Good morning, everyone. I hope you can hear me. The room is not so big. Welcome to the Boozt Capital Markets Day. We are witnessing history here today. It's the first one we ever had, so really exciting. You see that the space in here, it's neither too big nor too small. I think maybe this is a learning for next time. We could actually bring a little bit of a bigger room into play, but this would be really, really nice, cozy, and intimate for the ones who are here physically. We will be around 30 external participants, and then a lot of Boosters here also on the side. We also have people listening in online. The ones online, you are also able to ask questions during the day.
You will, I think, find it relatively intuitive how to do it. I will take the questions here and ask them to the speakers. We have some dedicated Q&A sessions throughout the day. I really urge you guys to take notes during the presentation. Prepare your best questions because we've brought some of the sharpest minds in Boozt for this day. It's gonna be really interesting. For the ones attending physically, here in the front, if you really wanna try the Boozt experience, we have actually placed a few discount vouchers. As an extraordinary service, we can actually do same-day delivery to those attending the warehouse tour later. We might even be able to make you pick the order yourself if you want to. We have the best selection in the Nordics.
You can test it out and see if it's true. Go ahead. Help yourself. I also want to say that this day is about the future of Boozt. It's the long-term view on the company. For those who are extremely interested in the current trading, we will announce our numbers next month. We will do that on the 27th of April. At that point in time, we can talk about current trading because we don't discuss current trading today. I think we will go to the agenda here. It has changed maybe slightly just to optimize how the day will flow. We will start with Hermann going through the strategy of the company, then the commercial part of the organization takes over. Peter G. will come and talk about the Nordic Department Store.
Mads will take the buying and merchandising. Then we will have a Q&A session and then a break. I will not go through the entire agenda. You have it. It's also online. I just want to tell you later today, after the presentations are done, we are going to the warehouse, the Boozt Fulfilment Centre. Sven has promised to show us around. I think, Sandra and Hermann will also participate and might be a few more from Boozt, so a good opportunity to see the actual physical operation. We have a bus. It's not full. If you wanna go, you changed your mind, you are more than welcome to join. With that said, I would like to hand it over to the first speaker of the day, our CEO and Co-founder, Hermann Haraldsson.
Thank you, Rudy. Now it's not working. Do it like this. I just want to start with, just presenting today's presenters. Instead of them kind of talking about who they are, I just would like to give some brief words on the people presenting today. The first one is Jesper, our Chief Technology Officer. Jesper was one of the guys who kind of founded the company. Jesper has a background from Netcompany as a junior partner and PhD in multivariate analytics, right? Something like that, analysis. He's kind of the outstanding tech guy that has built our platform. Together with Peter, he was one of the founders of the company.
Peter, an old friend and colleague from the past, Chief Commercial Officer with background from being the Chief Marketing Officer of Telenor in Denmark. Before that, some eight-ten years in media. Mads, he joined shortly after. He's technically not a co-founder, but basically when Jón Björnsson, who was a board member, joined the board very early on our journey, he said, "You have to get hold of Mads," who had been the guy leading Magasin du Nord in Denmark, the big department store. Their kind of turnaround transition, and he was the one introducing kind of the U.K. merchandising transition into Denmark.
We said, okay, because we were five guys that didn't know anything about fashion because Allan and Niels also were part of the founding team. Jón said, "You have to have someone who knows something about fashion." We got Mads on board, who built basically our buying and merchandise team. Then we have Sandra, who joined in 2016 from Deloitte. Sandra joined us as a kind of as a business transformation manager, helping in getting us ready for the IPO. Then she took over as CFO in 2019. Then the latest addition is Sven, who joined us from a German company one year ago.
Before you meet the other guys, because you have met basically Sandra and me several times, I think it's important just to give a recap of our strategy and we did the IPO in Stockholm back in May 2017. In 2019 we said, "Okay, maybe we should revisit the strategy." We had built boozt.com since we launched it in August 2011, focusing mainly on fashion, starting with women's fashion, then adding men's fashion. In 2019 we said, "Okay, let's kind of look at the strategy again and see should we kind of reassess what we're doing and take a bit more longer view." A big part of that was to see, okay, kind of where are we heading?
Where is the industry heading? We took a lot of inspiration from the development of Amazon in the U.S., of course. because when Amazon launched, they were this web shop selling books and have been gradually evolving into a kind of firstly an e-com platform, and then trying to kind of be an e-com ecosystem. Having the webshop, which is both selling own bought stuff, marketplace is also Amazon Fulfillment Services, web services, retail marketing, et cetera, et cetera. What we saw there was that things are developing and you're going kind of further on. Not only being a platform, but more kind of taking control of the entire e-com ecosystem.
we said this is something that we need to look at, so it's maybe it might not be enough to be just an online web shop or platform. You should look at the whole e-ecosystem. Also with this what we're seeing is taking place today, because now whether you are in payments, you want to control the whole kind of the ecosystem or you are in distribution, you want to control it. It's very much a game today of controlling the ecosystem. Personally, I have no doubts that at some stage we are no longer talking about e-com ecosystem. It's going to be the commerce ecosystem. Meaning that it will be a full system with both physical and online retail.
It probably won't be within the next five years, but in 20 years, most likely. Another thing we kind of revisited was what does it take to be successful in this market? What are the kind of the customer expectations? When we were launching Boozt and kind of in the early years, our early venture investors who were kind of a bit frustrated by us losing money in the beginning, they were always talking about what is the silver bullet? What is the one thing you have to be good at to be successful in e-commerce? What we found out is that basically it's not enough to be good at one thing. Basically because what we believe is that it's about ease and speed, relevance and price.
You have to basically master all four disciplines to be a champion in the market. You have to be relevant to the customers with a relevant selection. We believe very much in being curated. From the beginning we said we don't want to carry everything, even though there was a lot of talk about the long tail. But it's very tempting to basically have a long tail. The thing is that you lose control of your inventory. We want to be curated and we want to focus on Nordics. It has to be easy, basically very early on, we built a mobile experience, app, and the customer journeys should basically be able to travel across platforms. You have to be platform agnostic.
It has to be very convenient to return and also convenient delivery, meaning you have to have a lot of delivery options. We didn't opt for one carrier across the region, but have different strong carriers in every single country. The price, we are price takers. We don't need to be cheaper than the rest, but we also cannot take more than the rest. We are price takers, and we follow the market. I think that's why I'm saying you have to pay the right price. Then speed. The site has to be fast. You have to be fast delivery. We want to deliver within one to two days. It has to be easy and fast to return.
Then if they have a problem, they could call us kind of, and get a quick response. When we said, "Okay, well, how does that look in a kind of, in a kind of Boozt context?" because we had this Boozt store and we had very much inspired by, the big Danish department store. You have to remember that we were five guys that did not know anything about fashion. We basically walked into that store and said, "Okay, we want to basically build a copy of that, just online." And we said, "Okay, how would that look? What kind of departments could you add?" We had the women's, men's. We had also started kids, sport, also launched beauty, and we talked about should we also do the home part.
Of course the interesting part also was what about the vertical? , because the horizontal was a given, because that was quite easy to say, but it was the kind of the vertical from the marketing services, payment solutions, Fulfillment, brand service, brand sourcing. That was kind of the path where we also need to look into and see kind of what would our position be. We said, "Okay, if we want to succeed in this market," and this is back in 2019, and little did we know that half year later you would have the corona crisis, which first started as a crisis, then it turned into an opportunity.
we said, "Okay, you have to be relevant and important, relevant for the customers and to be important to the brands." In the beginning it was very difficult for us to onboard brands. we also saw that during corona there was a lot of talk about D2C, that the brands should move to D2C. most of the big consulting firms were advising the brands to basically jump over the wholesale part and go right to the consumers. Luckily, being focused on Nordics, being Our top three customer of most of our brands in the Nordics, we had the strength to basically to be still an important part and be relevant to the brands.
I think in the current situation, we are even more important to the brands than ever before. We want to secure a very strong position in the value chain. We want to own the customer relation, and that's kind of the big fight that is going on now, is who owns the customer relation, who can control the gateway to the consumer. And there's a struggle where you see the payment providers or the payment apps are trying to get there. A lot of the new distributors are also trying to get that access, but we want to own the relation. We want to be the dominant player in the value chain, and we want to take control of it.
also there is kind of a certain value in the value chain. We are getting the customers in there, buying with us, and of course, we want to take the biggest part of the value chain. We don't believe that there is room in the value chain or that too many parties have profits in different parts of the value chain. That's why we are taking more and more control of our own destiny. Then finally, as , from the beginning, we did not have much money and did not have access to a lot of funds. Quite early on and we said, "Okay, we have to be able to finance our own growth, and we have to make sure that we, at all times, can ensure financing." We need to be profitable.
We need to generate free cash flow, be cash-rich, and be bankable." I think in these times, thank God that we kind of stuck to our guns and never were tempted to grow at all costs and disregards unit economics or profitability. That's why I think that we are kind of in a strong position. In all modesty, we have been able to put kind of check marks to most of our parts. , we believe that we're in a strong position with a relevant selection. We are controlling bigger parts of the ecosystem. We are important to the brands. We own the customer relations, and we're taking bigger and bigger share of the value chain.
We phrased what we wanted to in 19, said, like, we want to be the largest online department store in the Nordics, supported by strong category specialists, control the relevant parts of the ecosystem. I think that kind of the only place where we have deviated is kind of the part of supported by strong category specialists, because we thought, okay, our learnings from when we launched beauty, which was kind of a bumpy start. Our idea was to kind of maybe we should acquire some category specialists who could help us build category expertise within different categories. The problem was that we just couldn't find anyone that made sense to buy, and the price was just way too high. We decided to build it ourselves.
That is kind of the, I think that is kind of what is our destiny, that we always end up building ourselves because we believe we can do it better than anyone else. So far, we've been able to do that and lucky so, because prices at that time were just almost ridiculous. This is kind of a proof point saying that we've been profitable since 2016. Also we have been kind of the fastest growing shop in amongst our peers.
We are quite kind of, so we think that kind of, if we kind of put a status on what we intended in 19, we can put a lot of check marks, and we believe that we're in a very strong position going forward. That, what does that mean for our kind of our strategy going forward? I believe, back in 2021, we came out and said, "Okay, we want to be the leading Nordic Department Store." For us, it was a big thing because when we launched boozt.com, that was the idea from the beginning. We want to be a department store. Our ventures investor said to us, "Never ever tell anyone that you want to be a department store because no one wants to invest in a department store.
No one wants to invest in a store that has an escalator, right?" We said, "Okay, but this," we said, "But this is what we want to do, and we believe that this is kind of the right thing because the concept of a department store is the right thing because people want to go into one place where they can kind of be quite sure that if they buy something it's an okay buy, and we have made kind of the initial pre-selection
." It took us a while to kind of get it out in the open and make it also clear to you guys what is our intention and we said, "Okay, we want to be a Nordic Department Store with a big emphasis on Nordic." Our ecosystem we want to kind of stay on course.
We have now believe that we are strong in all the categories. Mats will come back to the categories. Then you have Booztlet, and you can, you can debate because in the beginning, Booztlet was very far apart from Boozt. We tried to kind of keep customers away from Boozt and Booztlet customers away from each other as much as possible. But over the last couple of years, they are getting closer, and now kind of we make no secret about that Booztlet is the outlet of boozt.com. Mats sometimes says it's the seventh floor of our department store. You could also say it's kind of, it's the house next door to where people can buy off price.
Booztlet of course and the category is a big part of a kind of a horizontal system. Then we have kind of our vertical part where we have Booztpay, our payment system, you must say so, our brands, Boozt Media Partnership, and Boozt Data Intelligence. This is kind of, for us, the core and this is something kind of we are kind of building on, and we just started to build on. We believe that our positioning is quite strong. , we set out, we want to be in the mid to premium segment, and the reason why was that in an e-commerce market where you have free shipping and free returns, you just have to have a high basket size.
We said we can't beat all of them in Europe, but we can become world champions in the Nordics. I can give you a small anecdote, I guess. I was, Sandra and I were in the U.S. three weeks ago and met a manager from one of a very, very large fund. He had been just discussing with his analysts because they were very much into kind of e-commerce, both in Europe and also globally, and said he said to us, ", guys, we believe that you are in the sweet spot, because if you look at the enterprise level, you don't wanna be there because it's blood red.
Now with Shein or Shine or Sheen coming in, it's going to get even worse with low basket size, low margins, and nobody is going to make money. If you look at the luxury segments, the thing is that in their view, if you want to buy the luxury brands, could be Gucci, Prada, Louis Vuitton, Hermès, you want to engage with the brands. And the brand owners, of course, they have third-party marketplaces or shops, but they have give a kind of a limited access. They have the control because, and they own the customers, so it's also going to be very difficult to be profitable in that segment.
You guys, you're in the Nordics, your brands are small to medium-sized, where you are the biggest customers. Basically meaning that you have the basket use economics, plus you have a kind of a strong position vis-à-vis the brands, and they don't have the muscles to go to full out in a D2C strategy. In their view, we have placed ourselves in a sweet spot and kind of we say, "Yes," and of course we agree, and we intend to stay there.
Also I think that the biggest proof point is our basket size and we've updated with our 22 numbers and we have our European peers with 21 numbers and actually all of our peers, the basket size has gone down, and we're comparing basket size ex VAT and after returns. We can see that our basket size is some 8% higher than our peers. This is where the money is, because our kind of cost structure, be it fulfillment costs or distribution costs Sven will come into that later, are pretty much the same. , in the end, it's all about what is the absolute margin to fund. This also fund kind of the rest.
This is also why we believe that we are the most profitable e-commerce business in Europe. This is also why it's critical that we'll continue to do that because it's extremely difficult once you have placed yourself in a market or in a position with a low basket size, it's extremely difficult to get that basket size up again. Also, there's a lot of talk about after covid return of the physical store.
, it's now kind of, yes, guys, you had some tailwind, wind during COVID, but now the consumer is going back to the physical stores and you will find out that kind of it was a windfall thing and now kind of, okay, yeah, kind of the empire strikes back. That might not be the case, but we can see that we don't see that the physical store is getting more competitive. It's very difficult for us or difficult to get reliable data here in the Nordics or in Europe. We just took some U.S. Numbers because the U.S. also is some months or years ahead of Europe and the Nordics.
