on track to be fully automated by the back end of FY23. From the video and pictures on this slide, you will see that we have introduced some of the automation in preparation for this deployment. I've mentioned we have already complemented the site with low-cost robots to increase picking rates. Equally exciting, the planned automation includes a solution known as goods-to-person picking. As a result, we expect to see an increase in the picking rate in the region of 150% versus the 100% that was achieved in Barnsley. In addition to these benefits, installing part of the automation in the first phase enables us to work closely with the provider to establish and mature the operation with parts of automation in place. Equally importantly, they can be fully involved in the delivery of the fully automated solution, ensuring that it is landed well. To summarize why we automate our sites. We liken it to a productivity loop where investing CapEx drives productivity improvements, which in turn allows us to invest in the customer and drive growth. It's this growth which resulted in us announcing in October last year that we would be opening a new site in the U.K. Let's now take a look at how Lichfield is progressing. As you can see from the pictures on this slide and the video, Lichfield has progressed significantly since we signed the contract 8 months ago and is on track to go live early next year. With all new facilities, the first and most critical step is to determine the location and size to ensure we are scaling the network correctly. We use many criteria to do this, labor availability, transport links, and expansion opportunities being a few. Recruitment of the management team for the site by our third party, GXO, is well progressed with 80% of them already onboarded. This team is a key part of our playbook, and with their support, we will deliver a first phase that can store up to 7 million units in a mezzanine, which you can see in the photos. From an outbound perspective, we will ramp up to shipping 1.5 million units per week, supported by conveyors, which were in the video, and a parcel sorter that you can see on this slide. Involving the third party in this way ensures efficiency and effectiveness from the start of operations. After this, they will optimize and enhance the site with the adoption of our ASOS Lean framework, which is already running in Barnsley. With the GBP 90 million CapEx that has been invested in this facility, we will fast-track the automation in order to maximize capacity. This will provide an end state capacity of 15 million-17 million units of storage, which is roughly half of Barnsley's capacity. In terms of throughput, Lichfield will be able to dispatch 4.5 million units per week, which means Lichfield will be comparable to Barnsley in terms of output. Due to the evolution of our automated solutions, it will be more efficient per square foot than Barnsley, which operates on 700,000 square feet, while Lichfield is 400,000 square feet. I hope you've enjoyed getting a taste of our fulfillment centers and a better understanding of our world-class supply chain development capability. I will now hand you back to Mat Dunn to summarize. Thanks, Gary, and thanks, Matt. I hope you've enjoyed the dive we've made into our supply chain today. As both of the guys have said, we'd obviously really love to host this session in a facility, but nonetheless, I hope you've seen enough to see how our world-class supply chain operates and have a feel for the team that operate it, as well as gaining a short insight into how we are building out for the future and how we continue to innovate for our customers, our people, and to improve the productivity and cost effectiveness of our supply chain. We'd now like to open up the session for questions. For this presentation, we have two methods of asking questions. If you have Zoom downloaded, you can ask your question directly in person by live video link by clicking on the Ask Question via Video box underneath the live feed. If you don't have Zoom or don't wish to use this method, you can ask your question by written text as per previous presentations by clicking the Ask Questions via Text button. Just a brief reminder before we kick off that we will be answering questions on the content that we've covered today, which includes inbound logistics, the management of our fulfillment network, and the development of future capability. As Nick mentioned, we won't be taking any questions on sourcing, as we will cover those in a future update in sustainability next month, nor on current trading. I'd now like to hand over, and I think the first question looks like it comes from Charlie Muir-Sands from Exane. Good afternoon, guys. Thank you for taking my questions. Hopefully, you can hear me okay. We can, and we can see your rather impressive background as well, Charlie. Not for swim afterwards. I've got a few. I'll limit myself to 3, if that's okay. The first one is, you alluded to signing some longer term sea freight contracts significantly below current spot rates. I just wanted to clarify whether those were below what you're currently paying this year, and therefore costs should be reducing next year for that. Secondly, obviously, returns rates have been moving around a lot in the industry over the last year or 2, and I just wondered whether you could say most recently how close to normalizing returns rates are that you're now experiencing. The final one relates to efficiency and automation and so forth. I think historically the best you achieved was warehouse costs at around about 8% of sales. I