I don't have to tell you that retail is changing. Some people say that that's a challenge. I would say that that's an opportunity. It's never been more fun to work in retail than today because the tools we have necessary available is much more than what we had a few years ago and we'll come back to that later. If you look in this world and you look outside of Norway, there are many markets that are much more mature with respect to e commerce penetration than in Norway.
And in the U. S. And the U. K, the interesting thing is that all these markets, what we see is that discount variety retail is thriving and is actually outpacing the growth of the total retail market by roughly twice. In the last few years, the gap has been a little bit smaller, but it's still profound that discount variety retail is growing alongside
the growth
of the online giants. If we look a little bit deeper into the U. S, you will see that the likes of Dollar General and Family Dollar, all those Dollar stores are doing well alongside the growth of Amazon and the other online giants. And in the grocery sector, some of you might know that Aldi is doing great in the U. S.
Too and thriving next to the online growth. If you go to the U. K, you see a similar pattern where B&M and Home and Bargain, which is in our sort of it's a typical Ivory Coast of U. K, is doing well next to Amazon and the other online giants. And you see the same on the discount in the grocery sector where Aldi and Lidl is really eating away on the big 4 supermarket chains.
In the last years, Aldi and Vidal and the other discounters has taken 7.5 percentage point market share from the big four supermarket chains. So it's a huge change towards online, towards value in the U. S. And in the U. K.
And if you go closer to home, obviously, everyone today is digital, everyone is online, everyone is mobile. This is something that is influencing our business in the Kokam way too. As I said before, I think it's a huge opportunity for us. Our physical business is not cannibalized by online retail, but the digital opportunities we have in eCRM and also later on in online sales are huge. And we see that in online e commerce for us represent much more.
You already start seeing the first sign an opportunity for added sales. It's not necessarily cannibalizing our 16 assortment. It's an opportunity for us to extend the assortment and sell much more online than what we're doing in the physical world. I'll come back to it later, but we have a NOK300 billion addressable market in Norway. We are selling for a little bit north south of NOK 6,000,000,000.
The Tisket variety retail sector is selling somewhere between NOK 15,000,000,000 and NOK 20,000,000,000. So there's SEK 280,000,000,000 waiting for us if we can get to that. We also see that as I talked about before, e commerce is not starting to penetrate the grocery discount sector or the discount variety retail sector. There are several reasons for it according to McKinsey's. Some of them is the challenging economics.
If you have a product that on average costs NOK 30 in your existing assortment, it's challenging to sell that to consumer in a profitable way and send it home to everybody, especially if you're going to get free delivery. And from a consumer convenience point of view, especially in the grocery sector, we see that it takes time to change habits, long time. So even though some players are very successful in this segment, it's still a very, very small part of the market. So if you look at all these retail trends that we have together with McKinsey, we see that a lot of these retail trends are also relevant to Europris and to the discount variety retail sector, but that I'll come back to later. We actually think that most of these trends are beneficial to our segments and it's an opportunity more than a threat to our industry.
So that is the first part of the presentation is more the key message to you is that online is obviously growing. There's a digital shift, but discount variety retail, if you look outside of Norway, is thriving. If you go to the front part, this is Europe reason what we are going to do in this sector. We are now it's Christmas. You can see it here.
You can see it in the stores later today. We are the ultimate seasonal store of Norway. This was actually last year's course, but still it's valid. You will see even more of it this year. So this should be the 1st place for anyone who want to shop convenient, smart, big and at a low price obviously.
And if you look at the history of the company, we have been growing for 26 years now. And I can tell you a message that we are also obviously going to grow this year too. So for 26 years, we have been growing every single year. Now we are at 257 locations. Tomorrow, I'll open at 9 I'll open the 258 store at the RUKAN, very close to my cabin actually.
So it's very happy about that. We have 30,000,000 customer transactions every year, 30,000,000 people coming into our stores and being influenced and giving us an opportunity to influence them. We have more than 1,000,000 physical leaflets like this one distributed every week. Obviously, there's a tremendous growth online. People want it on their mobiles or access it on the web.
So that's growing. And we have more, as I said, more than 2 57 stores. And out of the like for like stores, more than 90%, 95% of the stores are profitable. So we have a thriving financially sound physical network. We have a lot of contact points and the whole idea is just to be a little bit better every time we meet our consumers 30,000,000 times throughout the year in the 257 stores.
We also have a very strong brand in Norway. This is the results from the 2018 survey that came out in November. And this year, I don't think we can improve on this first one. We have 100% brand recognition in Norway. It is a little bit difficult to beat next year.
But so everybody loves or everybody knows Europe is. You might love us or you might hate us, but you know us. And that's the most important thing. Even if you hate us, we can actually change that, but we cannot change you if you don't know us. So it's important, 100% brand recognition.
And among the discount variety retailers in Norway, there's an annual survey being done every year for the last 10 years. We are the undisputed number 1 on price, which is obviously also important for the discount variety retailer. The reason for Eurofins to exist is in many ways that we want to give our customers Neto Aurech Mortisde. So we will always focus on categories, on occasions and seasons where we can give our customers more to spend, in Ekerovic. That's the key underlying thing for everything we do.
And we want to give our customers more time and money to buy what they need and what they want, not just for everyday life, which is a focus lately, also to make it nice at home and then for these seasonal holidays and the special occasions. But we will focus on categories and occasions and seasons where we can make a difference. And over time, the Adventist concept will evolve that we focus most of our energy and time and resources on the occasions where we can make a difference to the consumers compared to the alternatives. And I started off saying that I think that the Europe is thriving and Europe is a good sort of future. I think the most important in retail, someone once said that culture eats strategy for breakfast.
Basically that even though these strategy plans and priorities are important, it's even more important about the culture of the company. And so and the last proof of that we actually saw a couple of weeks ago on the 23rd November, I was fortunate enough to be able to work in the stores. That was the Christmas Eve of retail this year, which is the Black Friday. All the leaders of Europies, all top 50 leaders of Europies was out in the stores working on that day because it's a big day out in the stores. So it's important that everybody works there.
I was at Waldenbeck, which is close to Berki, Bahn in Oslo. I was there at 6:45 in the morning, we started we opened the store at 7. Wasn't a lot of customers in the beginning. It was early morning, but even the liquid for car liquid was on offer, but that even that can get people to get in big numbers. At 6:40 in the morning at Volovek, I was expecting the store to be pretty in need of getting up to shape because we had a really, really good Thursday, back Thursday.
When I came in at 6:40, it was just everything was okay. I didn't have anything to do for the first two hours except serving customers, of course. So and the reason was, of course, that Seher and her team had been busy preparing not just that morning, but actually the day before. And it wasn't special just because I was coming there. It was in many stores.
Towards the end of the Black Thursday, you start working and preparing for the Black Friday, which is the big day of the year. And I think that kind of culture, that kind of commitment to your job is important and what makes us different from many others. And the best thing is that you cannot copy this. Culture is something you cannot really copy. It's the energy of the organization is really, really, really important.
We'd like to say that Adafis is not just a job, it's a way of life and especially during our Champions League final, which is the Christmas season. You see that kind of commitment. That's invaluable. Sustainability is another thing that is important to us. It's also important to our customers.
Sustainability is not just a lot of an ambitious vision and target and strategies. Sustainability for us is also a lot about action, specific actions, because in retail, strategy is one thing, but you live by what you actually achieve. So we are more concerned about the things we actually achieve to create a more sustainable future than the grand visions and the targets and the long term aims for this area. And since 2014, we've done a lot, but even more important is that we're going to do a lot also going forward on sustainability. If you look at the track record of the Avrilopris, we have obviously growth, as I said, every year since 1992.
We have our long term target is always to beat the market. This is total growth and keep profitability high. And even over the last few years, profitability has remained at a high level. The growth is coming both from customer growth and from basket, which is important that is sort of balanced both ways. And as I said before, we believe that we have a roughly NOK 300,000,000,000 addressable market in Norway.
We have NOK 6,000,000,000 in sales. If you add up all the other players in this segment, maybe we get to NOK 15,000,000,000, 20,000,000,000. There's a €280,000,000,000 market there out waiting for us. I said it before that when we look at the physical stores, what we are looking at is what gives us the highest gross margin per square meter selling area in the stores. We can sell anything as long as it's legal.
We just have to prioritize what gives us the biggest return. Online, the good thing is that we are not bound by the physical world. We can actually try and target not maybe not €280,000,000,000 of it, but at least much bigger than the €6,000,000,000 we're targeting today. So in the online world, we're not bound by the physical size of the stores. We can sell anything as long as it's low price and we can make a margin.
You also see that if you look at the retail discount variety retail sector in Norway, it's growing every year. It's also taking market share from the total retail market every year since we started measuring it in 1999. This is new figures from DIRIKA, so it's a little bit different numbers that you've seen before, but it's sort of the same message. Discount variety retail in Norway is growing, taking market share every year. We are among we are the biggest player in this segment in Norway, but we don't look upon the others as necessarily as competitors.
The competitors is just getting the consumer to get into a car and drive to our off-site location. So that's our main competitor. The main competitor is the 280,000,000,000, 85,000,000,000 that we have addressable market that we have not reached yet. It's not necessarily these other players in this segment. And very often, we are next to Biltema, Joola, Rista and those players and we are thriving next to them.
That was a little bit about the Agilopress. Long term, our vision and target, what make me tick and get up in the morning is I want us to be the best discount variety retailer in Europe. It's not just because it's nice to be European champion as a Norwegian. We're never European champions in any sports at least. But it's not just that.
It's also because we have to be. If we are not the best discount variety retailer in Europe, someone is going to look at the Nordic market and say, hey, we can go there and we can actually beat these guys. But if we are the best discount variety retailer on all the things we do in the different parts of our business, they will actually maybe not go to the Nordics and even maybe also partner with us, so we can create an even bigger base for further growth. So it's important because it's fun to be the European champion, but it's also important because we need to in order to be positioned among the leading players in Europe. And if we take a hard look at ourselves and look at some of the key areas we then need to focus on, let's put something up here, price.
We are as I said before, we ask our customers, the consumers in Norway, we are the undisputed price leader in Norway. But if you want to be best in Europe, the bar is raised. And we need to work with Nordic sourcing with our colleagues in OBE and Tukmani, you'll meet some of the people at OBE later today. We have to work with them in order to become that best in the Nordics, best in Europe. On the concept side, we need to continuously develop the concept.
If you are standing still, you're being eaten. You always have to improve the concept and I'll come back to that in a second. And on the value chain and the cost efficiency, if we want to have the lowest price, we have to have the lowest cost. And having the lowest cost, it's tough. And it requires a relentless focus on driving down costs.