If you look at U.S. retail, and it's also including grocery stores, we can see that yes, there was a big spike in penetration during COVID, then it went back. If , you don't have to be a big mathematician to see that kind of the trend is the same and the moment's the same. We still believe that basically we're on the track and it's just a matter of time, before online will be bigger than offline.
If you look at the nordics our estimate is that the forces that have been driving the online penetration so far, that could be the selection, it could be the convenience, pricing, and then cost structure, because we can deliver a garment to a customer at a lower cost than anyone in this region. This will all push, this will of course we can take some of the profits from that we can take ourselves, but a lot of it will be given back to the consumers. This will price e-commerce penetration. Our kind of, in our view is that at the latest in 2030, it will be 50/50 in this market.
Fifty percent of the fashion, apparel, lifestyle market in the Nordics is online, and in 2040, it's 60%. We believe it's just a matter of or question of time when the online market is bigger than the offline market. This, it might be sooner because we don't know what happens when things accelerate. We can know, we can see that for instance, if you, if you look at the stores if economics in a physical store, and we have a lot of small media fly stores in this region, they don't have the money, so they can't buy up front, so the selection gets worse.
The thing is that online has taught consumers that you have huge selection and you just don't wanna go into a shop anymore, and they don't have the item that you want in the size that you want, so you go online. More or less almost as convenient to buy online. I think that this will push consumers more towards online retail. This also... a lot of you have seen this before the market potential is still big. , we estimate in 2022 that the Nordic online market was around SEK 110 billion, and our market share of that was around 6% online.
if in 30 you have a 50% online penetration, that means that the market is at least 200 billion SEK. Of course, we want to have an even bigger share of that market. We just show kind of also kind of in Europe, 'cause we are now less than around 6% of the Nordic online market. I think we're 0.01% of the European market, we have no plans on getting to Europe, but we might do some kind of targeted parts of Europe, especially with maybe with Booztlet. There's a lot of room for us still to grow, and especially in the Nordics where we want to stay. This was for us to say that, there's ample growth opportunities.
The market will continue growing, and we will continue to take market share. This was my final slide, and I think now Peter will tell us how we will do this.
Good morning, everyone, again. Can you hear me? Goes through? Good. Let's see if this works. Yeah. Okay. Good to have you here, and good with the people online. Like Herman said, I will try to take you through some of the commercial area today, and you have a session. Like Ronnie said, take some notes and then please feel free to ask once we get to that. I think it's been an amazing ride that we've been on. It's fun. I could tell long stories about why I chose to join. Herman is one of them. Another one is actually breaking free of a bureaucratic, big organization coming into something that is agile and small and starting something up from the beginning, along with actually doing the commerce, e-commerce or whatever you call it, instead of reading about it.
I think that's some of the things that I took with me coming into this, and that's also what I actually see ten years plus later, that the organization is still eager to get when we onboard new people. Turning in, I think, the 11 numbers back in time, around 1 million SEK, something like that. We didn't really know if it was gross or net. We have trained a lot since then, and then turning in Sand on the team, recently the result from last year, close to SEK 7 billion. I think we have come extremely far, but I also think that there's far way room for us to grow. I will try to take you through some of these things. I probably have brought too much, so...
Let's see how that goes. Boom. Yes. I think if Herman just touch on it, I will just briefly do it again. I think our vision is crystal clear, and it's there from the beginning, visiting Magasin du Nord, saying, "Okay, we wanna do that, just online." That is crystal clear. We haven't moved away from that at all. At the same time, I think, taking each category by category, that's also the journey that we are on. We wanna make every single category a champion within its own, so compete against pure players. When we take fashion, this is where we are the closest to be the destination as we want it to be. We can still tweak some things.
If you take sport, kids, beauty and home, I think we have a lot of room and things to do and go on. Staying focused on building champions and destinations, and Mads will talk more about that. At the same time, we also see an opportunity in our strategy to do the verticals and do more with having customers, having data, and having built a lot of tools and models that can enable us to make money. I think just like we announced this morning, that if we see far ahead on the long term, I think we can do a big share of the market, 10 plus. We also believe that we can make money, I think the vertical axis a big part of that.
If you take fashion, I think this is our core. This is women and men deciding on buying something for the convenience, for the speed, and for the Nordic curation. We have had around 6 million into our business buying one time or more since we started. It is the core of who we are, and it is and will be to the very end. If you look at the market in general, I think somewhere around 50% of the household spend lies within women's and men's fashion. So we wanna stay and grow and make sure that we build this area. And Mads will talk a little bit more about that when he comes on the stage.
Kids as well, I think Mads and the team have done amazingly good in building a strong kids department. I think in the very beginning, we discussed quite a lot, should we have kids or shouldn't we have kids? The more we kind of saw into the data, we could see it makes a lot of sense. There's something around the average order value that gets higher, kids returns lower. You're not that into the size if it really fits on kids. Something worked there and we build onto it. I think we still have a lot of room in this area to grow. We have maternity, so pre-born, and then we have born, and then we have all the way up to actually buying into the women's and men's category.
This segment is interesting, and it's actually quite difficult, but we will do it properly and we're buying into it. Same thing with sport. Sport also a good area and compliments fashion in many sense and have done that over the last couple of years. I think in this area, we have turned just around 1.8 million customers over the period. Again, a very interesting category, and we wanna be a champion, especially within running, fitness, outdoor hiking and a few other things around team sport. Mads will touch on that later. Again, I think a big opportunity to give all the Nordic people easy access to good sport brands. The good sport brands really is the key here as we see it.
Same thing as we have done within women's and men's fashion, we believe we can strengthen within the sports segments. We have come far, and I think we have good room to grow here over the years. Beauty as well, interesting category, complements our core again a lot. We have also here turned more than 1 million customers into this category. The good thing about this category is that, and again, actually, lifts our average order value as a combination of buying into both fashion and beauty at the same time. I think the recent numbers indicates around 75% now that is buying something else and beauty. That means a lot because if you look at the beauty, the item price is relatively low.
There's a lot more to sell a dress at SEK 1,000 or a lipstick at SEK 100 or SEK 200, but the combination actually kicks the value for the customer, which is again strong. We have done a lot to make sure that the department kind of cross-sell beauty together with the other things instead of running a beauty store and competing one-to-one in a digital arena and online performance because that's tough. Having a department place and then building on top of this category makes a lot of sense. Recently, we launched the pleasure section within the beauty area, which we also believes will do us good as well as actually enlarging the portfolio. Beauty is for the whole family.
Home, the newest born in our family, it's been in our heads also from the very beginning, but there's something about home and home assess and then home bigger size item. We also believe that this is key to our department store, also because we live in the Nordics and we spend as household a lot more money in actually this area than the rest of Europe. Really an opportunity for us to accelerate this within the coming years for each of the different rooms, even room outside. I think Mads will also touch a little bit about this later on. Booztlet, not least, I think you have seen it in many of our things previously, but Booztlet is really key to our business.
Boozt is the department store with all the new things to the season. Booztlet is the destination where you get the good offer. I will come back to that later on in the presentation, the two companies together really goes hand in hand. On our way to building this department store, we're never really done. We have a lot of things to make sure that we optimize as we go. Putting in new categories and subcategories into our store across the different devices means that we need to make sure that Jesper and the team, which they do constantly develop the structure of our backbone, enabling us to present it in a proper and easy way to shop. It's kind of key.
You wanna make sure that when we get someone to the website, they can see this is about fashion, kids, sport, beauty, and home. If you're into sport, you wanna make sure that you drill down to sport and the categories quite fast. Same thing goes with this area that we work in. We need to help, we need to guide, and this goes for the dress for the occasion, or it can go for the running shoe with pronation. Constantly, trying to work with content that enables us to sell and guide our customers even more.
This is also an area that touches the vertical axis and our ability to earn more or make other revenue streams, obviously tailoring these types of things to our brand partners and then showing us, showing them to our end customers. Last but not least, in building this brand, we have done a lot. We still do in the Nordic market because it is key for us to be extremely relevant across the Nordics. It's not the same market. It is actually quite difficult. It's relatively small when you look at it. The greater Nordic, probably around 30.
If you cut down to our target around 20, you wanna handle all these activities as local as you can, both on the assortment, both the curation, how you present the different styles within the different subcategories. Gets a little nerdy, but it's key to the conversion. You also wanna make sure that you come out and build a household brand and a part of the society and part of the community. There we have invested quite a lot. Started out in Denmark, we have been part of the cancer association, and we have moved into the sports arena because that means a lot for the population.
We have done saga, we have done handball, we are doing running, different tracks, and we're doing some of the same things in Sweden with the handball federation, both for women and men, and Göteborgsvarvet, which I think is one of the biggest runs in Europe. The cool thing about this is actually our teams are capable of activating these initiatives with the partners and making money at the same time. Simply because you sign up, you get some tickets or you get a package, so we deliver it fast. It's true to what we actually wanna do, and then when you're done, we celebrate and there's an opportunity to sell more. I think all these things are thought into the machine room, which works.
I have brought something which goes way back in the days when we started. We didn't really have any customers, so it was all theory. I think really well time spent where we are today. It is our segmentation model, and it's quite basic. If you look at the vertical axis, you see 3 segments of value. If you look at the horizontal axis, you see 5 segments of behavior. Gives you 15 segments. What we do here is that we calculate the value every single day. You buy something, you return something, you buy on discount, or you buy at full price. You mark your favorite brands, or you leave something in the basket. Everything is stored on that customer ID and then stored in the backbone.
Jesper have enabled us to build a unbelievable system and ecosystem for the rest of our channels internally. We shoot it to the customer service so they know who they're talking to, how they can prioritize both blinks and calls to respond as fast as possible, especially to the top tiers, which is our most valuable customers. It also serves for the CRM. It goes without mentioning, but if you have good customers and they lapse buying into the normal frequency of buying, we will do something to win them back. That's all set up in systems, and they work with that every single day. It's also for the media buying team, where you can say, "Okay, you have bought something that doesn't make sense." They don't create value.
The question mark customers at the bottom, don't buy them again. kind of actually working with these segments so you don't buy them in Facebook, YouTube, Google, et cetera, where you actually can apply those rules. out of this model obviously comes other ideas and one of them being with Hermann in the media agency, we thought we can do we can do a Boozt Media Partnership. something similar to the media partnership that Hermann was doing previously, I joined. We did that back in 2014, 2015, had these initial ideas and everything we have done and do ourselves with the segmentation model, how we can approach different segments, is actually the foundation for Boozt Media Partnership.
We use the same methodology, we use the same models, and we execute it on-site in maze, off-site, and make money on that. Besides that, we looked at the data behind and saw, okay, some customers we can't make money on. Back in the days, it was a larger chunk. Now the chunk is smaller, but that was the initial ideas actually for opening the Booztlet. Again, back in 2014, 2015, saying, "Okay, how can we actually approach customers that buys with a lot of discount, returns a lot and that is having that profile?" Okay, we can do an outlet and we can put in all the clear stock to Boozt as fresh, and then we can introduce a fee of actually for getting a good price.
You get a good price and you pay for the shipping, then the model works and then we can make money and that's what we're doing today. Out of that also came, some customers that actually cost quite a lot and calls customer service, quite a lot and is also having a lot of claims. That's what we call non-fair usage. That's a very, very small part of our business, but they pollute the rest. It cost a lot to handle these. We decided back in 2019, prior to the Q4 and to the Black Days, we simply blocked them. We need to block them because it's not good for our business. All the other good customers suffer because of these. We blocked around 10,000 customers and today I think we have blocked around 40,000.
Some of them we have to open, some of them will be blocked forever. It makes a lot of sense and we save a lot of money. Further on, I'll touch on it later, we'll do the club. That's out in the open, and that obviously also ties into the segment changes. We have some customer that really is high value and we wanna work with them. This one here, many of you might have seen before. It is the single most important thing for our business. When we look at the customers, we wanna make sure that we move customers from left to right. Moving them from buying a single category to actually buying into fashion, kids, sport, beauty, and home. Buying all our categories.
If you take numbers from the last 12 months, if you have a woman buying into the fashion category, we'll get 1,000 net SEK. If you have another woman that actually buys into all categories, you get 20 times that. You get 20,000 SEK. This is also giving us good hopes for the future because within this lies the penetration supercharged thinking. So when you buy into more categories, you end up buying more from the individual categories. So the woman here that buying into all categories will buy for 7,000 fashion instead of 1 category, 1,000. The whole journey is for us to move them across the whole business into the department store.
I think this one gives you maybe a little bit more insights, even though it might be a little difficult to read. I think on the axis you on the vertical axis you have the recognition to our different departments. On the horizontal, you have the number of people that have tried the different department 1 time. If you look at the Nordics again and believe there's 20 million+ out there to capture and to try us, and if you believe that you also can get a level of recognition as a power brand in the Nordics of around 90%, then there's lots of room to grow.
If you take home, for instance, our youngest member of the family, we have had around half a million trying us, and we have a recognition in the market around 15%-20%, depending on if Sweden, Denmark, Norway, or Finland. Then you mature, and then you get to the beauty stage, and then you mature even more, and you get to the area where we would hope to create a destination. We are not there yet on kids and sport, but we are far. Then, women and men are up there. We can still do some things, but at the end of the day, moving the awareness, moving the trial, that will enable us to deliver on our long-term hopes and projections.
I think again, this one proves that there is potential out there because this one indicates that, a Nordic household will spend around SEK 40,000 a year on the categories that we have on Boozt. They have around SEK 500,000, SEK 40,000 of which are spent into fashion, sport, kids, beauty, and home. If you recall the SEK 20,000 that we have on our customer that buys into all categories, it's half of what they're spending. Literally taking a share of wallet of 50% on the ones that spend the most with us. Lots of room to grow. This one tells you a little bit more about last year, the composition of our departments.