just wonder once you get all of this automation in place, do you think that that is attainable again? Have the costs of running these kind of sites structurally increased? Thank you. Thanks, Charlie. I think the second one might be dangerously close to being about current trading, and there's probably not more that we can say right now just about where returns rates are. As we indicated in our P3 update, our returns rates are normalizing, and we'll obviously give you guys a fuller view at the full year. I might hand the question you had about freight over to Matt, if I can do, and I might take the opportunity to move seats while Matt's talking, if that's okay, so I can sit down. No problem, Matt. Yes, good question. Obviously the market has changed dramatically over the last 12 months. We've been operating with a blended ocean freight pricing structure. We have always committed to long-term deals. It would be difficult for me to give you an exact comparison, but the rate levels we're talking about would be slightly elevated to the start of last year. That being said, as you saw from my slides, there are efficiencies in the use of things like sea-air, and the reduction in premium air freight. Overall freight costs are balanced in that regard. Thanks, Mat. Charlie Muir-Sands, I'll pick up your last question about, I guess, the cost in the P&L. As Gary Beveridge mentioned, we're always looking at how we find incremental efficiencies. He spoke a little bit about what we're doing in Lichfield and then obviously some of the trials we've got running in the other sites. I guess those things have the benefit of offsetting any incremental cost inflation that comes through over time, just through natural inflationary pressures. From my point of view, there's nothing structural or substantive that should drive a materially different percentage of sales. I think although 8's probably the best we've ever achieved, I think it's probably closer to 9, if you look at it on a normalized basis. The only last caveat I'd apply, and you'll have probably heard me say it before, is that obviously you're always in a cycle and as we continue to build our capacity, when such a time as a steady state where all of our sites are automated, is obviously something that's difficult to predict and therefore, difficult to say when exactly when that's going to happen. We believe structurally, all of the sites have had the same structural efficiencies. There'll clearly be different labor rates, for example, in different markets, which will make them relatively slightly different. We believe they're potentially similar to what you've seen before. Understood. Thank you. Anything else from your perspective, Charlie, before we move on? Yeah, please. If I'm allowed to discard that second question as a reject. Yeah, fair enough. Let's give you another one then in return for that one being a reject. I think obviously, historically, you've been quite successful as an export model shipping into places like Australia, Russia and so forth. Given, in particular, the disruption of the last year or so, you've become quite commercially disadvantaged versus in-country models. Have you given any thought to establishing dark stores or mini warehouses? Do you really just think you just have to tough out this period and hope that eventually the cost and speed to serve in those far-flung locations comes back to where it used to be? I might cover the first bit and then maybe Nick, I might ask you for a perspective longer term. I think ultimately, COVID has driven a lot of disruption, as you said, Charlie. Our belief is once that normalizes, that our proposition will be competitive again. I think if you actually look at the types of markets that we're servicing from a rest of world perspective, they tend to have a mix of models. I think there are very few local providers that can necessarily provide the full suite of products that people want. However, flexible fulfillment and all that it brings with it, does open up the possibility for us to evolve our supply chain into the future. One of the things that it possibly brings with it, is the potential to have a slightly different logistical infrastructure where you may have some of the things you've spoken about. That's not a decision that we've taken yet, but I guess, flexible fulfillment has many benefits, but one of them is it provides that real flexibility in our underlying architecture that means we can look at those things. Nick, I don't know if there's anything you want to add to that from your perspective. Thanks, Charlie. Good afternoon. Right now, in the midst of the disruption in the pandemic calls on the supply chain, Australia, for example, our propositions look distinctly weaker than they once did. There used to be around 6 jumbo jets leaving a day, going to Australia with our product on, that's now about 6 a week. That means our propositions are about 7 days longer on average than they should be. That reduces our competitiveness. Our proposition for the Australian customer is, with our unique products, ASOS Design, Topshop, Topman, which augmented it, and the offer, which is still very relevant, we expect the propositions to come back as the freight market normalizes. We'll be monitoring that closely. If not, we'll be looking at local partnerships and other solutions to actually restore our propositions. We haven't made any decisions on that yet. We're monitoring it really closely. It's very important to us that, as the world normalizes with its supply chain market, we don't lose competitiveness in some of those territories. I hope that