And we'll come back to that and shed some light on what we're doing in order to do that. And of course, in the end, we are in retail business. And as I said, culture eats strategy for breakfast. It's more important what you actually achieve in the stores than what you say. And I think that culture is one of our strongest assets.
But if we want to be European Champion, we have to raise the bar even further. And that I know is energizing for the European organization, so it's actually what makes this fun. So if you go back to those trends that I've talked about previously, the McKinsey saw in the retail sector, not just in Norway, but across Europe and the U. S, a lot of these trends is actually beneficial to the discount variety retail sector in general and to Europe in particular. The retail polarization is great for value companies like us.
It's the guy stuck in the middle who has a trouble. The marketing, the 1,100,000 leaflets we distribute every week, the 257, soon 258 stores, the 30,000,000 customer transactions a year, it creates a kind of scale advantage that is very, very difficult to copy in Norway. And of course, with the things we're doing with our Swedish friends and partners and the Finnish, we are also creating a Nordic buying alliance that gives us an opportunity to have a scale advantage in the Nordics that is unprecedented. So I think a lot of these trends is an opportunity for us more than a threat. So we have defined 3 areas where we want to focus our efforts going forward.
One is on the strengthening price and cost position as maybe the most single most important focus area we are going to spend time on in the next few years. If we want to stay the price leader in the not just in Norway, but in the Nordic market, we have to have the lowest cost, and we're going to work hard for that. We have to continuously improve customer experience. That's important. Always developing.
This is the fun part of retail. You can never stand still. And then we have to drive customer growth because growth customer growth is the blood into the veins of any retailer, and you always have to come up with things. Now you have a toolbox that is much bigger than you used to. And that's why I think it's fun to do retail now compared to previously because the toolbox is so much wider.
With the digital channels, with the big data that we are now starting to get, we can really optimize in a fact based way. This is done. We also have some long term financial targets and operational ambitions that I know that the stock market always love to hear about. Our focus today is more on the things we're doing and then eventually we will deliver something that you will see. But as I said, we want to beat the market on like for like growth.
That might sound easy for you, but it's not. That means that we have to work smarter and harder than anyone else in the market to always beat the market for the now 11th consecutive year or something. Like for like is here defined as the stores that was opened on the 1st January last year, which means that it's the older stores. The new stores is, of course, always catching up and having high growth as they start penetrating the local market, But looking at the old existing store base and creating growth there, that's the real proof of the pudding. We also want to open on average 5 stores net per year.
We are beating that target by far this year and probably next year. As I said before, we do not have a hard target. We're not going to open stores, just open stores. We might open more. We might open less.
Over time, we believe that relocations and expansions will be more and more important because we have 257 stores now and a lot of them is not in the best place. As the retail market is changing, we are getting more and more attractive as a tenant and we see that we get more and more opportunities for attractive profitable relocations and extensions. So that's going to be even more focused in the years to come. On the EBITDA, obviously, we're going to do a lot to improve our margins and to reduce costs. We're going to give away part of that to keeping and maintaining our strong price position, but we think that we can increase the EBITDA margin over time.
It's just about filling up the arsenal of things we have and then some we will give back to the customers and some we will keep for the shareholders. And we'll maintain the dividend policy, But as we said before to you, we are not planning on starting a bank. So if we have some excess cash, we will give it back to the shareholders as we have done in the last 3 years on the stock market because there's no point in hoarding cash in the bank accounts. So we will keep an efficient balance sheet. Just a few words on the first big focus area, strengthening price and cost position.
If you are going to be have the lowest prices, you have to have the lowest costs, okay? So what do we do? Basically, we look at all the things we do in the value chain from the factory to the consumer. And then we look at everything and we challenge everything and we look at what how can new technology, especially in the Nordics, we are good at adopting new technology because it's expensive to with labor in the Nordics. So we look at what can we do in order to reduce costs and increase efficiency.
We will talk today a lot about the sourcing cooperation that we have with OBE, which has started off with a great start. That's a big part of it obviously, but it's also about the automatic replenishment using smarter and smarter data to optimize automatic replenishment. For Christian, we'll talk later today about the new warehouse going from 5 to 1 and starting automating it. That's a moving target. It's going to move further as time goes because there's huge opportunities now in doing automation and all the way actually to the stores.
We believe that we also in the stores have to work in a simpler way, make it easier for the store managers to do a good job and use technology to improve their everyday life so that we can actually be more efficient also in the stores. Our price position, as I said, is sort of undisputed in Norway. We are number 1, but we see when we look forward, we think that some of you have commented, we are going to get challenged on the price position. And we think that even if we're not, we have to prepare for it. So we have to build up this arsenal of cost savings and some of them will give back to the consumers and some will give back to the shareholders, but we think that this is important.
Nordic sourcing is a key initiative there. Private label is another one. We see the success that the grocery players, discount players have, for example, in the U. K, some really important area for us to develop. And then just building scale, reducing costs and increasing efficiency in the value chain, as I talked about.
So we have to do all these things in order to keep and maintain our price position. And we will not compromise on price. That's the only thing that I can assure you, it's a 100% guarantee. When you wake up in the morning on Monday or you access it on the e mail or digital on Sunday afternoon, this is the key reason why people come to Europe, please. We can never be beaten on the front page of these leaflets and we very, very seldom are.
So that's one part of it. But the other part of it is that we have defined what we call profile products. Profile product at Europe is a big volume item that is important to the consumer in a big category for us, we should not be beaten on price for that. And here we can benefit from the cooperation with TUKMANI and EOB to really create profile products that are astonishingly low price, attractive value to consumer. You see these acute Santa Claus over there.
We developed a 70 centimeter Santa Claus this year. We said that it has to cost DKK99. It's unbeaten in the market and then we design the Santa Claus just to fit that price. And next year, we're probably going to buy some volumes also for Sweden and for Finland and it's going to be Christmas in all Nordic countries. Fantastic products and a very good example of how you design a product to the price and then you work your way backwards and then you scale it up in the Nordics.
So now we just have a bigger toolbox to create those kind of profile products. On the rest of the assortment, we should obviously be competitive with the other discount variety retailers overall, and then we have to add obviously a value compared to the specialty stores. Private level is another area that I find very fascinating. If you look to the U. K, you can actually see that Aldi, I think that's one of our heroes in terms of private label development.
A few years ago, when they had these prices for the best private label development, the big 4 supermarket chains won all the prices. Last year in 2017, Aldi won more prices for private label development than the 4 supermarket chains combined. So I think private label is a very, very important tool for discounters. We make an attractive product at a high discount to the A brands and we give to the consumer the choice. It's good for us because it reinforces the value message for us.
It gives the consumers value, but it also creates margins for us as a retailer. So we are going to focus a lot on creating more private label, but also creating stronger brands among the private labels. A private label is a brand that you just didn't know was a brand. Trisysokin is a brand, fantastic brand, but you can only find it at Europrize. And Effect is another fantastic brand, And you will now only today, you can only find it at Europress.
But in 2019, Mikael and the team in Sweden, they will also introduce it in Sweden. And then probably late 2019 or 2020, you will also get it in Finland. And then you have a Nordic brand, Effect, great brand all over the Nordics, but you can only find it at Europies and their partners. This kind of products gives you a 25% to 40% price difference to the A brand, great value for the consumer and good margins for us as a retailer. And the quality, I challenge you, try and buy them and tell me if it doesn't stand up to the standards of the A brand, because it does.
Very often, it's actually produced sometimes at the same factories too. So that's a very, very important area for us. We're going to put a lot of emphasis into private label development in the years to come. With that, I think I will hand over to Espen, who will talk a little bit more about the sourcing and the benefits we're going to get from sourcing.
Thank you. Yes, like Paul has already said a couple of times, if you want to have the lowest prices, you need to have the lowest costs and that is my favorite topic. So we'll go a little bit more into the details. Paul Christian will afterwards tell you about the new warehouse and the savings we see there. But first of all, I will update on the sourcing partnership we have with Tocmani and with OBE.
Orbe. And actually, we'll start with a short film showing the Vendor Summit we had in Shanghai in October. Now also OBE. We started the partnership. We took money back in 2013.
And what we have done is that we established a joint sourcing office in Shanghai. And from that, we have moved away from agents and are now sourcing most of the products directly from the manufacturers. And through this, we have captured significant savings over the past couple of years. And now with Erbiy on board, we add even the largest scale and also knowledge to our team and we are expecting bigger savings in the years to come. So these 3 companies working now well together and what has actually surprised us the most with the start of the partnership is that the teams are working so well together.
The chemistry is there and we have got off to a really good start. And together, we represent the combined retail sales of SEK 17,100,000,000 in the Nordics. That is the source and scale really of world scale, and we have a deep knowledge on how we can do it. So with the negotiation power we have and the reach we have, this partnership is really of a scale that matters. And you might ask why does it matter?
And that is we have created a unique scale in the Nordic region. No one has this scale in the discount varieties retail sector in the Nordics, and we are able to reduce costs through better terms and larger orders. And we will benefit from best practice sharing with the knowledge we have. And like Paul had the example on effect, sharing this knowledge to create common private labels is really going to drive volumes and profitability for the companies. And with the combined volumes we have, we are one of the few in the Nordics that can actually run joint Scandinavian campaigns of a significant scale.
So this is adding volume and we can do things cross border and that is a new feature for Aeroplist and also for Tochmani and Orbe. But together with Orbe, we're taking the partnership a little bit further beyond just the sourcing. With the joint ownership, we will actually have equal share in each other's success. And Erbe is for us proved to be a perfect match for Erbele. It's a large category overlap, more than 90% and actually the culture of fit has been surprisingly strong.
So we think that the start we have got is very, very good. In addition, we believe that the strengths of the companies are different. OAVE is living in a much more price intense and more competition environment than we are doing at the moment. And on the other hand, we are much better on the seasons and on the inspiration. So I think we can learn from each other and really take benefit of these differences.
And that's what we're going to do going forward because the partnership is a great strategic fit and we will work and we really see that when we combine the best practices, this will boost the strategic initiatives we have already started in both companies. Eber has been in the process of increasing the profitability, but we are working on strengthening the price and the cost position. And we believe that we can learn from each other to really take benefit of what we know in this partnership. At the same time, we have already started the joint sourcing work. And in 2020, Aerofis has the option to require the remaining 80% stake in RB depending on whatever offers the best shareholder value.
Talking about the sourcing. The sourcing teams have started off very well. They are really working good together. And surprisingly, actually to see Swedes and Norwegians working so well together, that was a surprise. But they got off to a good start and they are working in parallel with 2 things.