You see the ones that are buying into our all categories is around a couple of %. Lots of room to move people the way over. You could ask, have we moved some? I can tell you we have. It's good to see that these curves are moving up and that we're moving people into two, three, four, five departments. Moving just below 200,000 last year into more categories. These are the cohorts that we constantly work with. When we do and when we get them to buy combined, this is an example. I've taken sport, and sport is the area where you actually have the least single revenue when you buy sport alone, and also margins that are lower than average.
It just tells us that when we combine sport with women or with men, we make more combined, and we make more also due to the fact that the return is lower. All in all, it works. This combo effect also works when we look at both Boozt and Booztlet, because like Hermann said, it is our outlet store. Some of our customers find it interesting to get things on a good price, even though it's not the current season. The latest numbers is that we have around 12% of our customers that have shopped in both shops. Again, here we can see the value net wise in a year, it doubles. Around SEK 2,000 for Boozt alone. If you shop in both shops, you double.
More than 4 times if you only shop in Booztlet. I think big potential also here to make sure that they don't go somewhere else to buy something that is inexpensive. They rather get the good brands that have been on Boozt but now is on Booztlet. I will just spend a few minutes on things that are in the making, so they're not live, just to disclose that, it's not on the site, it will not be for a while, but it will be later this year. I think this area is obviously to build more loyalty and to drive more multi-buys. That's the whole purpose of the club.
The club also gives us some opportunities in a market that gets more tough to operate in if you are e-commerce. Google makes it tough. Facebook makes it tough. Payment providers makes it tough. Everyone wants a piece of the cake, and GDPR and price regulation makes it tough to be a market leader or commercial person like Mads and me. This club enables us actually to differentiate the pricing towards the relevant customers. It also gives the opportunity to be in dialogue with our customers in another way, simply because the app will entail a wallet, and it will also entail an inbox. The dialogue will be in the Boozt and in the app, and that means a lot. When we launch a club, it will have the model, segmentation model underneath.
We will use all the tips and tricks that we have done in the past. We will have the most valuable customers in there. You will be born with benefits. I think that's some of the annoying things if you look at clubs in general. You always see this, sign up for this club and get this great offer, and then you sit back and say, "Okay, I've been shopping there for years. What do I get?" We will turn it around, and we will offer the best conditions for our best customers. You will be born with the benefits. You just have to pick the things that you believe that you want yourself. Is it services, or is it prices that you wanna have throughout the year on your favorite item, favorite brands?
We believe that makes a lot of sense. It all stacks up, you will, as you buy, you will get more. I think we wanna make sure that turning you from 1 to 2 to 3 all the way through the department store will lift your benefits and will give you more services. On the service I mentioned, they will be offered something like you do today. Even though we have 1 to 2 days in general, we will also make sure, together with Sven, that if you really want us to pack it fast track, that's what we will do for you along with other relevant services.
This is very nerdish, but it is very important, and it is simply because Google, Apple, mails, it worked ten years ago. It still does. It doesn't work as well. iOS and Apple pollutes all data around the performance on mails. Some of them actually disappear. Many of them are open, so you don't have the same data. We will, with an inbox and a wallet in this, actually be able to control our data much better. You probably also know yourself, if you get an SMS, you look at it 99%. Same thing with a notification. If you get an email, it's not 90%. I think that whole behavior is going towards away from mail and into some of these areas.
Jesper and the team are building something that is very strong for us to utilize across Masai and my team. I will just touch shortly on our vertical strategy, and that is BMP. That has been part of our journey for the years and still is. The different models and the segments that we have are being used by a small team that serves all our brand partners. The cool thing about this is that you can have the opportunity as a brand to introduce the new style to the customers that love your brand, that loves your brand the most. You can, just like we do, say the ones that haven't bought with us for a while, let's get them back.
You have the opportunity to actually work with your customer base at Boozt, very, very well. We have a lot of campaigns through the system. I think somewhere between 15 and 20. It's good traction, and it's constantly increasing. That's nice because it's a win-win thing. If they see opportunities and we can blitz it together, they will see that mass will buy more, and we will sell more. At the same time, there's a lot of profit for us, obviously, monetizing on the data, on the exposures that we then offer to our brand partners. Same thing goes for the newest bond vertical idea that we also have had for years and have worked for.
This is again giving our brand partners the ability to work very professional with the teams, Mats' team, my team, and see what is actually happening. You can see your sales down to SKU level, down to country, down to regions. You'll be able to see what performs. You will also be able to measure yourself up against the peer set. You will not be able to see the nearest competitors, but you'll be able to see that you actually have an opportunity to grow your business either in Sweden or within jackets that you have lost attraction on. This data really enables our partners to act. Once again, we have built it, we have the data, we have the customers. They obviously have to pay to use this.
We launched it last year. I think we had plus 20 brands using it for the fourth quarter, and they liked it. We launched it here early this year, and we have turned a lot of brands already. I think good promises on this end. I know we have guided this area within our last chapters. I think we're very positive in regards to making all the revenue stream in this area. We really see good traction. To conclude, some of the things that we are focusing on, these are the most important ones. We wanna continue to build the Nordic Department Store. We're nowhere near. We wanna make category champions.
At the same time, we wanna make sure that the single buyers turn into more buyers, multi-buyers at the end of the day. Remember, not even 2% sitting all the over to the right, around 50% of the share of wallet. A lot of potential still there. We wanna keep on finding good ideas and doing systems and building vertical revenue streams. We already have a couple of other crazy ideas that we will materialize within the next year or two. Yeah. Masai, over to you.
Thank you. Hi. Thank you, Peter. I joined the company in August 12th as a consultant. A reason for that, after talking to Herman and Jon, it sounded interesting. After reviewing the business, it was a little bit more shady. We didn't even have season codes back then. We had a portfolio of, I think, 20 brands, primarily within the Bestseller Group, so affordable fashion. After a couple months, we had a meeting in Copenhagen discussing our long-term dream, and what that was to build a department store. With that team, we were 40 people in Malmö. With those people, so many smart people around you, it just seemed, okay, this could be a fun journey to take.
The rest is history, I would say, because we have managed to build something very unique. Just short on my department consists of buying, merchandising, and supply chain, in-house supply chain. Buying consists of, or take care of negotiation, brand portfolio, brand relationship, which is even more important today as the world changes all the time. Merchandising is stock management, optimizing on our current stock, taking action on the good stuff and also on the less good. We have supply chain, which is the data supply of goods towards the warehouse, optimizing on our processes and on our flow. Coming out a very strong foundation around data. Everything we do is based on data.
After ten years, we have plenty of data, which means we can take decisions based on not only current performance, but also how the history developed in good times and less good times. We have a strong KPI for everything we do, and the organization is very much built that a lot of people got a lot of responsibility for their area. The, the KPI for each and every SKU is super important in our daily operation. We are very much day to day handling the business and delivering the targets, but also have a mindset that we cannot create a terminal stock issue behind us that will lose relevance for the store, and it will also make it difficult to buy into the future. We operate with 3 seasons.
The season we come out of, that is not something we forget about. It needs to be handled because that stock will be there if you don't do anything and just focus on current. That is important. We have a goal to achieve 99.5% sell-through within 18 months of seasonal buying. Current season, the newness, making sure the site is optimized for the season, making sure that we take action on the goods. We own our stock, which means we have the mandate to act on the stock if it doesn't perform, and we do that every day. We are not waiting for a brand partner to call us and say, "Please discount our stock." We do it as we believe is relevant towards our customers.
As the customers now are changing their behavior monthly, where in the old days it was probably a yearly thing, it now it is kind of every week something new happen to the environment, to the world. We need to meet the consumer and that is what we are doing and what we are doing with great success. Then of course, we have the coming season. This time it's AV 23, which we need to plan for, we need to buy, and we need to make sure it is the right portfolio. Historically we have been buying 80% upfront and 20% open to buy. That kind of was okay previously when you had a high growth or when the environment was more stable. Now we have changed to a 50/50, so we have 50% of our money to buy in-season.
That is for NOS, it is for reorders of seasonal buys, and it's for campaign stock. That gives us the agility to meet the consumer and adjust our buy and stock levels accordingly to where the consumer are. Also they're changing. Right now we see a big change in consumers moving away from more nice-to-have items, going into more need-to-have, and that we can then optimize as we go. 2022 was a good example. Now my first slide is coming there. That was a long introduction. I think 2022 is a very good example of how we work. We thought it would be a post-pandemic happy customer environment, back to party, back to you buying whatever you need. We came into the year with a high stock level.
We also had a high, commitment, upfront commitment increase. We thought, yes, it's good. Already in the end January, beginning of February, we saw the first signs that something was off with the customer. In February, we activated our trading, said we need to do something now. We are not waiting for others to tell us what to do. We do it right now and we managed throughout first half to bring our stock to a reasonable level. We were not happy with our sell-through for SS 22, but it came down to where we say, "Okay, it is not a terminal risk. We can fix this in the future." The next issue occurred. AV 22 was also brought up with a high growth for upfront commitment. A lot of stock came in. Q3 was difficult.
In some very good way, Q4, Peter made an amazing commercial plan, and we managed to get our stock down to the same level as we had the year before. For me, that is just key because you can be a success in the short term, but having a good, relevant and aligned stock level is just important for the long term profitability of the company. Looking at the bottom of the of the slide here, you can see the consumer sentiment in Denmark. Historical low, actually never tracked lower before. This is our journey to become the greatest within department stores. Ten years ago plus, we sat in this tower in Copenhagen and we said we want to be a department store.
From that on, it was a tough journey because we didn't really have money as we could have spent. We took it step by step. We are coming out of fashion, men's and women. It is the right place to come out of. You cannot build a department store coming out of a beauty pure player or a sport pure player because the integrity is not there. The core principles of running a retail store, stock management-wise, is just sitting in fashion. Our portfolio today is on its way. For men and women, it is super strong. We still have brands that we wanna add, of course. There are still brands that say no to us, but we don't have any critical brands we are missing. For our kids category, we are getting there.
We are the best within clothing and shoes. We are getting to become the biggest within kids' toys within a couple of seasons, according to the partners. We will be soon able to sell kids' strollers, car seats, bedding, and so on as a part of our strategy to be able to send out bigger items. Beauty came out of a niche. I think Herman said it. We didn't do it right in the beginning, but looking back, we probably did because we became a niche player. The partners thinks that is a very special place to be. From then on, we have grown now into becoming a volume partner. We are catering to the whole family, and the beauty category is getting there.
As it states in the beginning, we want to be equal or better than any pure player in the market. If you say in Denmark Matas is the best within beauty, we wanna be equal or better than Matas within beauty. For sport, we have tried a lot, and I think that is also the power of being a multi-category destination. You can actually try stuff within a separate category without hurting the overall business. We have tried several things within sports, but come to the conclusion, we need to be the best within running, fitness, outdoor, and team sport. Those are the biggest categories. That is where the biggest brands wanna be best, and that's where we're gonna be the best in the market. We've come a far way, and I think we are there now.
On the portfolio, it is obvious that we are missing one brand, Nike, and we've had a kind of a one-way dialogue for many years now, us contacting them in different ways. We don't get it. We have a super elevated premium cooperation with Adidas. We are the biggest partner with Adidas in some of their main categories in the Nordics. We have a good relationship. We will continue contacting Nike and then at some point they will hopefully say yes. On the home, our newest category, we have come far. I think it's a two-year-old category. We have a really nice selection right now, but we are also missing the large items that is a part of our short-term strategy to fix that.
Functionality-wise, in the beginning, we thought men, women, that you can just copy to other categories, the functionality, the look and feel. You can't. You need to be specialized in each of the categories. We are doing that now, together with Jesper's team. All in all, the portfolio and the credit, and the functionality is giving you a credibility towards the customer. That is, where we're getting to, soon. A main part, I think for me, but I think for any e-commerce or retailer, that is stock management, to be able to have the right stock at the right price at the right time. That is key. You don't wanna have too much old because then you lose relevance and your margin will be hurt.
At the same time, you wanna be fresh and new and having the right goods, but you don't wanna have too much because the environment is changing all the time. This is a key for us. This is how we perceive the current categories. We are always pessimistic, realistic when it comes to our own success, but we definitely have a lot of potential for our categories to grow. This is how we see the future.
It is an estimate, looking at our current, how our categories grow and how much we, how much potential we see in each of the categories by taking more market share, and adding more brands and styles, we see that our shift going from 30% today of our new category, 70% is men and women. We think that will shift around within a future to 70% new categories and 30% men and women. Men and women will still grow. There's still growth here. We will take market share, but there's so much potential in home, beauty, kids, and sport. This will of course mean that our return rate will go down, and we will increase the share of the wallet, which what Peter talked into.
Our Average Order Value will go up, our cost will be better, and therefore we will improve our profitability. A strong potential for the company. Short-term wise, this is what we are focusing on. Stock management is everyday thing for 100 people looking into this, optimizing, buying what we need to buy, and getting rid of the stock that doesn't perform. We need to meet the customer mindset. You can't plan that in event. You need to do it every day, looking at the numbers, looking at how they act on the site, the conversion, what are they buying, and then motivate them through that. We are adding on premium designers on our men, women category. We believe there's a gap in the market to take a little notch up.
It is not luxury, no, but it is to have a little bit more of the premium goods in our store. We can see our customers would buy into it. Of course, it's a journey because the brands expect something different from us, and we are working on that. We believe affordable fashion is key right now. We can see there is a momentum with it, within the cheaper brands, towards the customer. We have adjusted for that already during Q4, into 2023. We need to retain the brands we have and get some of the brands we have lost back. Of course, D2C, marketplace, too many doors are the excuses that or the reasons that some of them left us. Odd size, as I mentioned, for home and kids.
We are aiming to move more of manual work towards the brands. Instead of us doing it, the brands needs to provide us with the data to enhance our product detail page. We need to build the four new categories into destinations, which we have done for men and women. It takes a bit of time, but we are on the right path. Good?
Perfect.
Thank you very much to Mats and Peter, also you, Hermann. I'm a little bit surprised. Peter was faster than expected. We have actually a little bit extra time for Q&As.
Hope you guys have some questions prepared. Then, yeah, Mads and Peter in a joint collaboration will do their best to answer, and company. Just for the sake of the people listening in, online, and for the people online, you are able to type in your questions. I will see them here, and I will ask.