helps. Nothing concrete yet. We're watching it very closely. We have some ideas that we're looking through. Thanks, Nick. Thanks, Charlie. I'm going to do a couple of written questions, but again, would encourage anyone that wants to ask a question via Zoom to do so. Believe it or not, it is nice to look at the people rather than just looking at typed questions. Let me cover a couple of the typed ones. There's a couple of questions from Anne Critchlow at Société Générale. The first of those, which I might ask you to answer, Matt, is what percentage of orders are click and collected? Then I might ask you to answer the next one, which is when you launch partner fulfillment, maybe I'll pick up some of it, do you plan to use your logistics network to offer warehousing and shipping return services to brands? Yeah. On the first one, in relation to click and collect, it's very different in each of the territories we operate in. I would say overall it's circa 10%. Certainly in France, you would be looking closer to 30%-35% from a click and collect perspective. In the U.K., we're probably around 5% now. We've seen that shift in the U.K. reduce over the past year as more people have been working from home. It's also relatively new in some of the markets as well. We've only launched it into Germany at scale very recently. It's a developing proposition that we expect to grow over time. In relation to partner fulfillment and do we plan to use our logistics network to offer warehousing and shipping returns? There's no reason why not. I think that we are focused on what we need to do for ASOS currently, but there's no reason why we couldn't support third-party brands with fulfillment models, in the future. Let me add a bit to that. Key plank of our strategy is the ASOS platform. It starts with amazing brands, which is ASOS unique brands, augmented by the brands we acquired earlier in the year. The platform is already in the process of being enhanced in various ways. First of all, the virtual fulfillment, which is any warehouse to any customer. Not only that's optimizing availability and maximizing customer satisfaction, making sure we also optimize working capital. The next element of that will be connecting brands directly to our platform and the partner fulfill that for us. That will increase our width, increase our offer, increase our availability with less working capital. That's the next evolution of our platform development. Partner fulfillment coming at the end of the year. Already the virtual fulfillment I've described live in U.S. and Europe, and that will drive. Those are the areas we're optimizing and solving with our platform development. We'll give you greater update on that when we get to the Capital Markets Day in October. Thanks, Matt, and thank you, Nick. I think probably one for you, Gary, which is, could you update on the square footage differences between Lichfield, Barnsley, Atlanta, and Germany, and how we're thinking about expansion opportunities in those facilities? Yes. If we take Barnsley, as I say, is 750,000 square feet. Atlanta is 1 million square feet. Berlin is 800,000 square feet, and Lichfield is 400,000 square feet. As you can see, the sizes are very different. That's dictated primarily by the height of buildings. If you take Atlanta, for example, in America, the height of the buildings tend to be smaller. In terms of expansion, we have multiple options. We can either expand within the building or we can expand external to the building. As it stands, we're currently focusing all our expansion inside the building to basically sweat the assets that we have. I think the only other comment I'd make and just in addition to what Gary said, is there is a kind of optimal size of a building. It isn't that you'd want to have limitless square footage, even if you theoretically could do, and you kind of look to balance the efficiency that goes through one warehouse and the benefits that brings against both maximizing your customer and delivery proposition like we've done in Berlin and Atlanta. Also just in terms of resiliency. Having the flexibility that Lichfield and Barnsley offer, for example, is an example of how we're kind of managing that risk profile of effectively having too much volume potentially through one site. There is a balance. Thank you, Gary. A question from Michelle Wilson at Berenberg. Again, I might partially answer this just to clarify what we mean by some of the terminology. I think the rest of it we'll talk about more when we talk about sourcing at the sustainability CME. The question is, the 60% long lead supply chain might be a surprise to some for a fast fashion business. Can you elaborate on why 40% short lead and 60% long lead the right balance, and how does it impact inventory risk? I guess the clarification I wanted to make is, we use the term short lead and long lead really as a proxy for the length of the supply line. Really, it means where are they located in the world. Whilst we might use the term long lead, I'm not sure you should see that as a proxy for long lead in a non-fast fashion retailer. Even on a long lead product, you'd still be talking about lead times potentially as quick as 6 to 8 weeks, depending on the product. I won't go into all of the details. Why do we use different sourcing locations? We use them partly because of where products are made. There are certain products that are only made in certain locations. We also look to build resiliency across the supply chain. I understand it's an important question, but I think it's probably one more appropriately dealt with at the sourcing