We started with common suppliers in the Nordics and we are also working with suppliers in the Far East. On the Nordic scales, there we have the low hanging fruits where you can get some benefits fast and we gathered local suppliers in the Nordics. And basically, it's about harmonizing contractual terms. Now we have an access to how we work in the different countries. We're harmonizing the contractual terms.
We talked with 16 suppliers. We've completed now negotiations with 6 of them. And we also benchmarked the prices because we know that the brands, they take different prices in the different markets. And we want to put an end to that. So we want to have the lowest price in all markets.
And just by doing this from the first suppliers, we have been able to make savings of SEK13 1,000,000, which is we are rather equally shared between the two companies. And this is savings that's actually coming, Frick. So this will start coming on from January. While the Far East savings we're working on, that will take a little bit longer because of the lead time of the products. But those will also come.
And like Paul said, we have the Santa example. So we will work on the private labels. We will work on the signed products to cost and that's going to drive the partnership forward. We believe that the partnership is great when it comes to strategy, and it will create value for the shareholders. We're very happy with the good start and has a strong management team.
You will meet them afterwards. And they have dedicated employees and we actually realize to share all the same kind of focus areas as Adelofis. We're working on the same things. We have the same challenges and might we also find some common solutions. The initial savings estimates we had was SEK 30,000,000 to SEK 40,000,000 for our employees and that has been confirmed through the 1st months of work.
And for both companies, doing this partnership is international expansion at a very low risk and also at a very low cost. So now we move on to the distribution pot, yes, now.
Thank you. I would like to start off with showing a movie of the new premises we are building in Mas. I have to disappoint everyone, it's not going to be available on Netflix. So you have to sort of look at it at this version.
So the facility is large.
I mean, it's 62,000 square meters. The total area is 125,000 square meters where we operate on. We have already built in, in the buildings infrastructure, the support for future extension. So for example, the high bay warehouse here is already prepared for another extension of additional 30,000 pallets and the same applies to the low bay warehouse on the other end. What you see there is a mezzanine, which we inserted actually quite late in the project.
So it's a mezzanine approximately 2,500 square meters, which is inserted there to support what we hopefully is going to see be our e commerce business going forward. So when we launch the and move the e commerce business back to the central warehouse, this is where the production is going to take place. So we don't interrupt with the obviously with the wholesale business.
So
will get the key for the building in May next year. All the outdoor work has just been completed. Some of all the contractors are working inside. We have put in place 30 gates for inbound and 30 gates for outbound activities, so really large scale in order to have all trucks coming and going at any given time. So moving from 5 to 1, obviously something we have been waiting for, for a long time.
Doing so, we still the total footprint of the warehouse is actually declining with 13% and at the same time increasing the capacity with 34%. So that's a really good combo. There is a 15 year lease agreement with Fabrizusgruppen in place to support the setup. And as I just showed you, it's already prepared for future expansions. We will be partially operational from May next year and take full access to the automation a year later in May, June 2020, which means that we will work from 2 sites in a transition period from 2019 to 2020.
Before we talk about automation, I would like to draw your attention to 2 other quite analog items. And one is the setup here, which is quite unique. It is unique in Norway. It's the 1st dry port setup that is set up in Norway. And it's set up in this area here, which literally is a 30,000 square meter area, our next door neighbor.
And when we moved and decided to move for most as a location, obviously, we're one of the Norwegian's largest importers of containers. We import approximately 6,000 TEUs annually. And their proximity to the port is important. And having the port now as a next door neighbor, you don't get that much better setup than this. And we will have an extreme flexibility and closeness to our complete container park in the dry port.
So this is Moss Port Authorities has leased we have rent agreements with Moss Port Authorities for 10 years on this piece of land. And obviously, they will keep a lot of customers also in addition to Europies on this piece of land. But it's going to be a great setup and a huge benefit for us. The other item, which is literally on the other scale of being automated is our lean program. We introduced our lean program roughly 8 months back, starting off in trying to make lean facilitate the realization of automation at a full scale.
But really and truly lean is also about embracing, engaging, involving your people to get them truly involved and be a part of the decision making. So we are now in the program where all 180 operators are actually doing that. Lean is 1st and foremost 80% culture and it's 20% about methods. And we are taking advantage of some other methods initially. There is a whole stack of different methods, but we are taking advantage of the 5S method, which really is about housekeeping really, putting your things where it's supposed to be and clean up after yourself.
And my favorite is the blackboard meetings. So when the photographer is there, I even participate myself. But we have divided them the whole group of 180 operators meeting weekly in small groups, 5 to 10 people, looking at the whiteboard, looking at their key numbers, writing them in there with a pen, using traffic light colors to indicate if it's good or bad news, engaging with the people, talking about the problems, having suggestions. So all that interaction is extremely valuable. And even though we're just 8 months down the road, we have seen remarkable results.
I mean, it's actually too soon, but our sick leave is all time low, just 8 months into the program. And at the same time, the employee satisfaction survey just we just completed showed an all time high in terms of employee satisfaction. So an extremely attractive combo from our point of view. So high bay and automation. And the high bay as such is really 1st and foremost something about storage efficiency and storage density.
This black box, 10,000 square meters, is going to have a capacity of 65,000 pallets. We will have control of all inflow through the part here, where it is going to be format controls, labeling taking part. What you don't see that well is that we have inserted a we being one of the largest campaign machines in Norway, we have inserted a campaign peak area here, which is going to get feed constant feed from the high bay being continuously replenished. And we're going to take, I think, the 100 to 150 largest products from the campaign every week and we're going to pick them in this area, meaning that the operator is going to have a very short sort of picking route to complete his order, extremely efficient. Which is also don't show in the picture is that our low bay warehouse is going to be 2 60 meters long.
That's quite a distance to travel with a forklift. So we have inserted in the ceiling 9 meters up, we have ceiling mounted a conveyor that's going to take pallets automatically from the high bay warehouse and we have created 2 drop points inside the warehouse through to move pallets out with a capacity of around 100 pallets per hour. So it's an efficient way to move pallets when the building is large because the building needs to be large, our scale of business. This in many ways illustrates our journey. So we are in my hometown now in Fredrikstad, literally working out of 5 locations, 6 if you add our 3rd party logistics provider, which at the seasonal peaks actually consumes almost 50% of our business during spring and Christmas periods.
So hopefully this soon this efficiency represents the past. This will soon represent together with the automation part up here represent the present. And then we will talk now to the future, which is illustrated by these two photographs. And the automation part 2 is about we have been screening our main processes inbound, picking and packing, outbound, but fairly quickly fell down on looking at our picking process. For the obvious reason that that's where the most of the man hours are consumed.
And secondly also, that's where you find most of the developed technologies available. We have been looking at the other processes as well and there are techniques there, but they are not that developed, at least not meeting our requirements and demands. So moving into the picking area. We felt that we had fairly satisfactory solutions for high moving products, pallets coming in and out. You don't automate the full pallet and put it into a high bay area and take it out later on.
That is just moving constantly. We also have coverage for our campaign products in the picking round that I talked about initially. And at the same time, you don't automate your slow moving products. That is the business case that will never flow. So we have been looking at the white spot in the middle where most of the products actually lie.
Looking at different technologies available, being mini load, shuttle systems and our outdoor store. And we are fitting our product assortment and our processes was the shuttle solution. And I will show you part of that conceptually in a video now. We are currently in a tender process with several vendors. So this is an example from one of them.
A shuttle system is actually not a new invention. Shuttles has been around for 10, 15 years at least. But they have recently so this is generation 2, if you like, which was introduced to the marketplace 3, 4 years ago. So it's getting mature. And this is a goods demand solution.
And here you can see a part of why we decided on a shuttle compared to outdoor store, for example. And it's visualized by the cardboard boxes you see here, because in other solutions you have to literally empty the cardboard box into a plastic bin, in a plastic tote. But this shuttle solution, Generation 2 carries the cardboard box for you because this is how we'll receive it from the supplier. This is the same box that we later on is going to pick and put onto the store order. We don't want to move that around, pick and pack it and with no added value in the meantime.
So that's new for the 2nd generation of shuttles. What's also new to the 2nd generation is that the sizing of the location can vary according to your product. The phase of the generation 1 solution had a fixed size for storage. Normally that was 60x40x40, which is a standardized box in the industry. The generation 2 can actually narrow that down to be a 30x30x20, if that's what your product size is.
So that you don't so you then you don't have to compromise on the scale of the complete setup. So we are now designing a shuttle solution, which is going to take somewhere between 50,000 to 60,000 locations and it's going to hold production for 6 or 7 days of inventory. So that means that it's going to be a constant flog of products going in and out constantly. That's why we were seeking the solution where we could handle things easily. We can't empty a cardboard box of products into a plastic tote and then take it out 2 days later.
That doesn't make sense at all. So to support our business, we estimate that we looking at the shuffles here, we need to support the business we're setting up between 100 150 of these little babies to support all the traffic going in and out at any given time. And that's a part of the business case obviously. What you also can do, having a shuttle solution, which you can also do with other solutions obviously, is that you can sequence your products so that the operator receiving the products and creating the pallet and the order for the customer, we can sequence the products to match our store layout to improve the goods receiving process in the store, which tomorrow is going to be 258 stores and that's going to carry a lot of value. So in our world, it's going to look like another black box and you're going to have operators on the front who is receiving products constant flow.
So we have estimated that approximately 70% of the SKUs will actually be handled via this shuttle solution. We are designing it for what we expect to be our 2026 volumes. So that's going to be our sort of design year. And the bullet point number 3 is probably the most important bullet points on the slide as such because that's actually carrying the business case. We obviously increased the picking efficiency.
Instead of having an operator on a forklift driving around on 40,000 square meters, he or she is going to stand still now and receive products constantly. And our evaluation of this has been that we are currently running at just north of 90 pix per hour and this solution is going to give us 3 50 pix per hour. So that's really where the business case is lying. Busy days trying to get the shuttle project, if you like, going into parallel with the automation part 1 if you like of our project so that we can meet mid late 2020 as our finish date. And as I said earlier, that means that we will operate out of mass where we get the key May next year and we will continue to be in Fredrikstad until mid-twenty 20 to support our total business.
I won't keep you too long on this slide, but obviously the financing part for 1 for automation part 1 is a 10 year lease agreement covering the investment of SEK 150,000,000. The CapEx requirements for Automation Part 2 and there the finance part is still undecided. And I do refer you to the appendix for additional information on the topic. So what? This is sort of the key number.