Hi. Niklas Zethson here from Carnegie. A couple questions. Maybe you can talk about the Department Store strategy a little more. What kind of white spots do you see where you don't have a presence today? I'm thinking categories like jewelry. What is the potential to expand more in premium or even moving up to luxury? Electronics, anything else that you think could be interesting or not at all interesting?
I think that the power of the online department store is that we are able to deliver the same quality of goods as a physical. We are able to have a wide range of price points without that diluting the floor plan. Most important, we can use the e-commerce power of not being not having too little floor space, meaning we can expand as much as possible as long as it makes sense for our customers. I think fine jewelry, we are into fine jewelry. There is more potential there. Other categories could be interesting, but we are we are ambitious, but we also want to do the things we're doing now right because the potential lies lies there right now.
There is in principle, in essence, there's no limitations on how many floors you wanna add to your department store, as long as it makes sense for the customer. I think coming out of fashion, you can expand a lot.
Another category, you talked about bulky products or bigger products. How does that go with your AutoStore solution? Are you looking at ways of circumventing that or just expanding to warehouses that can cover bigger products as well?
Yeah. They are tough to chop up and put into the AutoStore. Okay, something is wrong here. Does it go through? Can you hear me? Okay. Sorry. Yeah. We believe that the home and the bigger item could be key for completing the home as an experience for the consumer, and we know that these items will have to be placed in another warehouse. Sven is looking into that. Furthermore, we also need the bigger items cost more to ship, and probably needs to be carried up maybe to the consumer to make a good experience. We're looking into all these things to create the best possible experience.
We have already developed features in our checkout that enables us to charge a price if the items get big and the cost of serving that item is too costly. I think we can create a good experience around that. Back to the premium and design question from before, I think that's where we're moving in already. Both within women and men's fashion, we have some ideas around how to do that, how to serve the brands in a way where we leave a more closed garden for some of the brands to be like in a curated store that they wanna be in. I think we're on good track there.
How big a share of your assortment today or of your orders today do not go through the AutoStore?
Orders through, today, Sven, where are we at the moment?
It's 5%-10%.
5%-10%.
Yeah.
Hmm.
Okay, thanks.
Yeah.
Thank you. Benjamin Walsh at ABG. sort of adding on to Nicholas' question, what sort of capabilities would a new vertical require in terms of staffing, for example?
The categories? Or
A new vertical, would that entail a new purchasing team, for example, or how does that work?
We tend to run on a, on a low staffing in general. Rather have few people who got a lot of responsibility than many doing little. Adding on a new category is a totally new category, so another floor will of course demand a team, a small team to handle that. The way we work and the tools and the processes and kind of the whole foundation of the B&M team, it is fairly easy to add on another category for us. It is more for the platform team to develop and for marketing, Peter's team to promote it to the customer. It's not a heavy headcount thing.
Could you also perhaps discuss, bulk discounts? I'm sure that's highly relevant for you. Sort of as you grow going forward, is it possible to quantify the incremental positive effects from bulk discounts, as your orders get larger?
bulk discount meaning?
I would assume a larger purchaser gets better prices than.
Our.
A mom-and-pop store, for example.
agreement with the brands?
Yeah.
I think in general we have a strong set of agreements with our brands. We are pushing on more than just the discount on the order. I think BDI, as Peter explained, the BMP, other income is for now when we look at our P&L is probably where we can see the upside.
I think we are quite good on our purchase agreements.
Yep. Then if we sort of look back to Q4 2022, it's my understanding that your relative outperformance to the market is not only due to maybe deeper discounts than your peers, but also a more relevant assortment. Does this align with your view of Q4? Is it possible to sort of project that going forward? What was the main difference and what have we learned from that into 2023?
I can maybe take some of it. I think to answer part of your question, I think we are not afraid of attacking. So even though we come through a year where the consumer sentiment is literally all the way down, we still saw trends in the market that could enable us to capture more during the last quarter and months. Again, back to our ability to actually move our cohorts, I think that means a lot for us that we have the tools to actually go out and expose them again and again. I think that means quite a lot.
If you have competitors that don't dare to spend money, and you have us that dares to spend with a higher AOV enabling us to spend more money, and at the same time can find them in media and attack the base, then it gives you obviously more eyeballs than competitors with a good assortment. It enabled us to come home, quite strong. Yeah.
Yeah. I just, if I can add on, because the way we are working with our shoes, the detail level, which of course is mainly done by the system, gives us super insight early, and we rather wanna act early than late. That is probably where we succeed in 2022, by acting early, putting on a small discount, seeing where did the consumer... If was that enough, increasing, decreasing, depending on our performance and therefore coming in front of our competitors. That is probably also a reason. Yes.
Basically staying more up to date than the competition.
Yes. Yes.
You also mentioned this season we'll probably see more in-season than pre-season purchasing. Could you just give us the brief rundown of what that entails for your job and?
As we have grown and gotten more knowledge about our business, it's easier for us to forecast how much is the critical upfront commitment we need in order to have the foundation in place. Using our tools to do early reorders, acting on a bestseller, calling the brand, say, "Hey, we can take 1,000 more there or 5,000 more there." Doing some special markup units. Taking old hero styles, producing that high margin goods and then have room to discount it if it doesn't perform. Our NOS, Never Out of Stock program, has grown into a massive, well-run business, where we get new goods every two weeks.
It's a matter of as the consumer gets more dynamic, you also wanna have a stock that is more dynamic and don't wanna be fixed, "This is what I got." Also we buy our stock ourselves, so we know what we bought, we know what the plan is with the stock. We don't have other people sending stock to us, and then they need to discount it. We own it and take action as early as possible.
Thank you.
Thank you.
All right.
Daniel Schmidt at Danske Bank. I just wanted to ask you, so you're at 4% margin now, and you're saying sort of long-term it should be double-digit. And if you look at the building blocks that you sort of described today in terms of taking a bigger share of the value chain, and you talk about the mix shift of new categories versus old categories, and on top of that, of course, economies of scale, which one of those, or maybe others as well, is the most important for you guys to get to 10% margin or above long term, you think?
That's a good question.
I think we're jumping a little bit ahead in terms of the agenda.
It is a good question.
We will get back to more details on how we get to 10% and, yeah, which part of the business that will drive what. I think it would be better to take it later on today.
Okay.
Morning. Michael Benedict from Berenberg. I have three, please. Just building on the upfront buy question firstly, and the move to 50%, I wondered how that changes your brand exposure over the course of a year. Are certain bigger or stronger brands less likely to sell you, sell to you in season or is that not really a factor?
In general, I think we have proven that it works, that we are able to get goods in the season. As I said, we have put even more emphasis on our NOS program, which is potentially delivering 15%-20% of our turnover on a full year. That is of course dynamic week and week or bi-weekly. Of course, the brands want more money each year. As Hermann said, I think our partner relationship, which is very much built on a win-win situation over many years, where we have been the smaller part of that negotiation, now we are probably equal or better. We are able to move some of the upfront commitment from regular upfront to maybe SMU.
We are doing block orders, meaning we are taking upfront commitment, but we are taking it on a later stage, in the season with a discount if we can't buy it as on normal price. We are trying to mitigate the.
The quest for any brand to grow, year- on- year with us. The brands that are growing upfront wise are also the brands that we believe is taking a bigger share of the market with us.
Great, thanks. The second one just on, Boozt Media Partnership. I guess unlike some of your peers with similar, businesses, you've almost always already bought the product from them. Does that impact their motivations for using Boozt Media Partnerships?
I would say not, and I think when we talk to the brands and when we work with the brands, like Mads said, it is a win-win. We encourage all the brands to work as detailed and granular with any other business if they could, because I would do so if I was sitting on the brand side. Having a brand, being a brand owner, I would definitely be able to cater to the customers that normally buy my products or know that some other related customers could be buying my brands. I think we turn a little bit around and encourage them actually to ask for the same things. What we experience is that they don't get the same things.
I think we have found a niche to develop this tool, a lot more detailed than many, if not all our competitors. Obviously, Zalando's having CMS, which is similar. But we also dare to put value on the new customers that they get in on a campaign period, which makes a lot of sense. You run a campaign and you sell something. You would've sold something anyway, but you sell something more and you onboard new customers. We can also give them an indication of how much revenue they will then make on that type of customers in the period after. I think we're quite confident in the model, and we spend around 10% on marketing, so we encourage them to spend 4%. We think that's fair.
Some do, some spend more, some spend less. We think we're on a journey actually to onboarding most of our brands. That will, to Daniel's question, obviously enable us to lift that area and make more money in the long term.
One more from me if that's okay. In Hermann's presentation, there were estimates around a 50/50 online penetration split. I wondered if you could give us a bit of color on the assumptions, estimates, that sort of underpin that forecast. It is a number that sort of lots of people have thrown around. Just interested to get color around that.
Yeah, I think it is a long-term number, and many are doing these predictions. It is a crystal ball. I think we have to deserve our rights to take 50% share. I think online is on its way. Make it easy, make it convenient, getting the brands that you really like. Let's see where it ends, but I think it moves in that direction. Yeah. I don't know if you have...
I think we put in, it's a CAGR of around 7%, right? We saw this plateau in 2022 in terms of online penetration after a few good years during the COVID and the close down of societies. Before that, we had a CAGR of around 10% growing. We could actually see things returning to that kind of pace because some of the things that Hermann also mentioned, we believe that will push the customers towards online, especially in a period like we're in right now, where the consumer is under pressure in terms of disposable income. I don't think you will be too sentimental. If you will pick the place that has the right selection and the right price, which will favor online in our way of seeing things.
Not the same growth rate as historically, but as Hermann also showed, it's kind of. There's a trend going on for the last 20 years. We think that trend will continue. Then of course, the big question is what is the end game? We say 60/40 around 2040. It can be 50/50, it can also be higher. This is our best guess or estimate based on what we see today.
My name is Daniel Devin, I work for Nordea Markets. I have one question on how you think about owning brands. You had this acquisition of Rosendahl a few years ago. How do you think of that going forward? Is that part of your strategy also in the department store and are there any risk around that, perhaps in competing with external brands, et cetera?
They look at me?
No.
I think Center will come to back to that. Yeah.
We will touch upon how big of a part we see it, as Boozt. I think you can comment in terms of if you see any risk with running own brands and then doing the majority of our business with third-party brands, if there are any opinions around that. Do you have a comment?
I think there's many things to that question. Obviously, looking at the potential margins, you would like to do so if you can, without, like you asked for, without polluting or destroying a relationship with our brands. Having a brand like Rosendahl with a clear target group, I think that can make sense. It also needs a size for us to scale it where we wanna go. I think in the environment at the time being, there's also a lot of opportunities to grow with existing brands, and I think that's what we have to balance at all times. I think we do that in Mads' team very well. It's key. We all know that a strong brand can sell.
A weaker brand needs to be strengthened, and so we have to figure out how do we do that if we continue on that track.
We are a mid to premium, the Nordic Department Store, and that's what we wanna do, and that's across all our categories, and that we will protect so. That will be vast majority of our business.
Okay, perfect. Thank you. Another question is on, if you take this 30% of sales that today come from other categories, I mean, I know that you're probably not gonna give me the exact numbers, but perhaps you can talk a little bit about what is the relative size of the other categories, which ones are the bigger ones? Where have you had more difficulties, et cetera? If I just draw on my experience from Zalando and speaking with them, I know that they had quite a difficult time to grow the home business. They seem to have been quite successful with beauty, but home has been much more difficult. Have you also seen that? It's slower start, perhaps, et cetera.
Maybe you can comment around, a little bit about, those individual, parts.
I think this is actually here where Ronnie would tell us, don't comment. I think we have actually commented quite a lot saying that it's the share it is at the moment, and that we see opportunities like Mads said on one of the last slides, that share of the other categories, kids, sport, beauty, and home could go to 70. That's a lot, we think it can. The reason for it is that simply the unit economics in some of the other categories, beauty, low, some of the sports items, relatively low, home is obviously high. Making monies, being a pure play in that can over time be tough.
We see a really good opportunity to get out for the whole Nordics, with these categories playing, creating a champion. A lot of growth, we will not share more numbers, individually, around them unless you think that's fair.
I don't think it's a big secret that kids and sport also, as Mads said, we've come further with that. They were introduced earlier on, then you had the beauty category coming in 2017. Had some initial challenges, and then you had the home coming on in late 2020. We kind of took the right decision from the beginning, meaning that home today is not the same size as beauty, but it has grown faster. It is around beauty and home together, 10%, and then sport and kids share the remaining 20, more or less even.
That's great. Thank you very much.
You got numbers.
That's more than I hoped for, actually.
Yeah.
I'm quite happy. Then finally, just a final question here on the repurchase agreement that you have with the brands because you have grown fast versus others and continue to, I assume, continue to close those type of agreements. I think we're also seeing the effect of that when you look now at Q3 and Q1, margins looks much better over time. I assume it's a bit on that. Question is where are we with that? Is there further upside on this? How many of the brands have you closed those kind of agreements with? What could be the upside from here on?
I think for the, in our business, it seems like line discount at some point you reach a level, so the bulky the size of your purchase is at some point they cap it, and you cannot get more. I would say for most of our agreements, we are having the best agreement when it comes to the actual purchase. What is more important is how we can get other income out of the brands. That is very much what Peter is talking about and what Jesper built the BDI, BMP marketing. I think that is where we are focusing now. We're actually quite happy with our agreement.
It is a combination of many things besides a volume discount, no claim discount, agreements on other stuff, marketing, data exchange. It is so it's more than just a bulk discount.
Okay. You can say that the upside from that is already taken more or less.
Yes.
Now it's other things that.
Yeah, it...
You're focusing.
It's a mix for us. One thing is your agreement, how much you get in %.
Okay. Okay.
It's also how much you end up in %, and that is where, as you work with your goods and the way you buy, if you carry or you care for it from day one and get it out on a lower discount, of course, you can make more money instead of waiting. It's much more a dynamic game of trading and optimizing your stock. That is where the upside could be.
Okay, great. Perfect. Thank you very much.
We take a last question.