update. The next question is from Rory Alexander at M&G. How much additional sales capacity beyond the GBP 6 billion outlined is needed to become truly global as per your long-term strategic pillars? Nick, I don't know if you want to elaborate, but I think it's one for the capital markets. Yeah update in October. I guess the only comment we can make at this point is we are obviously constantly monitoring what we need, and Gary's team are constantly looking at what our capacity needs are going to be, and therefore, we're kind of trying to build ahead of demand. We don't want to spoil the surprise, but obviously, we are looking at that capacity plan on a dynamic basis all of the time. I was just going to add something on Michelle's point. The sourcing location for various products is normally determined by the skill set. For example, the shorter lead time in Turkey and U.K. is normally jersey. Mauritius is an area that just specializes in suiting, tailoring, and denim. That is clearly a long lead time, but there's air freight from Mauritius, so it means it comes in as quick as it does from Turkey because its air freight is subsidized by the Mauritian Growth Initiative. Certain heavy appliqué, heavy design dresses, the higher price points are best done on a cost basis in places like China, India. We also do a mixed sourcing where Bangladesh, for example, we will create blank sweatshirts, T-shirts that are held locally to do printing locally. You optimize the input cost, you optimize the skills and the cost of the product versus the sourcing availability. That's kind of how we build it. I hope that helps, Michelle. Yeah, we promise much more of a detailed update in a month's time. The next question, and I'm going to call last orders if anyone does have any Zoom questions, because we're nearly out of the written questions. If you can come through now and we'll try and cover anything in the time we've got left. Next question is from Michelle. Again, I might pass this one to you, Nick, which is, "How happy are you with the performance in the U.S. market since opening the Atlanta D.C.? Is it on track with your expectations? We have built a very strong footprint in the U.S. in terms of our physical infrastructure. We built a strong digital offer in terms of various zonal regions with our tech. We've got strong propositions in terms of next-day delivery to all the major markets. We clearly would like far greater growth over the last 12 months. Some of that has been let down by COVID, as customers have chosen different products. We're really confident that the investments we've made over the past 18 months, particularly in the U.S., have been a key backbone to bring the market to where it is now, and we hope for a lot more out of the U.S. market. Again, I think we'll give greater clarity of our geo strategies when we get to the Capital Markets Day. Clearly, North American strategy is going to be anchored by our work with Nordstrom, the deal we've done with that. That's about maximizing eyeballs and awareness, using our footprint, using our digital offer, and maximizing attention and eyeballs for the U.S. customer. It's only one plank of it. There's way more of our U.S. strategy that we're in a place to deploy. That's something we will talk to you about in October. I might just ask Matt to briefly expand on that proposition and where it sits in the relative competitive context. Yeah, of course. I think, as you saw from my slides, we're absolutely obsessed with being the best and having the best cut-offs and the fastest deliveries. I think we see impacts when we have to have extension today propositions from a consumer perspective. We're confident that we're backing the right horse with going as fast as we can. I think it maybe cover the bills for me. I think, our ability to service next day, 90% plus of the U.S. population, as Matt said, we do believe is a significant strategic advantage. It is genuinely market leading in that context, which actually neatly leads us on to the next question, which is from Hugo at Sarasin. Do you have any data to show how the consumer responds to improvement in fulfillment and delivery offerings? Is this more powerful than a cheaper offering with weaker delivery? I probably feel like anyone here could answer it, but I know how much, Nick, you're passionate about the productivity loop of that, so I might ask you to answer it, and then perhaps Gary or Matt can chip in as appropriate. Sure. Actually it starts with having the product offer that customers want at the right price, right level of newness. It's then augmented by great delivery propositions that are fast. One of the stats that we gave you today, the power of that proposition with a multi-brand offer is the ASOS Premier offer in the U.K., now delivering 60% of U.K. sales. That works brilliantly with a multi-brand offer, multi-products, a delivery solution that customers want that's next day. That is clearly a key plank of our international rollout. You can't offer that compelling next-day delivery without local tech, local logistics to support it. That is going to be a key amplification to both Europe and also North American growth. There's an example of how the power of a multi-brand offer with a strong platform that delivers great tech, great logistics, and a compelling offer like ASOS Premier can drive future sales, future growth, and customer satisfaction. I think my 2 builds from a data point of view, 1 would be, Matt just mentioned it. At periods where we've been unable to sustain our proposition, we see the impact in our sales and measure that benefit. The second