The OpEx in the percent of group's revenue based accumulated based on all the initiatives that are shown in now is going to take that down with 0.75 to 1.25 percentage points and doing so at a full scale in 2023. The savings are and of course then this bandwidth is equivalent to a ratio of SEK 40,000,000 to SEK 70,000,000 assuming 2017 volumes. Savings coming from the quite obvious factors, obviously, lease expenses. We are moving the complete business, sort of the distribution business 30 kilometers closer to the origo of the chain. So that's going to carry value, especially in a country like Norway where transport costs are extremely high.
We will get sort of automatic savings from the pure fact going from
5 to
1 site. And obviously, at the same time, we will get benefits from the automation initiatives, both 1 and 2, as we have described. I think that was my message.
Thank you, Portia. Yes, we will continue. You will have the opportunity, of course, to chat with Port Christian in the break if you are interested in SVR in this automation opportunities are exciting. We'll move on just before the break to the efforts we're doing to improve customer experience. This is a constantly moving target and it's a fun part of the business too.
I think let's look at the movie first. From your homes, you can show me the front end facade. Of course, Europolize as a consumer concept is all about serving the needs of the consumers. Our customers are the most price conscious in Norway. They love doing a bargain.
That's why they come to Evotopolies every single week. They love seasons and they love the accessibility of the European network. That's key reasons for why they come. So what we're doing is that in the end, the consumers are the ultimate owners and managers of the Autopies. So what we are doing is that we are every year, we are asking them a set of brand statements to measure in a fact based way how do they actually appraise us on the most important brand statements.
And the survey this year was out just like a couple of weeks ago. And we mentioned some of it before, but every year we do this. And we follow the development to make sure that, yes, they trust us on prices. Yes, we are the campaign machine of Norway. Yes, we are the ultimate seasonal store of Norway, not just because I believe it, I think that we are, but because the consumers, the customers think we are.
That's important. And on all these kind of brand statements, what we have seen over the last 5 years is a huge trend where we are moving on all of them. We are moving in a positive way. On some of them, we are already number 1 in Norway and on some, we don't, but we are going to get there. So we're going to continue doing that, obviously, also going into the future.
And this is a proof sort of a little bit proof of the pudding that we are actually the journey we have just started in Europrest is, I think, one of the biggest transformations in Norwegian retail in the last years. We are going to continue that and we are going to measure that the customers appreciate it. Concept development. On the left hand side, you'll see a picture, I think, is from one of our stores in Borde that is closed now. It's actually a great store.
Oeyvind, who has sales and ops director, will see that you'll see the products, you see the volumes, pricing, good, but obviously a little bit more old fashioned. We have modernized now the stores. We have gone from being a store with 6, 7000 products at a low price, but just a lot of products, to be having distinct shop in shops. Going forward, what we're going to do is that we're going to make more within each shop in shop, even more distinct shop in shops in shop in shops. The coffee is a good example of that.
In some parts of the stores, we need to simplify because it's getting too complex. So in some parts of the store, we need to simplify the message to get the price message across to the consumers. In other parts of the store, we need to inspire more. In the home and interior segment, we are too efficient. You're not getting inspired.
And I'm not you guys maybe, but the girls here, you're not getting inspired enough. So we need to calm people down, let them go there and browse and get inspired because then they buy more products. And of course, this is also the high margin part of our business. So that's on the concept side and we know that concept matters. We have seen from our own figures that when we refurbish the stores, the consumers like it.
Some people ask me, are Europe are you getting too nice? But I said, you can never fool the customers. You're not getting too nice if the prices are not getting relative to competitors too high. The consumers are the ultimate judge on how we're doing and they like the new concept. They like the concept changes we do.
They like Evolopris more today than they did 5 years ago. And they are going to like Auropolis even more 5 years ahead than they do today. It's a constant journey. Also on the seasons, we are, as I said, these seasons are 5 years ago. I would say we were 1 among many seasonal stores in Norway.
You go to Agilopris, but you could also go other places. Today, I think we are the undisputed seasonal store of Norway. If there's one place if you only can have time to go one place, you come to Agilopris to get everything you need at attractive prices for Christmas. Going forward, we are going to do more within each season. Next year, we're going to be the lawn expert.
It sounds strange maybe. We're going to be the pesticide control expert. We are going to be we're going to have a more distinct position within each season, and that is going to reinforce the message to the consumer that we are the seasonal store of Norway. So also there, in the same way as we do with the concept, with the shop in shops, we're going to be more distinct within each season. And we see that all the category developments we do is actually changing the mix of our business.
In the last 4, 5 years, we have actually grown the part of our business that is the most competitive, the grocery part. That is the business that has grown most in Europe. Going forward, we're going to put a lot of emphasis also on the other parts of our business. And the good thing there is that it's not just creating sales, but it will also create better margins. So if you are able to succeed also in the general merchandise and specialty retail part of our business, that will have 2 benefits, increased sales and increased margins on average.
And we're going to do it in the same way as we have done it on the grocery part. It's we have a toolbox, I will call it internally. We have a toolbox that we use to develop our categories. In some categories, some are important and others, other things are important, but we go through the checklist for all the categories. And we constantly look at our categories, challenge ourselves constantly trying to become a little bit better.
So this is the toolbox we a part of it that we're using. We don't want to give all the details to our competitors. The best example of it is actually one of my favorite categories, even though I don't have a dog or a cat. It's a pet. 5 years ago, we were one place where you could buy pet food, primarily for your dog.
We didn't have any A brands. We had Max Dog, Max, and that was attractive price, but we didn't have any brands. Over the last 4, 5 years, we have introduced brands. So now we have a good, better and best offering to our customers, good being our own private label and then better and best being branded products. We started introducing the shop in shop that was dedicated to pets, pet food, all 5 for pet, not just dogs, but any pets.
We introduced our authorities to give more credibility to what we're doing in there. They are also our advisors on the assortment development, and we started using them in the marketing. And lately, we have also started developing our own private label, a little bit inspired, as you said previously, by the Aldi and Lidels of this world. And now we have not just the MaxDog, the Price Fighter, we also have a MaxDog Premium, which is in the like a better product and world news today, we're also going to have MaxDog Premium Selected. So this is a world launch of MaxDog Premium Selected.
It's on for you here today. It's going to be in the stores Q1 next year, so we have to be a little bit patient. I don't know how many of you have a dog? Fantastic. You know that when you this is the Mokkslaw Premium, great packaging and great products.
You know that when you make dry food for dogs, what you're actually doing is that you're heat treating it twice. It's a little bit like you're cooking your vegetable twice. Of course, that's not optimal for taste, but that's what you're doing when you're making the basic products. In Maxdrunk, premium selected, you are only heat treating it once and then you are dipping it, the product, into duck fat, which your dog loves, and then you're serving them. Does it sound nice?
Yes. I thought you would say that, so I actually brought some for you. So in the break, you can try and test it. Fantastic. It's a great product.
Okay. So muxDOG Premium Selected, launched next year, fantastic products. Now we're going to have a break. And after 10 minutes, take a coffee, some drinks, refreshments and come back, and we'll give you more details about our strategy. Okay.
Everybody, welcome back. I we had an extended break since I understood that most of you not only had coffee and gingerbreads, but also had a little bit taste of the MaxxStar Premium selected. That's good. And so we'll continue on the 3rd focus area that we have defined today, which is the driving the customer growth. As I said, this is the blood and veins of a retailer and you always have to increase customers' base.
Now we have a lot of digital tools in addition to the physical ones. We see that our physical tools is still working and Espen will come back to it in a minute. But of course, the exciting thing is just that we have a range of digital tools today that we are just in the starting phase of utilizing, and this is an exciting part of being a retailer today. Our consumers are in many different channels today, and we as a retailer have to follow them in all these different channels. And as I said, we know that the physical marketing we're doing is working and has a huge effect, but obviously, we also need to communicate with the consumers also in new channels.
And the data we get from that process, this is a fun thing about the digital area is that that gives us an invaluable insight into what the consumers really want, not just what they say they want, but also what they really want, and I'll come back to that in a minute. So the digital marketing, the eCRM and loyalty program, e commerce all have to connect. And I think one of the assets we have as a physical retailer is that we have the physical network and when we get a bigger online presence, we can actually combine the physical presence, the 30,000,000 people coming into the stores every year with our online offering. There is a reason why Amazon is investing into physical retail, and there is a reason why physical leading retailers are investing into online. So the future is not online or physical, it's actually both.
And the tools we have, obviously, I see that all of you are every now and then checking your mobiles. We are in a mobile society. The front thing is that, that means that we can reach an audience that we are not reaching today as good as we want with the physical leaflets. And in addition, we can actually create more loyalty If I am a dog lover, which I, of course, am, I'm If I am a dog lover, which I of course am, and we have an offer on the MaxDOG Premium Selected, I want to know about it. If I don't have a dog, I don't want to know about it.
It's nice. If I knit and Aveloppres has some special tips or some new sweater that you can produce by making without knitting, then of course, I want to know about it. I want to know it. If I'm not knitting, I don't want to know about it. So this is the relevance of mobile technology and mobile digital marketing.
And what really gets me up at night, which I think is in a fun way is, of course, that when you do that in the digital channels, you create all that kind of data. And this data is the gold mine of Europolis. It's not just the physical network, it's actually the data we have on the 30,000,000 customers, not just what they say, that's also valuable, but also what they do. And what we have put in place now this fall is starting to accumulate data, so it's still in the buildup phase, is that we are starting to create a database of information about what our customers, frequent, infrequent customers, loyal, not so loyal customers, what they're actually buying. So we can start understanding who are the bargain hunters, how do the bargain hunters differ in a very profound way from the most loyal customers, from the most profitable customers.
If we have a front page on this in these leaflets, we can know if we reach our most profitable customer or we can only reach bargain hunters. We can see in certain categories when we do the seasonal offering what kind of categories within Christmas is really appreciated by our most profitable customers and what is really just attracting the bargain hunters. When we do the category plans, we can understand in which categories are the customers coming back frequently, maybe we should give them more value, more offers And in which categories do they come very infrequent? It's a wealth of data that we have here. This is the goal.
That's why we have our own dedicated Chief Data Officer in the company. It's just because this is the gold mine of Europraz in the future. And the biggest challenge today is actually that we are not able to process it fully to the extent that we can, but we are getting the tools more and more. But the key thing is it doesn't matter how many tools you have. If you don't have the data, you don't control the data, you don't get it and access it in a way that you can utilize it.
So in the future, this is going to mean that we can in a much more fact based way develop our business, the categories, the seasons and the campaigns. This is exciting. Another thing which is we talked to the journalists here in the break, try to explain that for us, you saw the example from the U. S. And the U.
K. In markets that are much more e commerce mature than Norway, this could vary the region. Most players actually don't have an online offering. They don't have an e commerce offering at all. We think that's unwise.