Final one.
Yes, good.
Thank you. It's Niklas Ekman from Carnegie. I had a follow-up on slide 51, or actually a few follow-ups on the mix shift, the 70/30%. Longer term, if you could say anything on the time perspective, how far out do you expect that or the ambition? Is that five, ten years out, or what are we talking about? Secondly, also, it sounds like from the discussion here that that's primarily or the expansion in the, if we take outside fashion, that's primarily gonna be in home interior, given that we're talking about higher AOV and lower returns.
I'm just curious, the expansion there, is that primarily going to be organically, or are you looking for adding more brands, or do you see opportunities of doing it private label-wise, acquisitions? Yeah.
I think I can take the first part in terms of the timeline.
Yeah.
That is plus ten years. You can more or less put in your same your own assumption. It's like end game, so to say.
Yeah. Yeah.
...for the business that we see this will be the optimal mix, the way things look today.
The rest I will let Mads and Peter deal with.
Yeah. As you saw, we're on the way to the 50/50, which I think is not far away because I think we have good traction in the other categories. I think in regards to building more revenue, it is simply due doing more of what we already do really well in Mads' team. It's about not buying 500 but 700. I think that applies to the things that we see in the numbers. Back to some of the earlier slides saying, okay, if you have customers that continuously buy into more categories, they will also buy more within the individual departments. You get that exponential buying behavior, and I think they look somewhat similar like the other ones that are buying.
It's bigger volume, bigger commitments, that will grow the business. I think on the brand level, it will be obviously adding someone will fail, someone will come in. I think that's the relevant that we've been through, exchanging brands over the time, and we will do so also in the newer categories.
Yeah.
Yeah.
Maybe just a final one on the topic. Given the discussion on AOV, could you say anything if you are at EUR 80-85 today on the group, what are you at within beauty or in home interior, for example?
On the AOVs?
Yeah, average order values.
Yes. We see if you take the beauty, for instance, we see an extremely good traction. It's back to the item price. It's relatively lower, so maybe around SEK 200. The other items are probably closer to SEK 600. The combination of beauty, with other orders, which is around the 75%, lifted actually to a quite high level. We live in a blended value of around SEK 500-600 on the beauty orders within the women's fashion. So we are actually in a good spot of not getting single orders with low beauty items, which I think is key to our business, so blending them in. It's low return. The highest return, wedding dresses, we don't have many, but sky high, we don't want to sell that much.
On the other hand, women in general is fairly okay, tie, especially for existing good customers that know us. They get something home, they try, and that's the whole idea about the Boozt, making that easy. Combining some beauty stuff into that, you get a return rate that is really nice, in the mid-20s instead of in the plus 40s. So I think beauty with fashion is extremely strong.
Okay. Thank you.
Yeah.
We will close it down for this. Thanks a lot to Mads and Peter. We will take a 15 minutes break. Yeah. Please look at your watch and be back in around 12 or 13 minutes, so you're ready to go.
I'm Jesper. I'm CTO, head of the computers, as my kids say. When Hermann convinced me to join Boozt 12 and a half years ago, leaving the consultancy world, I was tired of working with other people's problems, other people's technologies, and never seeing really how it went out. I wanted to try to set strategy and try to execute it and again, see how the results would be. I think it's fair to say that I've certainly met those ambitions here in Boozt over those years. I'm representing platform here, the tech guy, the engineer in the room, and I think it's very nice to meet you all. It's nice to get this airtime. I think it's rare that I do that.
I think it's super important as well. We are a digital native company. We were born with the computers in the hand. We've never been through a digital transformation 'cause we've always been here. Technology has always been a key part of how we do and what we do here. You will hear that today. I'll try to give you a historic view of our technology development and where we are today, but also, of course, some indications of the opportunities that we have going forward. I hope you will also see that yet this being a technical talk, you will also see how close we are with the business.
You already heard my name and my team mentioned several times from Peter and Mads, that's one of the key things is that we really try to be close together. We are not the IT team in the basement that you order some project from, then you come back six months later, you get something else, and you are upset about it. We really try to be close together, that's a key thing, that's how we've been thinking all along. All right, let's get it started. I think I want to start with an overview of our team. We are 190 people all in all, mainly developers, almost all of them. We are spread on five locations physically.
We are here in Malmo with the biggest team. We are in Copenhagen, where we mainly do app development. We are in Aarhus in Denmark, where we do data science mainly. We are in Vilnius in Lithuania with a quite big team, more than 50 people, doing a lot of webshop-related work, also app development a lot. They've been with us since the beginning. We have a team in Poznan that works with some of our business systems as well. We have 15 people in Poznan, have been there five years. That's how we're spread.
We are decentralized, that's a strategic decision not to be 1 big team in 1 location, but spread so we can so we can spread the risks of hirings and bottlenecks and so on, and also try to feel small in the teams. We are split in 6 branches are kind of divisions, but it's more dynamic. It's something that can merge or split and and develop over time, and it does. We are now in 6 branches. As I said, we are web, we are app, we are logistics, we are transactional, so basically the core processes. Then we are insights. That's a lot about data. Then we have an engineering team underneath it that is a key thing for our future development and scalability.
All in all, in those six branches, we are spread in 30 small teams, small cross-functional teams. It's also a key thing. I'll come back to it a bit later. We like to work in small teams, in general, together with the business. Right. When we launched Boozt platform some 12 years ago, we basically sat down with two main purposes for why we should be there. You have it on the right here. The main one is that to offer a webshop to offer a shopping experience for our customers. It has to be easy to use, it has to be frictionless. It has to be basically nothing. There shouldn't be anything to think about, just go through it.
It's a webshop, it's a checkout, it's a delivery process, it's returns, it's payments, it's everything around it. It should basically just be easy. That was 1 thing. The second thing was to build tools for our colleagues, for the business people, so that they can operate the webshop, do everything that they should do. You heard a lot about it, as I mentioned, from Mads and Peter already. The tools we take responsibility for. Further on, it has also extended to the brands, to the collaboration we have with the brands. We also develop tools for them to be able to help us with the processes around the business we run. We early did our own slogan and our own logo even, you see here.
We had the slogan, power to the people, and the people here are the consumers, it's the customers, it's the colleagues, it's the partners. Power to the people has been following us all along. We are not the bottlenecks, but we give them the tools that they can operate the business with. We take control of all core processes in Boozt. Control is a key thing. You'll hear about it again later. We hate to be dependent on others. We really, really need to be in control of things we do. We take ownership, we control the performance, the stability, the priorities, and so on. It doesn't mean we do everything, but we try to do the right things.
We work, as I mentioned, in small, autonomous teams that are fairly responsible for their own priorities and how they collaborate and how they meet with all the business people. When we do that, we also have the right to ask why. So when someone comes with a project, I would like to have this done, we always reserve the right to say, "Why should we do that?" It's not to be annoying. Sometimes we are, but it's to be sure we understand it, and it's to be sure we do the right thing. And we can help with that. Then we have a factor 10 mentality. So when we run into bottlenecks, we try to experience, observe them really, really early so we can remove them, that we can scale.
Factor 10 basically means that if we have the situation we have now multiplied by 10, can we handle that? If you consider orders or finance flow and so on, we've had that situation several times where we 10 doubled what's happened here. It's, it's not just an unrealistic discussion to have. We are working on a shared technology stack across the system. It actually means that a lot of the different systems that we built are built on the same technologies. We can move people around, we can move systems around, we can reuse some modules across as well. It's, it's a way of growing, it's a way of being efficient.
We have tried to move a full team to another branch and do something completely else for six months and then move them back again because we had a bottleneck we needed to fix. Right. Quickly, a historic overview of what has happened on platform over time. All the way back before we launched Boozt.com, we were a completely outsourcing company. the story probably that the brands would outsource their e-commerce to us, and then we would outsource everything we did to someone else. They would develop the systems, they would run the priorities, they would run the projects, and so on. They even ran the warehouse for us. It was very monolithic, so it wasn't really in our control. When I joined them in 2010, we decided to take ownership.
That was the next phase that we came to. No outsourcing, no consultants. We built our own established our own warehouse. We started building our platform, the power to the people concept. We launched Boozt.com. Later, we launched Booztlet as well. We changed our strategy around the monobrand, so we only did the very few, very big ones where we could make a change and not having to work with hundreds of small businesses as well. We started the cloud journey. That was the establishment of where we are today that we did in those years. We came into the next phase where we expanded it. We had kind of proven the way to go. We went into a more service-focused way of running it.
Mobile first, later app first, warehouse automation. We established a data warehouse where we get most of the data that we do the decision based on. We went into this decentralized way of working together in the small teams, on several occasions. We started up this engineering focus that's very, very much again, a matter of scaling the business to be sure that we are well ahead, usually, a year ahead of business decisions in engineering, phases. Over the last few years, we have moved to the next phase again, where we have become more offensive. I would say the department store strategy. Everything we do now, we have proven. We've beaten most of our competitors. We think we are really, really good, really efficient. Now it's about building the club, implementing that concept.
It's about the department store, more categories, differentiating how we work it. We are moving a little bit away from having an engineering mindset to having a product-focused mindset. The why question, why do we do this? Who's the owner? How do we continue working with this, is super important when you start differentiating what we do more and more. Then also, as Peter and Mads mentioned, we are going into some of these new areas with the revenue generating services that has appeared for us, and I'll come back to that. This is more an evolutional graph of where we have ended up or where we are now, we would say. In the early days, if you start from the top, we had NetSuite. It was the main system.
It was actually in the beginning of Boozt, very early days, meant to be the only system we would use. It could do everything we needed. It was cloud-based, it could scale. There's no need to do anything else. That was the thought behind Boozt in the early days. Obviously, that didn't turn out well. It was split out into two. We had the ERP part in NetSuite, and then we did a webshop. All this was still when it was outsourced. We took the ownership ourselves and started building our own platform and own technologies. We continued this philosophy of whenever things become a bottleneck, we split it out into multiple systems. We added a warehouse management system that we built ourselves.
We added a content management system as well. Again, later on, that became a bottleneck, so we added a customer service system. We added an EDI integration framework, so we could integrate automatically with all our partners. We also replaced the ERP system with our own finance system because that was basically all that we needed, and that we could scale up in our own control. We added apps later on, we added a partner portal, and we added media services that is running the BMP. That has continued since then. We actually right now in a stage where we have about 40 different systems and services that we have built ourselves.
Again, from the philosophy that when something becomes a bottleneck, we can split it out, and then we can do something that is more optimal for scaling forward. It's not 40 systems that you can log into. It's maybe we have 15 systems that you can actually log into. It's 40 services that we offer that we have split out. We have an email service, for instance, that we send emails to our customers, and that's used from different other systems, et cetera. That's the philosophy that we have gone through, and we're not done. We'll probably never be done because it's a continued journey to keep on going, down this road. It's, it has, really given us power and has taken us to where we are today.
Yes, cybersecurity is one of the questions that you will ask me anyway, so we took it up here. Is cybersecurity a problem for us? Yes and no. We are hit approximately 15 times per day by a cyberattacks of different scale. We have taken some initiatives very early in our technology choice. We're working with Cloudflare. That is, it's a global web traffic distributor service, and they help us to protect against some of these cyberattacks, a lot of them. They cover about 20% of all internet traffic, and they can turn up and down service and direct it to another direction if something is wrong with it. We're using Google Cloud. We've done that for the last five years.
All our applications are hosted by Google Cloud, and that we can scale up and down. On a normal day, we have maybe three or four web servers running. When we run Black Friday, I think we have 45 servers running simultaneously. We can scale up and down, and we're never really in the risk of losing all our data because there is a redundancy in all this. Then we're using some partners, Rackspace and HackerOne. HackerOne is a, is a hacking service that are actually hacking our sites, and finding potential bottlenecks that they release, and then we reward them for that service.
Most of the choices we have done all along is something we are that keeps us sleeping well at night. We don't have any single point of failures. We don't have any on-metals of our own servers really that is that is in the risk of being taken over by hacker services and so on. We are working a lot internally as well, ID auditing. We are working with security training for our people and hacker security training for our developers and so on and so on. We are trying to be on top of this and we have never had any severe attacks that has taken us down.
Yes, this was mentioned already by both Mads and Peter. The department store journey that we are on, we are coming from being a women's dress shop only to becoming a full department store that should be able to service all different kinds of categories and also different kinds of needs. There are a lot of different initiatives around that, and some of them are listed here that we're moving from the way we are working on categories into being much more category-dependent on the different journeys that we take through. We are working together with the brands to get more self-service from them, so they get part of the challenge for selling their own items, but also an opportunity for selling more.
We are sharing that success with them. We're going towards a more context-based recommendation system. If you go into the beauty category, for instance, and you bought something a month ago, there is a big chance you want that one item again. If you go into a dress category and you bought a dress a month ago, there's a very low risk you'll want to buy that dress again. That's just a very well understandable example that we will go through different ways of serving the customers in these situations. Shop alignment, this is very much aligning between Boozt and Booztlet. It's offering the same features, same functionality across the shops we have, also across the different devices we have.
Being desktop, being mobile app, being a mobile web, basically to be able to offer a device-agnostic service across that. Also an area we're going into. Navigation, search, and filters, all that should be different work from depending on where you are in the department store. Inspirational universe, same. We are working a lot with being much more inspirational towards our customers in the way that they should read and learn about it. All that is also very, very department store-dependent. Logistics, there was a question about it. What will it differ there? Lots of stuff on shipping.
I think, as Sven will come back to, the way we store the odd size items, so small items, and the way we pack it, will it be sent in multiple packages? Will it sent by multiple distributors, maybe even, maybe from 2 different locations even and how you handle all that, including all the return process as well. Then not the least, the next generation of customer communication. Peter mentioned the club. It's a huge investment from us also technically, offering rich text messages in the app format, the inbox, the wallet, for vouchers and discounts, etc. All that is stuff we are building ourselves in platform.
Yes, one question that I've had many times is that why can't we just sell our technology and offer our systems to someone else? That is very hard to do because we normally say that we have the very best system in the whole world for ourselves, but not necessarily for others. If we should start doing the systems and offer them to others, we would have to work on their functionality as well. We would have to offer 24/7 support to someone else. We would have to offer a release cycle that is in their interest and not necessarily in ours. It's always been a matter of priorities that we would rather spend our energy on the internal development that we have done.