data point we've got is when we extend a cut off by 1 hour, i.e., we move next day delivery from 2:00 P.M. to 3:00 P.M. or 3:00 P.M. to 4:00 P.M. or 10:00 A.M. till 11:00 A.M. or whatever it might be, again, we can tangibly measure the impact that that has. Therefore, what we know is how meaningful an advantage proposition is for consumers for the relevance of our product portfolio. Clearly, there are alternative strategies, but we believe that that has ultimate consumer utility, as Nick was speaking about. It's really well supported by the data, I guess is the point. I think a couple of concluding questions, both from Georgina. First is, how has shift to more sea freight impacted lead times? Matt, I might get you to cover that really briefly. Yeah. Again, as I stated, there are obviously some delays on the ocean freight market now, but what we can't do is necessarily read into our increase in sea freight as added lead time. If you look at European sourced product, for example, places like Turkey, historically that has been road freighted into Berlin, into the U.K., and then onward dispatch via air, for example, to the U.S. Whereas now we're set to consolidate EU volume and Turkish volume and do sea freight into the U.S. That increases our overall mix of sea and less reliance on road just due to the fact that we are going now direct to market. Actually, overall, the lead time is probably very similar to that of bringing it into the U.K. and air freighting it across, as it is to go sea freight direct to the U.S. from there. Thanks, Matt. The last couple, one for you, Gary. Can you remind us which part of the tech across the whole of how we operate our warehouse fulfillment centers are internally developed and which are third party? Kind of break out how we approach that. Yeah. All tech that we have in our facilities are third party. We work with a number of different partners, to help us build the automation with their tech to build a WMS, again, a different partner. The tech in the warehouse is all third party. One key element of that, we own the data integration, all the integration, all the data is ours. We outsource the packages to other third parties, we own the integration, we own the data. That gives a strategic advantage to develop AI solutions the back of it, which is greater efficiency, greater demand prediction. That's the key aspect of it. That's the central nervous system of how we go about building it. We own the integration, we therefore own the data. We don't develop all the packages, we make sure we own the data flow. I think that's a really good way to describe it from my point of view, Nick, in terms of we own the nervous system. That is effectively proprietary, but what we're not trying to do is develop our own WMSs or technology to automate because there are people who specialize only in that. I've been on a crash course over the last 2 and a half years and a particular crash course over the last couple of months in terms of a fulfillment center only works when all of the elements fit together and work perfectly. That's what our capability set is and that's the bit that ultimately defines the speed and efficiency of the operation. It's all the bits working in sync that's really important. I think last question, which I might answer, which is how do you expect to manage stock between the U.K. sites, i.e. Lichfield when it's operating in Barnsley? I guess 2 important points to make here. The first is that the way that we're bringing Lichfield on stream is relatively measured over time and therefore ultimately Barnsley will there's no hard cutover like there was when we moved from Barnsley to Eurohub or to Atlanta. We will effectively start to bleed volume into Lichfield. I won't go into all the technicalities in the interest of time as to how we're planning to do that. Effectively we will use 2 bits of technology. 1 is optimization technology where orders that can be fully fulfilled from Lichfield will automatically be fulfilled from Lichfield and then over time we'll start to use flexible fulfillment. Ultimately what that will allow us to do is make sure that we are balancing our load and our stock profile appropriately across Barnsley and Lichfield. In the short term it means that we can introduce Lichfield in a balanced and hopefully relatively risk averse mode. Let me just add a couple of points to that. Please. Couple of things that's really important. The flex fulfillment means we won't let the customer down. We can fulfill from any warehouse to that customer, which de-risks the transition of the warehouses as well. It wasn't built for that, but it's a happy consequence that we were mindful of how we did it. Going from building extra warehouses on a solid base is incrementally less disruptive than when we went from Barnsley to Berlin and Atlanta. That's the benefit of scale with that extra capability. The other element of stock pool management was our TGR program, which will start to give visibility for our merchandisers from needle point to warehouse, and that gives us the greater ability coming forward, coming from now of how we manage the product in the right warehouse to mix the customer demand at that point in time. Those are the only things I wanted to add to Matt's response. Thank you, Nick. I think that takes us to a power hour and a minute, I think so, we'll call time there. Thank you everybody for taking the time to listen to us today, and we look forward to seeing you in around a month's time with the Sustainability CME. Thanks for your attention and I hope you found it useful. Thank you, guys. Thank you.