We think that you should have an online offering, not because it's going to be huge business in 2018 2019, but because you're starting to learn what can we sell online and what can we sell only in the physical stores and what can we sell in both. And actually, if we have a NOK 300,000,000,000 addressable market in Norway, we are in the physical stores only able to reach NOK 6,000,000,000 of it. So we have NOK 294,000,000,000 that we can reach theoretically, of course, online. So this is a much bigger market outside of that. And we are not necessarily competing with the grocery chains or with the Amazons of this world.
We are very often also competing with specialty stores, inefficient specialty retailers that has trying to protect the local position. So it's a good competition. A very small example of that is the Christmas tree this year. It's not the biggest example, but you see that tree over there. That cost you only $2,499 on regular price if it's not an offer.
Fantastic Christmas tree, it won the test best in test in VG 2017. I think it has 2,478 tips, this is branches. It has 345 candles lights. Fantastic product, you can go to Haag, land and find something similar, but you have to pay SEK 1,000 more for a SEK 1 100 and 80 meter 3 instead of SEK 2 10. It's your choice, but I would advise you to buy this one.
So we have now we have 9 trees that we have in all stores. We have 4 extra trees that we have only in the biggest stores. And then this year, this is a new thing, we're just testing it, is that we have one tree that is only online. So 14 trees online, 13 trees in the biggest stores and 9 in the smaller stores. If you're if we open a city store at some point, which we might do, actually do it in Guneirios in March, if you come into Guneirios, 5 60 square meter selling area, you're not going to find 14 trees, but you can access it to click and collect, so you have the full assortment online.
And that combination is obviously going to open up new markets to us. So we think it's the e commerce business growing from miniscule small, small tiny volumes, but of course, it's going to be in the future, it's going to be more and more important in the future. The good thing for the discount variety retail sector, if we are smart and aggressive, is that it's going not going to cannibalize existing sales, it's more going to be additional sales in categories that we are not reaching or in product areas we are not reaching with our physical network. So that's why it's so important and so fun. We see that our consumers today are really, really getting digital.
70% of the traffic at agroforestotenin is now digital and mobile. So mobile, 70%. And the traffic has been increasing every year over the last 5, 6 years and now is at 1,200,000 hits every month and even more obviously during Christmas. So it's consumers are getting oriented online and then they're going to the physical stores. I think roughly onethree in a new survey done by Postnur, almost a third of the consumers also say that they actually check prices online when they are in the physical stores.
So that separation between physical stores and online is just artificial. It's not in the mind of the consumer. I expect Evolopris to be present and attractive online, digital, physical, whatever I am. I don't think Agelop is physical is something different than Agelop is digital. And transparency is an opportunity for us because it tells you that you can go and check that Christmas tree at Haagland and you understand that, that looks very similar to the Europies tree.
And then you check the number of lights and you check the tips and you check the height and you say, maybe I should try and check this out at the Europies. So transparency is good for value So we had provided some estimate. We call it estimates just because we don't really know how much the pace of it, but we think obviously that at some point, e commerce is going to be a significant part of our business too. But the good thing is that we think that majority of that business is things we are not able to sell in physical stores. And we still think, and you can ask other retailers too, who have a much higher e commerce penetration than us, most of the e commerce sales today is click and collect.
And we think that even in 2025, it's still going to be the same. Today, much more than 90% of our sales are click and collect. But even when our e commerce home delivery business is maturing, we think that most of it is still going to be click and collect. And the reason is that you don't buy the 10, 20, 25 kroner products online, but you buy the Christmas trees, the lawn movers, the bigger items, that is a value for you to buy online. So that's why it's going to be more click and collect.
So with that, we also think that, of course, there are opportunities in the physical world, but once again, I would like to emphasize that we don't see a distinction between physical and digital. It's 1 europerease. And to talk about the physical opportunities to drive customer growth, I will ask Jesper to come back again and maybe he will eat some Maximo premium selected here too.
That's my bonus. Okay. Paul is talking about the digital opportunities, and we truly believe that this will help drive traffic to the physical stores as well. And honestly, the physical stores will be the main source of sales and also profits for Auropis for many years to come. We have a robust pipeline of new stores.
We closed one store this year, opened 8 new so far. And Paul is really proud tomorrow opting store number 258 at Terukan. I actually opened my first store 3 years ago. You see this nice picture? It was actually meant to be Tevye Haley opening the store, but he was stuck at the airport.
So please visit my store at Begbie in Frederiksstad. Based on current information, we expect to open 8 new stores next year, and we have a pipeline also beyond that. So it's a good pipeline of new stores coming forward. As Paulus said, we're not that concerned about the number of new stores. It's more important that we open the right stores.
And we have a very strict set of criteria when we evaluate new store openings. They should be EBITDA profitable for the group in the 1st year of operation. They should meet a very strict return criteria. And coming to payback, payback on the CapEx should be less than 3 years. And including the inventory, it should be less than 5 years.
And if the new stores doesn't meet these criteria, we say no because we want to have a profitable store base. So this is very important for us. We work on this and we do past calculations every year in order to make sure that we actually follow-up on the investment criteria as we presented to the Board of Directors. And what we see is actually that the new stores we opened, they deliver on these criterias. In fact, the stores we have opened in the past years are actually more profitable than they were a few years ago.
So the latest vintage we have a full year of operation on is 2016. This is the 2017 numbers. And you see that revenue is growing in these stores year by year. Profitability is high, and they are actually meeting the payback criteria as well as the CapEx is low on the new stores. So we will continue to open new stores, and we will continue to do these benchmarking.
We have a revenue driven concept, so it's important for us that they meet the revenue targets we put in their prospectus for each business case. And we're doing also post calculations on how good the prospectus are for each case. And we see that we are hitting the revenue targets better and better and that makes sure that they actually hit the profitability criteria as well. And what we see when we look at the store base is that the new stores have a high growth in their 1st year of operations. This actually confirms what we have seen in the past that the new stores, they have a high growth as it takes normally 4 to 5 years for an average store to become mature.
So during the 1st 4, 5 years, we have a high growth above the chain average, which was 3.1% in 2017. And the more mature generations, they develop into a more steady state of growth over time. Looking on like for like sales, we have also said that we will focus on developing the existing store base. So basically doing relocations to more attractive locations and also doing modernizations and refurbishments. And during the past years, we've done many relocations and refurbishments.
If we look at the 2016, with the mid-ten relocations, showing a growth of 7.1% in 2017. In 2017, we relocated 7 stores, delivering a growth of 10.8%. So doing this is very important to develop the existing store portfolio, and we will continue to do that. And we do the same investment materials when we do this kind of relocation. So working on the store profitability is extremely important.
And the like for like benchmark is basically all stores that was opened on 1st January, the year before we're doing the analysis. And when we put more focus on the potential in relocating stores, we also need to evaluate how they are located next to other retail. And we actually see that competition can be positive. When we look at this we have 76 stores that are located next to a grocery store, and they deliver above average growth. Same thing for the 12 stores we have in shopping centers and also for the stores we have in small shopping areas.
That's what we're going to visit this afternoon. We're going to one of these 10 stores, and we can see that they are delivering good growth. While the stand alone or the retail park stores actually delivered somewhat lower growth than average. So we see that competition can be positive. We know that when we relocate ourselves next to other retail, both drive traffic and both benefit from that.
So competition is good. When we look at the store base we have, we see it's very profitable. And we believe that this is a testament that we are putting focus on new store openings that it should be profitable, and we see that reflected in the current store portfolio. In 2017, we had 228 like for like stores, of which 212 actually 93% were profitable. And that's a very strong statement.
We do have some that are not positive and those we work really hard to turn. I mean, we saw that onethree of the tail we had back in 2016 turned into positive in 2017. And that is basically we're doing with working with relocations, management issues and putting focus on costs. But we think that the biggest potential is actually on working on this side of the tail, developing the existing portfolio. And we believe that doing a little bit more relocations, a little bit more extensions than what we've done in the past is going to drive growth going forward.
And we see now that in the market, we are offered better locations than we were in the past and sometimes also at more attractive rents. So working on this is going to be quite important. And normally, investors ask what's in it for me. And we are, of course, focused on delivering returns to shareholders, creating value. And we believe that delivering on the long term ambitions we presented that Paul talked about, we will create value.
And we should capture market share with the like for like sales above the market. We will add new stores and work on better locations and do relocations in order to improve profitability and sales. We will reduce costs and increase efficiency to improve profitability for the company and in the end, return cash to the owners. Talking about like for like and growth. We target to continue to deliver like for like growth above the market.
We will add new stores, but the key driver will be the existing store portfolio, where we believe that working on the concept we have, the category management, also the digital opportunities will drive like for like sales in the stores. We have a focused strategy when it comes to developing the store portfolio, very strict on the investment into new stores. And as Paul said, if you don't find it profitable, we will not open the store. If it's 5 on year, that's fine. If it's 0, that's also fine because it should be profitable and it could also be more than 5 stores.
Let's see what kind of opportunities that comes ahead, but we will remain very strict to the investment criteria we have. Talking about the margin. The target for us is to increase the EBITDA margin over time. We believe still that the gross margin effects we will see from the sourcing corporation together with Bintockmoney, that will be, to some extent, be reinvested into the price position because the reason we exist is the low prices and we cannot compromise on that. So we expect that some of those savings will be reinvested into the competitive situation we are in.
But the OpEx reductions we get from the warehouse, that's what's going to drive the savings and the margin improvements going forward. So we did when we presented the first case, it was automation in the High Bay area. Now we're extending that, and we have raised the bar for the savings potential with also the shuttle solution that Paul Christian showed before the break. So the savings from the new warehouse, that's going to be the key for driving profitability forward. And like Paul said, we're not going to be a bank.
We target to return excess cash to the shareholders, and that's just what we have done in the past. The wording in the dividend policy remains unchanged. So it's 50% to 60%, but also then to keep an eye on maintaining an efficient balance sheet. And that's what we've done in the past. We also now done a share buyback program.
So our Arupis completed this week. So we held now 4,500,000 shares in Arupis. That equals 2.7% of the issued shares. And that will not affect the dividend next year. And what is an efficient balance sheet?
We believe that the healthy liquidity position we have at the moment, that is a healthy balance sheet. And that's what we've seen in the past. We know that the Q4, like Paul said, is the Champions League of Adelofis every year. That's also the Champions League for the CFO because it's the high season for cash. And by year end, I'm sure that we will have an efficient and healthy balance sheet with a leverage ratio that's acceptable, And we are in the process of refinancing as well.
So by May 2020, we need to refinance. And optimizing the terms is key. And it's really promising to see so many banks in the room. I'm looking forward to see your offers. There's a lot of competition out there also among banks.