What has happened instead is that we have seen the opportunity to build on top of what we already have. BMP, that is about working on top of all the media display that we have to our 3 million customers. Or the BDI is about working with data and understanding data and offering that as an added service to our consumers. Booztpay is about lifting us up to a level where we can offer something that others can as well. When we can do it for ourselves, we can also take that and offer to others. Live Shop is something makes a lot of sense for ourselves. It might be spun off to something that we can offer to others as well. We have these added services that we have seen on top of it.
It's not about copying our platform or taking one of our 40 different systems and selling that off by itself, but it's about building new services on top of what we already do. There is a good example here. It's BMP, and it's from a technical perspective that we're offering a dashboard that basically tells the brands everything about a specific campaign that has been running. We're offering a planning tool for the internal users of how to book these different campaigns and how to negotiate with the brands when we sell it. Something we have built. The whole inspirational part where we include information from these banks and from the BMP campaigns in the different inspirational articles we do.
We have Live Shop, as mentioned, that we're running as part of BMP. We have product placements where the banks can actually buy placements, of products, can be in an email, can be on-site, can be on the front page, can be on a page two page, etc. We sell banners as well. Banners, again, in emails or on content, all that. Those are some examples of components we technically have built that they can go and choose, and we can use in a planning system, and then we can include it in the campaigns, and then we can display afterwards and measure it. We have the bank as well.
It's a BMP bank that is basically a matter of we invoice the banks what the BMP campaigns cost, and then we draw from the bank as we go along through a year. They can go in and see how much do I have left that I can spend on different campaigns, and then we can use that information as we go along. It's continuous. Instead of us sending invoices all the time, we invoice, and then we draw the money from the bank as we go along. All technical components that makes BMP possible to go live and on top of the services that we already offer. This is just a zoom in on the one dashboard that I showed on the previous page as well.
Information about impressions, how many times have the campaign been seen by the consumers? What is the value of the campaign? How much sale did it generate? What is the return on investment calculated on a specific formula? What is the conversion rate for the campaign? How much was the newsletter seen and clicked on and converting and so on, and again, from all the campaigns? There is a long list here of additional information that we display. It's all back to data that we have and that we can follow and that we can show for the banks, and there's no way that they will be able to see that. This is part of our partner portal, by the way. The banks log into this interface here.
You see a lot of different modules on the left side. This is what the brands see. Yeah. This is the last slide, and it's basically just to get you back on track from all the different from all the different screenshots that you just saw that that building a platform here has been about being in control of of the business. Again, I hope you get a feeling of this is something we do very, very close with the business people, being everybody in the company, also to some degree, to the external partners that we have. It's about being ahead. It's about scalability to be sure that we can continue this development going forward. not running into bottlenecks and being the limiting factor.
I don't think we've ever been that, except we need more people. That's it. Yeah. Sven?
Hello, everybody. My name is Sven. As Simon introduced, I'm from Germany. Just joined Boozt last year, now responsible for all topics around supply chain, especially logistics. Today, I would like to walk you through our logistics highlights. Starting off with our purpose. Logistics for us is the internal service provider that delivers the capacity and the capabilities that we need to cater our leading Nordic Department Store vision. We operate on 88,000 square meters warehouse space located close to Ängelholm, a bit north of Helsingborg, right in the center of our core markets where we are close to our customers and where we can basically reach everybody within 24 hours. We handle shipping and returns locally, which also gives us faster lead times, it gives us lower costs and of course, lower emissions.
We have a customized and scalable ASRS, an automated storage and retrieval system. Somebody already mentioned it, AutoStore, that is catered to our needs. We have roughly 1.2 million bins that we have in this AutoStore and a bit more than 1,200 robots running the operations there. As Jesper mentioned, we have our own in-house developed WMS, giving us a high degree of flexibility. We said it before, the fulfillment and distribution costs are at a very competitive level. You can see here that we're at the right point. You see that corrected value, SEK 121. We were quite ambitious on the depreciation time with our technology because at that point, we didn't really have any comparable values, and we thought a system that's running 24/7, basically, when we don't work, the system prepares everything.
We didn't know how long it will take until we need to replace the first things. We now realized after five years in that, we're quite good on path and we can extend that depreciation period. Depending on the components of the system, we extended this to 10-15 years. That gives us an amazing head start, I would say, to the future being positioned quite well. Of course, there are two things that we need to focus on to further improve, further optimize. One thing is the productivity, the other, the capacity. Jumping into productivity first, what are the key projects that we currently work on? Packaging materials sounds quite simple, but has a huge impact on our cost, especially since raw material prices are increasing ever, and so does paper.
With our new commodity group, our proto-product portfolio mixture, we see that we also need more of different types of packaging, and being on top of this, making sure we have the right materials to protect the goods, but also be lean and efficient is key. This is something that is strongly in focus for this half year to improve. Leverage data science, create a Glass fc from the Glass Citizen. We need to know everything that happens in our warehouse. We need to have scans everywhere, and we're already at a good level, but I think we can always do more to understand where do we have wastes, where do we have buffers, where can we be much better than we are now. This is something we professionalize heavily in and want to identify those opportunities.
Next level, lean management, very basic. But it requires a lot of discipline to really set it up well and to keep it up and running. If you run a company that has multiple warehouses, you can always see that the warehouse that is very, very disciplined on that end actually always has the better performance. That is something we have kicked off and we are already at a good level, but we want to take it to a much higher level and be an example in that end. Consolidation, quite technical topic, but as you may know, we have the biggest AutoStore installation in the world, and we have 3 big cubes, 2 of them in one building, the 3rd one in another building.
With our growing product portfolio, we do not have every article in every cube. That means we need to be able to efficiently connect those cubes in order to consolidate the orders. Also with an increasing items per order value, that will also increase those efforts. We want to be a lot more lean and automated on that end. There is one slide. Oh, yeah. Capacity in the current fulfillment facility is a big topic. We want to be able to grow as long as possible in the existing facilities, leveraging economies of scale. We currently have a capacity of roughly SEK 9 billion-10 billion in net revenue. As I said, roughly 10 million-13 million items. We want to increase the items per bin in AutoStore. How do we become more efficient in using our main technology?
We want to expand and optimize the storage setup that we have outside the AutoStore, our shelving areas and other areas that we process the goods in. We want to improve the flow of goods, be really smart about what we put where and when do we get what, which items at what place. The goal is that we do investments in the next two years to get us to a SEK 10 billion-SEK 11 billion in net revenue capacity. We will spend roughly SEK 100 million per year, depending a bit on when will we pull which option and implement it, but we stick in line with the previous budget planning there. Being a bit more detailed on these topics, increase items per bin in AutoStore. How do we wanna get there?
First of all, we want to adjust our store strategy, knowing exactly what is the goods that we need to put in the AutoStore. It was also mentioned previously in a question, how do you deal with bigger goods? What is the right size? Where should we stop putting things into the AutoStore and what should go somewhere else? Of course, adapt the configuration of our AutoStore. With the changing product portfolio, you also need to be on top of it and know how should the AutoStore be configured, how should the bins be configured, so we cater best to the needs and have the highest degree of efficiency. Expand and optimize storage for refill and large items.
Uh, we do a lot on, on that end understanding, okay, how do we go from pallet shelves, for example, to VNA, very narrow aisle, very small shelves with very narrow aisles that we can basically, uh, increase our storage, uh, capacity on that end, and also move from pallets to collies to cater to our needs. Um, and then of course, we also look into the layouts. Uh, improve flow of goods, I already mentioned it, reduce buffer spaces, reuse those areas for more storage capacity and, uh, be a lot more efficient, and we need to maintain a high degree of flexibility. Since we're growing and, uh, again, as mentioned, we're not at the end yet with regards to our port- uh, portfolio, so we need to be able to adapt to new needs.
When Mats and his teams identify an opportunity, we need to be able to grab it, we need to be able to grab it quick. That's why we're always looking into these topics and not get ourselves too bound to one way of doing things. The next big thing on the horizon is our BFC 2.0, our next warehouse. We started already last year planning it. We have finished the evaluation phase, so basically we have done a very thorough data analysis on historic data, on current data. We have done future workshops with our most important stakeholders to understand where are we heading in the next couple of years, because it's basically a project that will go live in two-three years from now, and we need to operate it for another eight-ten years.
We need to think way ahead, which is difficult, especially since we're a very agile company. We roughly know where we're heading, so that's good. Now we're in the conception phase. We need to set up the processes and understand what are the volumes, the items that we need to process through this warehouse. The next thing that we will do is so-called guided engineering, where we will sit down with automation technology providers, we will identify the best ones for our needs. We will discuss fully-fledged concepts, fully integrated concepts, and then choose the right company, and then we will basically implement and start construction.
The building will be designed around this, so that's also a very nice part of that. We believe in the campus strategy. We do not want to spread our warehouses across the country or across countries.
We believe that we are a lot faster and a lot more efficient when we are in the core of where we are. The Nordic Department Store, we need to expand our capabilities, bigger items. How do we deal with them? How do we send them well-protected and fast and good to our customers at a low price? The modular expansion, really important for us. Of course, we know that in the future we will grow, but we will not build one building that already is able to cater our needs in six, seven years. We think about modular growth, where we know, okay, we will build modular one or module one. In the next step, when we see, okay, we grow fast or we grow slow, we can postpone the next phase.
At the end, when we have built our 3 or 4 modules, we will know it's a fully integrated concept. It's highly efficient. It all works with each other. That's the really important piece that we look into. It gives us a high degree of flexibility and, of course, a high degree of efficiency 'cause we do not spend all the money right in the beginning. Then tailor-made intralogistics concept. That's the beauty of it. Also having our own WMS, we know that we can build the perfect process, the perfect intralogistics for Boozt. It's not for everybody. For us, it's the perfect thing, and we can build from inside out. At the core of everything is our processes.
If you grow into a brownfield like we did in the past, then of course, you're limited by the premises that you have, you're limited by the building, ceiling height, floor loads, and so on. In this case, we can build the perfect building for our technologies and our processes. Yes. Quickly summarizing the key takeaways. We have competitive logistics services with cost per order among the best in industry. Clear roadmap to further improve our operational excellence and keep that head start that we have here. We have the required capacity until the end of 2025 secured well into 2026, and we're well on track with our capacities beyond 2026 with the new warehouse. Thank you.
Thank you very much, Sven.
You're very welcome.
We will bring Jesper onto the stage also, and I promise to step up here.
Again, same procedure, and we start with Nicholas.
Yeah. Nicklas Ekman, Carnegie again. Can I ask on the last topic here, you talked about BFC 2.0. We're talking about an additional warehouse somewhere in the Ängelholm region, not adjacent to the current warehouse. Is that correct?
Correct.
How would you manage, consolidation as you talked about here?
Yes. Of course, by being smart within the item allocation, we can reduce this consolidation efforts. Depending on our strategy, how we move over. There will be an overlapping time. Also, I mean, at that point when we have the second warehouse, what do we put where? We also know exactly. We also now have a warehouse in Helsingborg dealing with the bigger items that are usually sent by themselves. We split these orders, there is no consolidation efforts needed. By being smart with the product categories and knowing what do we put where, we can heavily reduce this effort. With the short distance, it'll only take an hour or two, but not as in comparable environments, it takes...
it adds a day to the lead time because you have to drive from one country to another.
Okay, we're talking about an AutoStore warehouse, or?
That is open. We love the technology. We think it's great. But of course, every technology has its sweet spot. Depending on where we are and where we will be in the future, we need to reevaluate the options that we have. A lot of competitors came up in the last years, and I think there are some super interesting systems out there, and we need to thoroughly look into it, and we will do so. We're really open with the technology, and it will not be that one technology probably will be a combination of different technologies that we aim for. Then we look who provides the best efficiency and value for money, actually.
Mm-hmm. Can I also ask about the slide you showed about the fulfillment costs, the SEK 121? What exactly is included in that? I assume that is that would be the warehouse, the shipping, also the returns-
Yes.
is included in that.
Correct.
Okay. Yeah. Okay, thanks.
You're welcome.
Hi, Benjamin Wahlstedt, ABG again. You added about 70% on both bins and robots this year. And you communicate an increased capacity of roughly 40%. What are the main reasons for the diminishing returns here, please?
Say the last part again, please.
Diminishing returns. You add 70% in bins and robots, capacity is up 40%.
Yes.
according to the annual report. What is the reason for the diminishing returns?
I don't understand.
I think if you look at these numbers, I think we have always guided towards the 9 to 10 billion in terms of items and not so much in terms of the number of bins or the number of robots. I think if we look at it, we have added around 500,000 bins this year, and some of them into this year also. Not everything was in the AutoStore at that point in time. It is, yeah, some of it has to do with item composition, of course, that there can be some diminishing returns in that, but the difference is not that great. At the end of the day, it will add up to the 10 to 11 billion.
Thank you. If you could perhaps highlight some key items in the pipeline for the platform and the app, respectively, perhaps not including the club that we've talked about.
Certainly, we are working a lot with supply chain to make that even more smooth, automating a bigger part of the communication we do, especially around invoicing. That's one thing. The club has honestly taken a lot of resources over the last, say half year, and it will continue to do so as well going forward. Overall, this whole department store switch that we are in the process of consists of hundreds of small projects that are lined up. It's step by step that we chew on these, those ones. Big, big, big projects. I think it's pretty much there. There is...
We're doing some internal refactoring with an a PIM system that we will reach probably towards the end of the year. Product information management system, which is a little bit decentralized now, switched between different systems. We're going towards centralizing that as well. That is a big project, but it's not it's not prioritized where it has a fixed deadline. A lot of the refactoring is going on constantly to be sure we are one year ahead. That's basically my main concern.
Thank you. Could you perhaps briefly discuss how you handle changing regulations around internet user privacy, cookie regulations and things like that, please?