So we are an attractive customer for the banks and the refinancing will be done in due time. And then we will also decide on how we do the financing of the automation part 2, the SEK 150,000,000 that Pakistan talked about. We are implementing the IFRS 16 from the 1st January 2019. That has no cash effect, but it has a balance sheet effect and it has a profit and loss effect. And that is explained in detail in the appendix to the presentation.
So I think we'll move over to and the presentation of the Swedes. Paul? Yes.
Thank you. Thank you, Espen. Even CEOs can be sick every now and then. So Fredrik sends his regards, he's actually sick. So he couldn't be here today.
So you have to picture me now as Fredrik. I'm 10, 15 centimeters lower. I'm much more fit. This guy runs a marathon in 3 hours and 30 minutes, which I'm not even trying to. So I'm Fredrik, okay.
And we present RuneScruppen and Robere. Luckily for us, it's not going to be just me because that would be boring. It's also Mikael and Meta on the side here from Erobe. So part of the team there, great people and as you'll see, very, very sort of experienced managers in the most commercial positions at OBE. And as Esper and we have talked about before, the relationship and the cooperation with OBE has really hit off to a good start.
So it's almost love at first sight, very, very good. Just looking at OBE, I'm going to start and now I'm Fredrik, but not really. So just some key facts, there's more facts in the material handed out. OBE is actually 70 years this year, so I think it makes it the oldest discount variety retailer in the Nordics. So a proud company started by Rune Svensson in a small town, very much like my hometown, Harmal, but it's called Schellinge in southern south of Stockholm and has very basically it's very much similar to Europe.
It's not just in the culture and the people, but in the managers, but also in the assortment and the offering to the consumer. But I'll leave that to Mikael and Merta, so I can do that much better than me. The management team, because retail is all about operations and obviously management is important. Frederik has a long experience in from ICA and from the pharmacy business, so a seasoned executive, great guy. He was at the extended management team meeting in Agudotris in October and got outstanding ovation, so really good performance.
Eeva represents the continuity, which she has been in the company for almost 10 years on HR and Kent as the CFO. And then Mikael and Mette are the key commercial managers. So Mikael has the responsibility for buying and category development and logistics, so no small feat. And then Meta has the responsibility for the store operations and the marketing and concept. Mikael has an extensive experience from IKEA, Santas and Viskars not just in the Nordics, but also been in the Far East.
And Meta has worked with numerous retailers, also IKEA and also worked with Drusta, who was one of the architects in the change at Drusta back in 2011 and a couple of years forward. So great people to have on the team. It's an asset also for us at Europriest because we can exchange ideas. EOB can benefit from our learnings, but we can also benefit from the experience that we have in Sweden, in addition to all the synergies that we're getting together. And guess what, at OBE, the price is the difference.
It's all about price also at the in Sweden. And I think there's no one who's more price conscious than the Swedes. So they can I think they can learn and ask Norwegians a lesson in that aspect? And even better is the fact that OBE is really, really known in Sweden for having low prices. In the discount variety sector, they are unrivaled in terms of price position.
So when you think about it, it's sort of OIB, that's where we get the drivers and best prices. What's taken place over the last few years is that over the last 2 years at there's been some big changes. There's some very experienced managers coming in with Mikael, Mehta and Fredrik heading up. In 2017, it was a focus on developing a plan. When you want to do a turnaround, you start cutting costs first.
So they cut down the cost base in an impressive way to get the kind of platform they need to be able to profitably start growing. So that was the focus in 2017. I'll show you some figures afterwards. And then we have started working on the assortment and the concept and eventually the seasons and all that stuff and how we operate the stores. Very, very similar to what we have done at Europareys.
And of course, they can benefit from our experiences, but we can also benefit from their expertise and learnings. And then going forward, it's all about setting the concept, setting the category plans and the seasonal offering and then comparing notes and learning from each other. So it's an ideal point of time where you can just started cutting costs and having a clear plan and then now it's time to grow. The first initial part, this is not a listed company. So I mean, it's not like they are doing quarterly details on the figures.
Sales are quite sort of flat, slightly up, but it's quite flat. Gross margin is improving. This is year to date October. And then sorry, September, sorry, September. So it's but the costs, the work they have done on the cost side means that it's a huge improvement this year compared to 2017 and that is before we start growing.
So it's an exciting time. I think the cultural fit are good and we are very much committed to the cooperations together with them. So we think there's an exciting times ahead of us. We can learn from each other. So to in order to present a little bit more what they're doing much better than I can do, I'll hand the word over first to Mikael, who will then hand it over to Metan, and I'll be back again as Fredrik, the fit guy in a second.
Okay. Thank you, Paul. As Paul said, my name is Mikael Demetz Hilli, and I'm responsible for Range and Supply within Rundgrengruppen. And I started here at Rundgren at the end of 2016. Before that, I spent 10 years in Asia in various positions, mainly focusing on sourcing from Asia.
And before that, I was 3 years in North America, focusing on range and sourcing within the Americas. If we look at how we have organized our business within Rundsen, we are organized in 2 different business areas, groceries and general merchandising. And then from the category level, we have approximately 11 different categories, which are then more or less synchronized to the same categories that you would find in Europe, please. We have approximately 90%, 95% match between our categories and the Europe's categories. What we have done also in Rundsen is we have 5 profile categories, which you could say are destination categories, and that is wash and clean.
We have health and beauty, pet and personal care. And then the seasonal business is also then a destination category within Rundsen OBE. If we look at the split between groceries and general merchandising today, general merchandising stands for 37% of our total sales and groceries for 63% of our sales. Looking at 2019, then general merchandise will be at 40% of our sales and thus, of course, then groceries being at 60%. And our goal here is to improve the general merchandising up to 50%, So we will have an equal share of sales, groceries 50% and general merchandise 50%.
One key in driving our profitability is then private label. We have today 10 brands that we own ourselves, which you can see on the right hand side. And they vary from barbecue ranges to small appliances to mobile and computer products, etcetera, etcetera. Here, we are also then working together with Europies, as mentioned earlier. So our first common brand will be Effect.
And Effect will be then also RuneSchenerobe's washing and cleaning brand going forward. So that will be implemented within RuneScen during 2019. Looking at then our own brands. Majority of our brands are sourced in Asia. Today, we are sourcing approximately 20% of our annual sales are coming from Asia.
And the target now is to increase up to 25% of our total sales should now come from Asia going forward. In order to support the journey of going to an equal sale of fifty-fifty between general merchandise and groceries. We have also then for 2019 2020 4 specific categories that we are focusing on in driving sales and profitability. One is one area that Paul has spoken about, and that is the seasonal area, where we will increase then if you look at springsummer, where we will have a much wider range and deeper range going forward. And we will also allocate more space, both floor space and shelf space, in the stores during 2019 to support then the growth of spring and summer sales.
The same goes for Christmas. We will also then have a new wider and deeper range going forward with an improved gross margin. And here I can also say, Paul, that it's not just a hope, but we will in 2019 also then have common products that we will source together, starting with the small Santa that Paul was talking about before. So that will already start in 2019. So here we have both decorative items and lighting items that will be commonly sourced between Europies and Rundsen.
Another focus area is the disposable range that we have, which is a big part of our business. Here, we now are starting the journey of phasing out all plastic items within the disposable area and then replacing that with biodegradable items. We are also improving a new range of seasonal items, both when it comes to spring summer and Christmas and the new basic range for disposable items. The 3rd area that we are focusing on during 'nineteen will be small appliances, where we will have a new wider offer with improved gross margin, also new packaging and new communication. There will also be a new layout of the area in the store where the items will be displayed.
And finally, the focus area that we have is also what we call multicultural. We have today a range of what we call world fruits in the grocery side, which we will continue to develop going forward. We are also introducing multicultural items when it comes to health and beauty, candy, etcetera. And not the least then in home decoration, we will also then have a new range of more multicultural items. So parallel with these four focus areas that will support then our sales and profitability, we are also working on 2 areas, more in projects, where we're looking at what we call a green room, which we today are testing in 2 stores, which consists, of course, of green plants, hence the name, but also then gathering green plants, artificial plants and all the accessories around the plant business into one area in the store.
And this then we are running now in 2 stores, and we will evaluate in the beginning of 2019. And we have also started a project around the family. How can we be more relevant for the family? Thus, focusing on children 0 to 5 years and the range and the products around kids 0 to 5 years. So this, we aim to start to test at the end of 2019 and then going into 2020.
So these are the 6 main focus areas then that we are running currently when it comes to the range and how that supports our sales and profitability. To support then the category organization in Sweden, we have our sourcing organization in Asia. Today, we have 3 offices in Asia, Ningbo, Shenzhen and Ho Chi Minh. And they are then focusing on the sourcing part of the business, meaning being the prolonged arm of the category manager, dealing with the supplier on a day to day basis, doing the negotiations, doing the quality management and also when it comes to supplier code of conduct is also a vital part for this organization. Looking at supplier code of conduct.
We are, since 2017, a member of BSCI, Amfori BSCI. And today, 86% of all our suppliers in Asia are also then connected to Amfori BSCI, and that's also audited by BSCI. We are putting our effort and concentrating more on then moving the supplier up towards a higher standard than maybe what they are today. But the important thing is that we have the cooperation and we're then taking also responsibility of moving and improving the conditions at the suppliers. Then coming back to maybe the most exciting part, I would say, and that is the start of the sourcing cooperation that we have with Europrice, which has started in a very good way, I would say.
And I would also maybe, Espen, say that we have concluded 14 of our suppliers where we have finalized now the common negotiations with 14 of our largest European suppliers, which is really, really exciting. And also the initial saving, I would say, are maybe in the more moderate side. I think we will see a good improvement when it comes to cost savings, starting with these only with these 14 suppliers. Then we've had also a good we had an exercise together, all category managers a couple of months ago and identified approximately 115 common projects that we are now running in the sourcing organization. And we will have a follow-up now on the status of those projects in January 2019.
And parallel to that, we have also then identified 8 projects, significant projects that we are running together then, RuneScen, Europes and TOKMANI, which we're also now then moving forward with. That will also improve our gross margin. Yes. So that was short about the sourcing.
Join me to visit a brand new EOBE store. Warm
welcome.
I didn't so the meaning was it was supposed to be really nice music here. And my first was to say now, did you enjoy the ride? But you can feel the ride, I hope. I know that our customers like our new customer flow because they stay much longer in our store. And what you'll see was we are working within big opening areas.
We have those red breaks with strong low prices, campaign areas, of course, big volumes and simple materials. We really want this to be the feeling of low prices. Don't get too fancy. EOB is a low price company, a strong low priced company within Sweden. Our goal, grand opening every day or as we say, a store in shape is new every morning for our customers.
And I think that's very important to focus on every day so the customers have a first impression that it's very strong. My name is Mehta. I've been working within retail for the whole of my life. I am the commercial manager for EOB since 1.5 years. Before that, I have the same position at the Sweden company, Rusta.
During my years within Rusta, I also started up Rusta Norway. So it's really nice to be back in Norway again. It's been some years ago though. For me, it's very important to have the feeling of ease and joy of shopping. I think that's my passion and that's why I've been working so many years within the retail business.
And I bring that with me to Eovia today. Eats and joy of shopping, that's really something extra. I live in Stockholm, and I'm very happy now because now I can take by foot to our new concept store or concept shops, Euobia City. We built some of those Euobia City shops now in the big city areas. And EOBIA City is one of many new things within the EOBIA company we started up this year.
So EOBIA City is brand new for us in April in Stockholm. In November, we had a new market survey, and I'm very proud and happy that we still have this strong low price position within the Swedish market. For us, that says that we are in a good direction for the coming years. But it's not just low prices. It's also good bargains for our customers and of course, ease and joy of shopping in our stores.
And this all this together is also very good for a good position for us for the next coming years. And we have a strong start for 2019. We are a popular brand. Customer loves us, even the likes and loves us. And I think that's also a nice position to have customers who are so frequently in our stores.
But 1 year ago, we decided to launch a new commercial concept, low price party or Lopfiz Patiet. For us, it was very important to put the foot on the Swedish market again and to tell the market that we have the lowest prices to still be very strong. So I will show you an example of our manifest low price party. Enjoy it even though it's in Swedish.
I should be trying to
get some
sound on it.
Yes, could you? That would be very nice. I'm very happy that Espen is with me. So this was the first manifest we launched in April this year to be very strong at a low price position within the Swedish market. And it was the election year that start up with a low priced party.
And it was really nice for us to do this. We've been using it. So we've been using in all commercial channels this year. And I think it's very you need to be strong in all channels and make it very simple. It's a low priced party we've been using for 2018.
And I guess we are the only party that also keep our promises because we have some difficult in Sweden right now, but we are very strong to keep our promises. So every crown counts. So and we say low price yes to that. We have a lot of customers who love us and we have a lot of new customers. And altogether, I'm very proud today to present our new loyalty program.
We launched it last week. And for us, it's important to now be thoughtfulness, work with simplicity and also do some surprises for our customers. So they feel a very good feeling within our stores. So low L'OCCIS PATRIT or low price club, so to speak, even more Aerobel lovers we guess for the coming years. The Swedes have made a choice and now it's up to you.
You're so warm welcome to a new EOBR store. Thank you.
Okay. So now I'm back again, Fredrik, 10 centimeters, 15 centimeters lower, but much more fit. So, OBE, just to sum up, I think that obviously I hope you understand that the logic is very strong between the cooperation between OBE and Europis. 1 plus 1 is in this aspect 3. We think that size matters.
It's important. The market is consolidating and becoming European. So it's really, really important to get that kind of European scale on especially on the buying side, but also on the best practice sharing because very many of the things that Mikael and Mietta talked about is also relevant to Europe, please, and the other way around. So I think but for that to work, the culture has to work together and the cultural fit and I think there's many examples of that not happening, but I think the start of the Erbiloprenees and the OBE Corporation has really, really been good. So very happy with that.
Just to sum up the OBE part, I think that we have a strong management team on board with seasoned executives that really have done this before too. The new organization has set itself in Sweden and is working well in Sennigene. There's a stable sales development. The costs has been focused in the first part and it's under control, and I think that's a smart way to start. And now the focus is on improving and increasing sales and earnings.
So it's at the end of the first initial turnaround. And of course, the cooperation with the Aeroblastics is important, but also the things we are doing on the category, the concept, the seasons and the campaigns. There's a lot of benefits from cooperating together. So we're very excited about the start and Sweden and Norway exactly is a love story. That's good.
So now I'm back again and I'm Paul, 15 centimeters higher and less fit. Our long term vision is to be the best discount variety retailer in Europe. I hope that we have been able throughout these presentations to convey to you that conviction and not just that we want to be European champions because everyone wants that, but that we also have the actions and the focus to achieve it. I think this is what makes it fun to be a retailer today. Some people say that it's never been as challenging to be in retail today that it has been ever.
I would say it's never been as fun because the kind of tools we have necessary available now is unprecedented in our history. So being a retailer has never been more fun. And with the alliance with TUKMANI and OBE, we have a unique opportunity to achieve that being the best discount variety retailer in Europe. The 3 focus areas, I hope you remember, and I hope also you will get the impression that it's not just focus areas and sort of lofty ideas, it's actually also supported by specific actions because in the end, retail is all about implementation and operations more than strategy. Everyone wants to be the best, everyone wants to be better, but it's actually what you achieve eventually online or in the stores that actually matters.
And I hope that you have given you a little bit of a glimpse into what we are actually doing to achieve strengthen our price and cost position, to improve the customer experience and to drive customer growth. So to sum up, why should you guys be sitting? I see most many of you are already investors, so I don't have to convince you, but you have to go out and convince even more. I think first of all, we are in Norway. It's a fantastic market to be in.
There are significant untapped potential in the thriving discount variety retail sector in Norway, but also in the Nordics. We are the undisputed number 1 in Norway in discount variety retail. So we have a good basis for growing. We have more than 2 decades actually of consecutive growth, which is also good. But even more important is that we have a clear plan for where we want to go.
And we want to increase. We want to have like for like above the market. We want to beat the market all the time. We want to improve the EBITDA margin. And if you have any excess cash, we will hand it back to you guys so you can enjoy it.
So we are still it's very much the same plan, but we have a toolbox now that is much bigger with the cooperation with the OBE and TUKMANI and with all the digital tools we have available for a modern retailer. So with that, I think we're going to open up for a session with some questions, if you have anything. After that, there will be a break. We will serve you some lunch outside here. And after that, at 12:15, there will be a bus, you have an Aveloppres bus to Lambert Chetty, where we show you one of the newest stores.
And we will take you through and explain a little bit about how we think about the concept because it might look incidental, but it's actually some thinking behind it and the way we do the seasonal stores. And we've done it now for some time, so we know what we're doing. So I hope that as many as possible can join us on the bus ride. The bus was quite full before you all showed up, and you showed a lot more than I thought. So if any one of you haven't signed up for the bus ride, please make sure that you contact Trine at the back there.
We will get you there, but we just have to make sure that there's space for everyone. So with that, Espen, I think we'll open up for if there are any questions. Just a second. There's help on the way.
Hi, Niklas Kugman from Handelsbanken. I have a question to
Fredrik, so just ask me.
Yes. So I see that the EBITDA has improved in the 1st 9 months from 21 to 51.
So I was just wondering if you are on track
to deliver the €164,000,000 in
EBITDA for the full year
that was in the budget?
I think that, that the most important part of the year is still to come. So I think we will have to come back on that when we are finished with the year, I think.
Okay. And then the like for like below 1%,
Well, a strong summer. I think that the market in Sweden in the summer has been quite challenging as in Norway, I mean, with the heat. So I think this has been a tough year for many retailers, not just in Sweden, but in Norway. I think when you do a turnaround, I think the first and most important thing is the first initial phase is to get the cost base right and then you have to start to do the things in order to grow. So I think the key message today and that we have conveyed here is just that it's an early phase of the development, very much the same kind of challenges that we have seen in Norway over the last 5 years and it's a start of a journey.
So I wouldn't be too worried about the quarterly and monthly figures. I would be much more excited about the long term prospects. We have roughly we have the 37%, 38% of our sales is A Brands today, 37%, 38%. The rest is you could call it private label, 25% is pure private label. The rest is factory brands, which means that it's basically brands where there's no special it's either the factory brand or it's a no brand.
We want the private label part to increase over time by roughly 10 percentage point. So, I mean, I think that there's a huge potential in making it more distinct, creating brands. It can come from the factory brands. It can also come the A brands. But making more brands, stronger brands is an important emphasis for us.
The only reason why we didn't talk about it was because it's definitely high season now, so we are so excited about Christmas. But obviously, for Europe, this is one of those areas of the year where we think that we can we are on a journey where we can improve and we can learn a lot from Robe and the kind of experience and focus they have on price and consumables. We started, remember, last year to really see that and focus on it, and we started the first sort of things this year. Low season is basically from mid August to late October and it's from mid January after the January sales until Easter. That's what we kind of love season.
We have done a lot of learnings in the 1st year. Overall, very, very positive. We know that it's the right direction. And now we are all just basically just using facts to tune in what we are going to optimize, to optimize and improve the replenishment systems and the processes. So I would say that if I'm even more convinced now than I was 12 months ago, that is the right way to go, focus on consumables, make sure that we centrally control the best sales spaces in the store throughout the year, not just in high season to get the best possible bargains and then using new technology to optimize the business.
But it's a learning process. I think it's going to take 2 or 3 or 4 years for us to optimize it if we're ever going to do it. There's always going to be a possibility of doing it better, but it's really a promising science.
And just in terms of mix, your gross
fee has increased over time. Yes.
You're focusing more on the general merchandising. The idea is to bring back
No, I think we should do at least the reverse when it goes back. It's not necessarily a target to go back to the previous mix, but definitely we see that, as I said, grocery has increased its share and that's the most competitive part of our business. We think that we have huge opportunities in kitchen and home and some decorations, And we are sort of setting the pieces in place now. And you should we expect more of ourselves in this area. But it's a different kind of in many of it, it's a slightly different success factors where you have to inspire a little bit more.
It
At the moment, it's from the central warehouse. It's actually quite I think it's quite impressive that we are able to sell the kind of figures we're doing. And we only have a limited number of SKUs from the central warehouse at the moment. We are just in the process of turning up so we can increase the number of SKUs available, and we can utilize store inventory. So it's we are just in that transition.
So the figures you saw earlier today was just I think it's 50 or 100 products where we have where one F pack is same as a D pack, consumer pack is same as a D pack and is serviced from the central warehouse. So very simple just to get started. So we are really, really in the initial stage of that development. And we see that our consumers, not just ours but also in other formats, they like that convenience of buying online but picking up offline. You can ask as many as you want, that is fine.
What's the medium term margin target?
No, we haven't. Martin
started took money back in 2013. Do you have any numbers for us in terms of what you have gained, I'd say, in the gross margin results on back of that sourcing partnership?
We don't have any specific numbers on that because over time, this also develops into the stage where you change the portfolio. You're moving to more branded goods and so on. But roughly based on the figures we have, it should be supportive on the gross margin in the range 1% to 1.5% points.