We have a legal team in Boozt, consisting of a few people that are very, with a finger on the pulse of what's going on there in the different markets that we're in, and they are very close to some of the people in my team. It's actually getting back to the business developer collaboration that happens, on a day-to-day level. It's not a top-down priority. It doesn't have to be, because basically those people know that this is important and the people know what has to be done on the other side. It's again, down to a communication between the developers and the business people that just happens to know the regulations there.
Perfect. Thank you.
Hi, Michael Benedict from Berenberg. Just one from me, please. On the tech side of things, I wondered if you could give a bit of color around what the key things you do better than your peers are, say, Zalando or an ASOS. Where do you think you're lagging slightly versus those peers? How do you approach it differently? Just to give a bit of context.
We really trust the people. I know it sounds like a cliché, but we do. We hate overhead, so we really try to put the right people in the same room and basically just fix it. That's a balance we've had all along that we have done very few things that are not being used. That, to me, is a high quality factor, that the things we do are the right ones. We have very few big priority meetings where too many people sit around the table and do reports on we should do this in six months and this in 12 months and so on, because it's never the actual stage when you read those six months or 12 months later.
It's my job is to be sure that we do the big projects when needed, because they will not come out of the day-to-day collaboration between the business center. That day you get the 100 small tickets. From time to time we say, "Okay, we need to be aware of this. We need to build a finance system, otherwise we will run into a bottleneck here and there." Then we set up a new team or a new structure, something like that. I don't know if that answers it, but we are very much on the pulse of what needs to be done, and we do very little unneeded work, very little overhead. We have product owners, product managers, but we don't have any project managers.
That is just moving tickets and papers. That's the philosophy I like.
All right. Another question from me then. Daniel from Danske. It is then maybe a similar question, actually. Given your background, you came from Zalando. I think you went from, when you came to Zalando, you went from Amazon. Correct me if I'm wrong. What do you see in sort of coming to Boozt? Where is sort of Boozt ahead of Zalando? Where do they need to catch up? What has been your main reflections?
I think it's quite difficult to compare, because, we're at different stages, right? I think what Boozt does really well is, as Jesper already mentioned, it's a very lean setup and a very fast-moving setup. Of course, if you become a big corporate, you're bound to a lot more complexity, and that slows you down. That is something that we do not have. We move at a very, very high speed, and decisions are taken really fast. I think that gives us quite a head start.
You don't see any risk that you're building in complexity with sort of what you're doing with the company going forward. You're sort of quite confident that you're not gonna be ending up in that situation.
We're very, very conscious about this. We try to avoid it at any cost. Of course, there will be added complexity when you grow. It's unavoidable. You can keep it at a fairly low level, and that's what we try to do every day. We're very, very conscious about it.
Thank you.
I think we have one here from the online audience also, and it's to you, Sven. In terms of the BFC 2.0, are there any considerations at this point in time in terms of size now that you talked about a modular expansion?
Well, not really, because it depends a lot on how high can we build, what is the technology that we will put in. At the end, we will see what also the final stage of capacity will be in with regards to items. Will we go for 50 million, 60 million items? We do not know yet. That's the phase that we're currently in to evaluate this exactly, and then we will look at the technologies, and the technologies basically dictate us what kind of a building will we need and what is the size of this building. It could be 100,000 square meters, it could be 200,000 square meters. We definitely look out for plots, and we have some that give us that freedom of choice that we grow into.
Very good. Any last questions for Jesper or for Sven? We are closing in. We're actually more or less back on time, which is really great. We will take a lunch break now, and we will be back at 12:20 P.M., where we will say hello to our lovely CFO, Sandra.
Thank you.
Okay. Everyone is still awake? You don't say anything. Okay. Well, nice to see you in person and especially a few of the voices that we hear on the earnings call to actually see you when I expect a lot of questions later. Very nice. It's time to go through the financial part of this presentation. Before, we're actually gonna do a little dive into our sustainability performance because last week we released our annual report, and most of us very well, so you would recognize most of the things that you see in the reports. However, we spent quite a lot of time in the sustainability report, increasing the number of KPIs and data and describing methodology, and there's a quite clear reason for that.
I will just give you a few highlights from our report. One of the most famous initiatives we made is the fair use policy, and this policy has been good for so many reasons. First of all, and something that I'm very happy about, is obviously that we save quite a lot of money. What we have to... Since we introduced this policy in late 2019, we have paused around 40,000 customers. That equals to around 1.6% of our customer base, so it's a fairly small number. Still, if they would all be allowed to shop on our site. Last year, they would've been... Their part of the returns would be 25% of all the returns made.
That's quite a lot, that is due to them returning all around 95% of everything that they buy. By pausing these customers, of course, this becomes a little theoretical because we didn't allow them to buy, we just want to give you an overview of what it actually means in terms both in terms of our business, but also in terms of saved CO2. We actually had 800,000 parcels not being sent out of the warehouse and then coming back as returns. That equals to around 791 tons of CO2 emissions. Just as previous years, we also reported on the CO2 intensity per parcel. If we look at the Nordic region, here we include the Sweden, Norway, Denmark, and Finland, the CO2 intensity is 0.29 kilos per parcel.
It's kind of hard to find a good and relevant measure to compare or do a benchmark. There have been some studies out in Europe, Central Europe, and Germany, but it's not, . You can't take it for granted that it's totally comparable, but the average is around 1 kilo or 1.5 kilo. That's the indication that we have. We have fair assumptions to believe that this is fairly low, that our emissions. What we have been focusing during the last year is to make sure that we can measure our climate impact, and that is a lot related to the GHG emissions and especially in Scope 3.
Since we now can report on more than 67% of our GHG emissions in Scope 3, we are eligible to set Science-Based Targets, and that's what we aim to do this year by having. We have already set the targets, but we will have them verified. That verification would help us to work in a very structured way going forward from, in 2024 and going forward, in how to reduce those emissions. We dive into the emissions normally, and the way we approach this is first looking inside and then outside. Looking at the Scope 1, which is our direct emissions, these are fairly low. It is due to the way we operate, that we are in this region, the way we run our business very efficiently.
Scope 2 includes the energy that we buy for our warehouse, for all our offices, and since it's renewable, and as you can see in this chart, it's almost nothing out of the total emission. That means that Scope 3 is the emissions that are the most relevant to take a look at going forward. It is also the hardest part. There are 15 categories of Scope 3 emissions. We have assessed that 9 of these are relevant. Last year, we reported on 4 of them, and this year we report on all 9, but not everything in it, but more than 67%. This has been major work, but we think we made a huge process, progress this year.
In order to take it further, we need to collaborate with others, and we have joined the SAC and some of our other big European peers to try and get to our brand partners because there's a lot of data that we need from them in terms of Both in terms of environmental impact, but also on social impact, down to a product level. This takes a lot of work. It will take. It's just a journey that we started, but since it's 99.8% of our total emissions come from Scope 3, this is something that we need to work on in the coming years, and probably a few more years than that. There's a lot of new things in our sustainability report. Last year, we reported around 40 KPIs.
This year, we're in the level of 170. With the coming regulations that we need to report on from fiscal year of 2024, we need to consider more than 1,000 KPIs, and then where 400 are mandatory to report on. It will take quite a lot of work to be transparent, but our overall mission in relation to this audience is, of course, to give you the best information we have, to structure it in a way that will make it easy for you to assess our sustainability performance. Cool. As Eminem would say, let's get down to business.
Today, I'm going to start by looking a little back on the promises that we made at the time of the IPO, what you can expect from us in the future, and finally, we'll take a look at our capital allocation priorities. When we did the IPO in 2017, we set a midterm guidance, the midterm was three to five years. In terms of growth, we said that we were going to grow 25%-30%. In terms of EBIT, we said that we expected an adjusted EBIT margin that would exceed 6% at the end of the period. We also said that we assumed that the increases in the profitability will come on a year-by-year basis due to scale efficiencies.
In terms of cash or capital allocation, we said we adopted this rather standardized policy on dividends that when we didn't have any more investment in growth to consider, we would consider dividends. We also made clear that during midterm, in these three-five years, we didn't expect to do any dividends. What happened? In 2020, when the market went turbulent, both us, and we think also your community, experienced that we didn't really know what to expect. In terms of growth, we became a little less specific on the growth. We said that, well, we will outgrow the Nordic market significantly. In terms of profitability, we assume that at this stage, during this time, and at this level of maturity, a profitability margin between 5% and 7% would be reasonable.
By saying that, we also said that it wouldn't probably come like this, but go a little up and down depending on how the market was. If we follow up on how it actually went, we can see that the CAGR of net revenue growth have been 30% if we go back from 2017 up until 2022. That's quite on spot and something we're very proud of. It's... Also considering that we have been significantly outgrowing the Nordic market. Looking at the EBIT margin, it's been a little more of a bumpy ride, you can say, and the profitability didn't come gradually in, in a very smooth pace, but it's been up and down.
If we look at the average adjusted EBIT margin for the full period, 2017 to 2022, it was 4.1%. If you look at the accumulated adjusted EBIT over the same period, it was 4.5%. If we take the latter part of the timeline, 2020 to 2022, we delivered an average adjusted EBIT margin of 5.6% and accumulated 5.4%. We think that we can conclude that we've been quite on spot with what we have promised to the market, and this is something that we're very proud of in our organization. Where does this put us in relation to others?
We have, throughout the day, shown a few other examples hinting that we believe that we are in the very good spot. I think this speak for itself. If you look at the vertical axis, you see the growth, and if you look at the horizontal axis, you see the EBIT margin, and it's accumulated over the period 2017 to 2022. What conclusions can you make from this? Well, we believe that there are a few where we are one of those that have been investing in profitable growth. Is there something alike with these players? Well, most of us been around for quite some time. If you look at the other end where the profitability is lacking, those are maybe an slightly newer players.
It, I think it reflects both the environment that's been on the capital market to grow at all costs, but also it shows that it's quite hard to enter this market. There are quite a lot of entry barriers in the Nordic market in our field. We have also included some of the more classical department stores, and that's because we believe that we take a lot of consumers from them, and they come onto our platform instead. Yeah, this is a nice view if you work at Boozt. What can you expect from us going forward? We have guided for this year.
As , the aim is not to talk about the near future here, but given how the market looks, we have made a wider range, both in terms of growth, but also in terms of profitability. We think it goes hand in hand. If we end up in the higher end of the growth corridor, the EBIT will follow and vice versa. The share of fixed costs impacts the profitability here. We also expect that we will be free cash flow positive due to the investments that we made. What we won't do is set a new midterm guidance, but we would rather talk about the long-term opportunity for...
The reason for that is, one, because it's too messy, but it's also that this is something that we learned over the last couple of years. It's very hard to guide because if you want it in the near term, you want it quite specific. That's As the market has been developing, that's been very, very hard. We wanna talk about our long-term opportunities. We will continue to guide on a year-by-year basis, for your sake. The ambition is to reach a market share of around 10%, and that includes both the online and the offline. We will soon go into how that will happen. We will In order to do that, we obviously need to continue to grow significantly faster than the Nordic market in general.
In terms of profitability, we believe that we have a very good model and that we can reach an adjusted EBIT margin exceeding 10%. We are the most profitable among our peers. That's what we will continue to do. We think it's time to start to discuss how we can return excess cash to shareholders. Here you probably have the most busy slide of today, but we will go through it.
If we start with our core business, being Boozt, the Nordic Department Store, and Booztlet, our Nordic designer outlet, we have a quite clear value proposition that my colleagues have been describing and talking about in more details than we usually do today. Currently, we assess that our market share is around 1%-2% if we look at the whole market, both online and offline. If we only look at the online market, we assess our market share to be around 5%-6%. There's quite a lot of room to grow. We are the biggest e-commerce player in the Nordic, and we still only have 1%-2% of the market in here. We believe that there's so much more to do. We don't have any ambition of changing the revenue model.
It is owned by, and a lot of the things that Mats and Peter talked about, that's the way we are in control. I think control is one of our key messages and something that we talk a lot about internally. We want to be in control, and we are that by having as a wholesale or owned by model. If we start to look at the other revenue streams, we have Boozt Media Partnership and Boozt Data Intelligence. We see this as one area, but since BDI is rather new, we separated them here. Currently, Boozt Media Partnership is less than 3% of our group net revenue. BDI we just launched, but in a very good manner.
We believe that long-term, this business area could constitute 4%-5% of the group's revenue. It's not tomorrow, it's not today, but we think we've started building Boozt Media Partnership a few years ago, and we see that it's really taking a big jump. This is not impossible by any means. If we start to look at the Nordic Brand Hub, this brand hub actually have different names. When we bought Rosemunde a few years ago, the ambition with that was that this was kind of a blind spot within our competence areas. We had a lot of offers of buying brands that were under.
That had financial issues, we could pick them up at a very low price. We just didn't have the capability or the knowledge around how to drive a brand or how to deliver on that. Since we worked with Rosemunde for quite some years, we knew them well. They were profitable. They were not like the most high fashion one, but more focusing on essentials. We thought that this was a good fit for us to start the journey with trying to experiment with being a brand owner. Since then, we have bought Svea, a very small brand for a small sum that they were in financial difficulties, and also we started our own brand, Inte.
We have three active brands, and their revenue is quite low in comparison to the whole group. If we, with the BMP, wanna talk about the opportunities, I actually wanna turn it around in terms of this ambition. We are, as Peter also mentioned, first and foremost, a third-party brand. That's what we're focusing on. This is more to make sure that we use the data that we have gained over the years and that we benefit from that and also learn and that we're in control in how we can use it. The ambition is not that this is gonna be anything more than 5%-10% of our revenue.
We're not aiming to become a brand house, but this will be a small part of our business where we can learn and fill out the gaps in the assortment where needed. Finally, we have Boozt PAY. If you look at this chart, you actually see one difference, and that's that we haven't set like a revenue target for that one. The reason for that is that the main purpose of Boozt PAY is to be in control. It's to be in control of the customer journey, and that's what started this from the beginning because we experienced that when we work with different payment partners, the customer gets turned...
They need to go out of the site to do their BankID, and they need to go back, and the customer experience wasn't really the best in class. We really think that this is a tool for us to deliver the best in class customer experience. Also, and you all know this, that there are other players in the market that wants to benefit the data and our the way our customers behave. We don't think that's fair. We think that the value chain is too lean and the margins are too small for other other businesses to make any money out of that. We wanna be in control.