And then about premises leases, I mean, of stores and also the new warehouse. Yes.
Will you be
able to say anything about the renegotiations on the store premises? And also what you feel about the lease terms on the warehouse?
Yes. On the if you look at the store lease terms, obviously, what we can say as a general direction is that it's better to be a tenant now than it was 5 years ago, and it's going to be even better to be a tenant in 5 years, so if you're surviving and we are the survivors and the winners. I think we are seeing that a lot of good and smart and long term investors in the real estate business, they want to have the best formats in their portfolio because they know that that's the best assurance they have for the values of their property. So I think that it's going to be better and better. We don't see the same development yet as we see in the U.
K. And the U. S. Where basically premises are thrown after you, but I think it's going to improve. And I think we see the trend in relocations where we see it's picking up.
One of the reason for that is that a lot of land owners, they really want a tenant like Jaldobris to be there. When it comes to the warehouse, I can only say that I think we have a very, very competitive lease agreement there. The the bidding or between the different developers and of course then you get a little bit more of the value instead of just being a tenant. But we are very, very happy with the cooperation with Fabrizio. It's a 1st class owner, really, really good start to that cooperation.
And then about not only Black Friday but Black Week. Did you say anything about the Black Week performance now?
Right. I think you have to wait until January 31. I can say that at Volubec, you had a very good Friday. But we'll see. It's the Champions League of the year and it's the most fun part
of the year.
So you're breaking up more in the queue for August?
We'll see. I'll provide you with the details.
And then I would like to ask you
I think that's first of all, you have to keep in mind that there's a lot more Swedes in Norwegians and there's a lot more Swedes in Stockholm than in Oslo. Just I'm a board member now of EOB and when I see the figures for the city stores in EOB, I'm like amazed. I would get even more seats to Norway. So obviously, it's an even bigger potential in Stockholm for city stores in Norway and the traffic is impressive. And we see that the first city stores is doing very well.
The newest one is developing well. So getting some are already surpassed expectations, some are going up towards expectations. I think that's the early side. It's only a few months, so it's really, really early days. I don't if you ever get the figure for a city store in Stockholm, don't apply that to Cunetrius because we are a little bit fewer people in Oslo.
But we still think that we are not going to get that many 1200 square meter selling area spaces in Central Oslo. So we are open for discussions with the landlords, but only if we get the right price.
And then the last one. What about self checkout systems? We will see that in the next couple of days.
I think that's one of the things we learned. I mean, the city council, when we opened at Gunes, obviously, we have been looking and talking to Mehta and Mikael about the experiences in Sweden. One of the things we saw was that, yes, they had some self checkout counters. We are also going to eventually going to have that in Norway. It's not a priority yet because of the traffic isn't as strong in Central Oslo as it is in Central Stockholm.
But obviously, we have a firsthand look at the experiences they have and it's very good,
Yes. Just a follow-up
question for me. Very detailed, very good overview of the warehousing and the effects we will see both short term and long term. My main risk is, do you underestimate the changes to the rest of your cost base, given your new and bigger toolbox that you might risk, for instance, spreading double marketing expenses, both delinquents and going online with marketing? And are there other consequences short term?
The short answer to it is, it's no. I mean, it's not like it's a very good question. I think that we are already seeing that first phase of the 2 worlds where you have a digital world and you have physical world. At the moment, as you can see from our figures, we are not really scaling up the marketing in percent of sales. And the reason is that we are gradually getting cost advantages and scale advantages in the physical world and taking down the physical world and increasing the digital.
And the customer club is another grand example of that where we can actually communicate directly to our consumers. It's a very, very cost efficient, but also very sort of personalized way of communicating with our customers. So we don't foresee that it's going to be in huge investment. There's some investment in the IT and the systems and the backbone, but it's not in the big scale. It's not really high.
So that's why we still think that it's an opportunity for us more than a threat. That's a good question. Ole Martin? Yes. Okay.
Markus. The banks are already starting to compete.
If you could start with reminding me about the size of the SKU base, say, 4 or 5 years ago and where you are today? And if you can say something about where you think that will go the next 3 years, both in terms of complexity and size and also in terms of planning cycles for your campaigns. If I remember vaguely correct, I think it was for quite a few campaigns group planned 6 to 9 months ahead a few years ago. What's that cycle looks like today? And where do you see it going in the next few years?
What was
the first?
SQ SQU
base. SQU base, okay. We think that it's we're going to have seen some increases in the SQU base, but not dramatic. The key reason for that is that we believe that the main assortment that we see coming online is products that we don't sell in the physical stores today, but that can equally be sold from partners. So it's not necessarily just that we need to put them in our central warehouse and service our customers with it.
We also see that the online is a way for us to test the potential of certain SKUs. And then if it's big enough, we can actually take it into all the stores. If it's marginal or we can actually sell it purely online, delivered sometimes from directly from suppliers. So some increase, but not a dramatic increase. But that could, of course, change if the potential changes.
And then we have the expansion opportunities at MOS. So that's one part of it. I think that when it comes to the planning cycles, I think it's quite stable. We think that you need actually very much the same planning cycles to get the really best offers on the online. Some products like the grocery part, it's more short term cycles because the suppliers are closer to us.
In the others, it's more Far East and then it's longer planning cycles. What you have to do every now and then is that you have to be more tactical in the pricing and the way you sort of play with the mix. And that you can be even more short term on the digital side.
Okay. And a different one, but when you showed us the different vintages and all the strict criteria, both in new stores, how about closing stores? What obviously, you do have some stores that are loss making in EBITDA. What will it take for you to actually close any of those stores?
Basically, it will be that we see that it's loss making, and we don't see a potential to relocate or to make it profitable doing changes to the management. So basically, that's the one. So if you don't see an option to relocate, make it profitable through management issues, then you can close it down.
The last one we closed was in 2013. I mean, we built it was 1 in 2015, 2016, but that was just because the building was demolished. We don't have any precision not we will close doors if they're not having a path to profitability.
And we also closed one this year because we didn't get the rent we wanted.
Okay.
A couple of questions. First on the dividend, you have 2 criterias, 50%, 60% payout and then an efficient balance sheet. And then my understanding is that you already think you have an efficient balance sheet. So why do you keep the 50%, 60% payout ratio?
Because it actually works. We kept the same policy for the last couple of years, and it works well. So as you know, the payout has been above that range because we have an efficient balance sheet. So we don't see any issue to change something that already works.
Okay. Thanks. And then a
follow-up on Markus question here. You are targeting 5 new stores net each year. Can you say something about the gross number? Or should we expect that also to be around 5?
As we said that average 5, I think that we might actually surpass expectations this year and next year. As we said, we're not really wedded to have specific numbers. It could be 0, it could be 10. It depends on the availability of premises and that we can actually see that it's going long term to be profitable. And every year, we're going to go back and audit.
If we see that there's a deteriorating trend in profitability, obviously, then we will turn it down. So I think that you can expect around 5. It's not going to be a lot of closures that we see now, but that can change. But from the last 3 to 5 years, we've been able to improve on the stores that are unprofitable. So it's not going to be a huge number of difference between gross and net.
Okay. Then a final one for me. You're also saying that your target is to increase EBITDA margin going forward. In that target, is there any effect from the potential of lower store rent costs in that guidance or in that target?
I think looking at an improved EBITDA margin over time, that includes basically every cost item that comes in. And to be honest, I don't care where the savings comes from. If it comes from rent, if it comes from purchase agreements, it's from efficiencies, that doesn't really matter. But over time, we expect to see EBITDA margin to increase.
Okay. Thank you, Martin. Let's go on BNB Markets. On Slide 61, you showed the category mix on your sales. And If you do some back of envelope calculations, you will end up with that from 2015 to 2018, some 60% of your growth has been in groceries.
And now the ambition is to reverse that trend, growing into more general merchandise. What makes you comfortable on that sheet? And hasn't it been very important to have groceries growing to put the traffic?
It's not necessarily that we want to reverse the trend. I mean, we don't want to decrease the growth in grocery. I think, as you say, it's a valuable traffic builder and it's the most competitive categories we have, but still we've been able to see it. It's more a sign that we want to put emphasis on growing also the other categories as we have been growing the grocery. So it's not a target in itself to reverse it.
It's a target to increase the other things. And we see some promising signs in the specialty part and then we need more work cut out for us in the home and inspiration side. So it's not a specific target to get the grocery done and the other one up. It's get the other one up as we have been succeeding with the grocery.
And on your I guess, when you're at your factory IPO, you have the target initially of some long term 30 stores. Now you're taking down the long term store growth guidance from 8 to 5 on average.
The composition might be a little bit different. It might be more city stores and there might be less stand alone stores. But and it might be that at some point the growth is so big online that we don't have to take the last 10 or 20 stores. As I said, this is one of the few areas in our business where we said we're only going to open if there's a business case for it and the audits every year show a good trend that has done over the last few years. But probably it's going to be more city stores in that portfolio than we thought 3, 5 years ago.
And finally on the franchise stores, I don't think a bit of a break on the margins. What is the situation there? Should we expect several franchise stores to take orders over the next few years?
I think we should expect that it comes like 3 to 4 franchise stores every year, and that is quite normal. We are in the phase now where many franchisees has been there for more than 20 years, and it's a generation shift and not many want to pass that on to the next generation. So then we take the stores over. So 3 to 4 spare, I think that will continue going forward.
There's some questions from the web, I think.
Just one question. How aggressively are you chasing cost saving in your cities for your supply and value share? It looks like a lot of areas have digitalized. Are you looking at more experimental solutions like distribution lectures, the blockchain technology that are going to bring about both efficiency and cost benefits?
I think the biggest, quickest answer to that is that we are definitely going to go do with the proven technologies. I think that it's for others to develop the kind of to be the 1st to develop the technologies to achieve the cost savings. Even in the automation that Christian talked about, this is not something that no one has done before. I think it's a prudent advice to sort of follow from the learnings of others. There's a lot of things happening.
Blockchain is not necessarily the biggest trend, but artificial intelligence, big data, there's a lot of things happening. We will eventually be 1st not necessarily 1st mover, but we get quick adapters. Okay. So with that, now it's time for lunch. Some of you no?
Christmas present. Christmas present, yes. How can I forget that? Of course, we always have a handout for you. That's probably why there's so many people here today.
So today, we've done it a little bit different since it's Christmas and we want to give you a nice Christmas, of course. So there's a surprise gift for all of you there. You don't know what it is, but I can promise you it's from the best chain, biscuit variety chain in Europe. So rest assure, Christmas is in the box. So please make sure that you grab all of those, have lunch outside and at 12:15, we meet upstairs for the bus to Lambert Sherte.
So thank you for