However, if we look at what we gained from insourcing what our payment services, we have gained, we have saved cost, and we also have a very good revenue share model that allows us to get some money on the top line as well. It's less than 1%, but it's a very important part to take the vertical to take ownership of the vertical. What does this mean for our business? If you look at the arrows at the bottom, you can kind of get a sense for it. Going forward and by expanding and building and growing the market share for our core business, we don't assume that the gross margin will go up.
Actually, we need to make sure that all the benefits we get from different agreements that Mats' team is making with the brand owners, in some ways, that probably will go back to the customer. We can stay very competitive with the margins we have, and we assume the gross margin of 39%-40% from these businesses to maintain. However, with the scale efficiencies we will get by growing the business, obviously, we expect a higher EBIT margin. When it comes to BDI and BMP, that is a 100% gross margin, therefore, we place the arrow straight up. The EBIT impact is also positive, but obviously, we have some costs related to building its systems for Jesper's team.
It's people in both Mats and Peter G.'s team, and there's some other costs associated with it. Brandhub is the same. It's they have a higher margin than we do, so therefore it's in that range and also a higher EBIT margin. Booztpay, 100% gross margin there as well and quite profitable. We said that our long-term ambition is to have a margin that exceeds 10%. There's different ways of going there. This is not the only true model, and this is exactly how it will be. We've drawn this in order to show something that we think is quite reasonable.
If you notice something here, we have talked about this 10% margin possibility over the years, it's a little bit different from what we talked about before. That is actually due to the marketing cost ratio here. Let's start at the top. The gross margin we expect from the scalability of the other revenue streams that there's a potential impact of around 1 percentage point. Will that be near term? No, probably not, and especially not in this climate. We will use every tool we have to make sure we grow, and the gross margin will probably remain quite flat. Going forward, having other incomes, it should increase the gross margin slightly.
In terms of fulfillment, we said over the last couple of years that we believe 11% fulfillment cost ratio is a good spot. We also have seen quite increases in average order values. We are becoming more efficient. We also know, and I know you're very efficient, Sven, there's still some more room to improve. We believe that 10% long term is not at all impossible. Admin, the same things goes there. If we double our size, we shouldn't double the number of employees. The fixed cost is relatively lower, so to decrease this by 1.2 percentage points, it shouldn't be that hard. Depreciation, fairly small change.
Right now, we have overcapacity and that will go a little up and down, but 3% we think it's fairly reasonable. Marketing, 9%. Is that reasonable when you're at the mature state? Personally, I would say that it's a little too much, and we also think that it can go down. We wanna be a little prudent here. It would be quite easy to just say all savings will come from lower marketing costs, and then you have a higher adjusted EBIT margin. We think that this shows, and even if the marketing cost ratio would be lower, obviously the margin could be higher.
By showing this, we can show that even if marketing costs remain rather high, there's a good road to this 10%. Finally, capital allocation. Up until now, we have prioritized building capacity, and we spent quite a lot of money on that and quite a lot of efforts as well. Inventory, in terms of in the, in the market that or the business model that we have, where we make 2 big buys every year, we take a bet on inventory. Sometimes Mats comes up and said that he found a really good deal, and he needs SEK x number of millions to make sure that we can grow everything we need to, and he should be able to do that. We need to have that flexibility.
We need to be able to be fast and that means that we need to have some room in our networking capital to take the deals that are on the table and also make some bets on new categories that won't work. Innovation, it's a lot about what Jesper said. He needs more developers, we need to invest in more developers. We also need to invest in other type of innovation, but this is something that we've been favoring throughout our lifetime. Finally, people. It's people who build a business. Obviously we need to invest in people. I think this is a side note, but we're just very proud of it.
During this time when it's really, really tough on the markets, we've never had more happy employees ever than right now. Investing in our people, actually, it's hard to do an ROI on this, but having the most happy employees at this time when the market is as tough, I think it's a proof in a that we are investing in our people. Previously we also said and that, when we did the dual listing in Copenhagen, we did a capital raise and we talked about the acquisition possibility. Different types of acquisitions could be relevant that we have talked about.
Gaining category expertise. That was one of the things, when we launched Home, for example, or Beauty, there was a lot of talk and we got a lot of questions around whether it would make sense for us to actually buy a category specialist to get a head start into that category. It's been something that we've been looking into. In boiling down mostly to the average order value, we could never make sense out of that. It always ended up us building the category itself. This is something that we haven't done. When it comes to technology, we have invested in. We've been doing a few acqui-hires. It's small acquisitions, but still we made them and they have been very successful and growing.
For example, Jesper's team in Copenhagen with the we call the innovation lab. They work with the app. It's very hard to find app developers, so we managed to do acqui-hire there, which has been very successful. Nordic market presence, not something that we've done. We've been able to manage the Nordic market quite well on our own. Selected brands, that's the Rosendahl acquisition that we talked about. We have an empty square here, that was because it wasn't a priority back in the days. If we look at the cash flow deployment, it's 1 thing with the priorities, but what did we actually spend our money on? As you can see here, we have spent quite a lot of money on our tangible CapEx.
If you look at the right-hand corner, the financial liabilities, you can actually put down that on top of on the tangible CapEx because the liabilities are directly connected to the AutoStore expansion and warehouse automation. We have financed quite a lot of those investments ourselves, that is due to different reasons. I think one is that when we started with this, both the technique that we invested in was rather new, so the repayment period was quite short. We were less mature than we are right now. I think we've reached We are much more bankable now, we expect to remain that. We finance quite a lot of our investments ourselves. Intangible CapEx, yes, those people, basically, then we've done some M&As.
If you look on the right-hand side, we've done a few equity issues, one at the IPO in Stockholm and the one on Copenhagen, when we listed in Copenhagen. What is our future or what are our new capital allocation priorities? Well, we've changed them because we think we are at a different stage from a maturity perspective. We will continue to invest in capacity. As Sven talked about, we need to build a new warehouse. Can we finance this in a less cash flow up and down way? We think so. We have a strong balance sheet. We think we are bankable. We think that we can look at different alternatives of financing.
I can't say how that's gonna look like right now, but we're obviously gonna look at the most favorable one. But the assumption is that we maybe can even out the cash flow slightly. Inventory, if we're gonna grow to have a 10% market share, obviously we need to invest in inventory and quite a lot. You can expect that net working capital swings will be quite high, that we won't have this perfect net working capital. We need to take chances, and we need to continue to have the swings we have. But obviously, as the business mature, it will be more and more lean. Innovation is something that we... people is something that we need to continue to invest in. There's nothing new there.
What is new is that due to us having some excess cash and also that we expect to have positive cash flow generation in the coming years, we think it's time for us to start consider when to return some cash for the shareholders. We don't see dividends as the primary way of doing it, but rather to do. The board asked for permission from the AGM to do share buyback. That's the methodology we think makes most sense. Obviously, that's not up to us. If the shareholders agree, we think that that would be a favorable way of doing it. Just to repeat here, fulfillment capacity, we think we have up until SEK 11 billion of sales.
That means that we need to invest around SEK 150 million-SEK 200 million per year, where SEK 100 million is related to the warehouse and the rest is innovation and other smaller things. When it comes to acquisitions, it's still an opportunity, the opportunity would be primarily on the vertical, and I think you sensed that from what I said before. That we don't see that there's too many interesting targets to buy in relation to expanding on the horizontal part, but rather on the vertical, making sure that we are in control, making sure that we have the right people, that we have the right tech structure and such. Acquisitions is an opportunity, but it's not a priority. I think that's it. Monsieur?
Very good.
Thank you.
Then we kick-
Will you join me?
I will join you.
Thank you.
We will kick off the last Q&A session of today. Now is the time to get all the good questions out, and I can see we will start with Michael.
We have a few, suspects here.
Michael Benedict from Berenberg. My first one, you used to talk a lot about the commission model or a commission type model making up a sizable proportion of your business in the medium longer term. Clearly, that's no longer the plan. I guess what's changed in the last few years?
Yeah, when we talked about the commission model, Mike, was that we said, okay, looking at department stores in the past, at a mature stage, they started to kind of to do a commission model where the brands owned the inventory, and the brands were responsible. The problem with a model like that, and you see that also with traditional department store, is that they tend to become lazy. If you don't own the stock, you become lazy, so meaning that you don't care if you have the right stock at the right time. Having met the guys we're all about control.
I think that we will delay probably after when I've sitting in a retirement home to do that part because it's just basically that's, that is one of the big fears, that you become lazy. Because if you look at traditional department stores, if you don't own the stock, you don't care if you have the item in the right color or the right size, and that's kind of the route to irrelevance. I think that kind of we will wait as long as possible to go down the commission. I know that investors like the idea of having a lean balance sheet and we've been hammered over five years, "Why don't you do a marketplace model?" Well, what we also have seen is that the marketplace model is a lose-lose-lose proposition.
The brand owner loses, the retailer loses, and the customer loses on that proposition. Kind of we stick to our guns, and we want to continue to own the stock, take responsibility, and be able to match the stock and be in control of kind of the customer experience. Long answer to a short question, Mike. Sorry.
Very helpful. Thank you. My second one is on the fulfillment ratio. Is the current ratio not as efficient as it's likely to get, given you've got one fully utilized warehouse or close to fully utilized, and in the future clearly you're gonna have two, there'll be split orders, et cetera? I guess what gives you confidence that there's more leverage to come?
Going into our operations, listening to Sven, and looking at the opportunities we have in terms of making things more lean. It's all about productivity. , we have been the first runners on the technology we used, and we've been growing a lot. It's been a lot, as , making sure that we just have the capacity. I think there's a lot to do with how we can, how we can do things smarter and a few of the things Sven already mentioned, how do we place things in the bins and how do we use them more efficiently? There's just a lot of fine-tuning that we haven't even begun with. It's not that we're unsatisfied.
I think being around 11% at this stage when we're growing a lot, when we're expanding a lot, makes a lot of sense. Obviously there's always some 10% to cut, ?
Can I ask something as well? Previously we thought that we would need a new warehouse in 2024.
Mm-hmm.
With all the measures we've done, we now probably have extended that for one another year. That also has. We're actually kind of, we are not at full capacity to say so. We have still a lot of space, so there is still kind of a lot of room. As Sandra was saying, we are. There's a lot of kind of firsts in what we're doing, so as you learn, you get more efficient.
Then also looking at the technology we have, and we're developing it all the time, there's a lot of things that. We built a scalable technology. I think there's quite a lot to get from that as well, doing things smarter.
Great. Last one for me, sorry, it's a fulfillment follow-up. Just in the medium term, as you launch and ramp up that second DC, do you think there's enough sort of efficiency savings to hold the ratio flattish? Is it likely to go up or-
Obviously, depending on where the market is, but around 11%. If we're around 11%, and that could be 11.3%, it could be 11%, it could be 10.9%, we think that's the fair place to be at this time. Jonas?
Jonas from Rask. Just thinking about sort of those, of course, when it comes to the other revenue streams, you've come some way in some of them, and some of them are quite new. If you look at the ones that you've had for some time, and clearly Booztpay goes without saying that it's some cyclicality to it, given that it's dependent on the frequency of on conversion and orders and stuff like that. If you look at Boozt Media Partnership, which is of course also in structural growth, do you see any sort of cyclicality to that business as we speak right now?
It's actually a difficult question, Daniel, because of course, a part of the Boozt Media Partnership is linked to our buy. That's the whole essence of retail media. It's part of that. What our team has been very good at in the past is getting brands to buy more, so getting additional campaigns not linked to the buying. We're coming out of two, maybe three exceptional good years for the brands, so it has been easier. Now we're going into maybe a phase where the brands will have difficulties.
What we are seeing now is that, in general when you have maybe tough times, brands, they tend to go more for performance marketing, and retail media is kind of the ultimate performance marketing tool. What I would think as an old media guy, after all, I was 16 years as a media planner, buyer, and advisor they tend to kind of turn down the offline marketing and go more in kind of the one that gives ROI immediately. We don't we don't expect them to kind of turn it down. It might even be an opportunity, but kind of, we...
It hasn't given us any reasons to believe that there will be a cyclic downturn on people's media patterns. So if anything with all the data that the guys can provide, it's kind of, it should be kind of a happy days for a brand to know exactly what am I doing? Which countries? Which styles? How am I performing towards peers? , when I was a media advisor, we talked about 50% of your marketing spend is wasted, but you don't know which half. Now you can be extremely targeted. I think that kind of... I would say that it should be quite a cyclicality-resilient. Is there a word that you can say?
I don't see a reason why we should expect it to turn down.
You think it's gonna be sort of a quite of a good buffer for you guys as the entire market experience increased pressure on product margins?
Yes. Plus we're the best friends with the brands. , now with a lot of our competitors going in for the marketplace model, so the brands don't even get cash on delivery or get cash. Us, we pay in cash and offer them a unique maximum opportunity. I think that's a very strong proposition in the market that there might be in turbulence going forward.
If we can use that to gain market share.
Yeah.
That's what we will do.
Yeah. Maybe a second question as well, coming back to sort of the long-term, and I think you, Sandra, mentioned it, that when you went to the market in... Or you did have these targets, but you also said long-term that this should be a double-digit margin business. That's also of course what you're saying today, six years out. I think Ronnie sort of maybe answered the question when we talked about mix and how long it's gonna take to get from 30 to 70 with new products, and you said +10 years. Is that also how we should view the sort of the long-term target ambition? Is that a +10 years, or is that gonna happen before? How do you see it?
On EBIT, you said?
Exactly.
I think we said that when we grow in line with the markets, that kind of is the, not the end game, but that's when we re-reach that level of maturity.
That's some time out, simply.
That's some time out.
Yeah.
It also looking at the individual numbers, it can come before.
Yeah.
I don't see why it couldn't, but I'm not promising anything.
All right. Thank you.
Hi, it's Daniel at Nordea this time.
It's fun that you're all on the road.
Yeah, exactly. Exactly. All right. A question here on the market share and this reaching 10% in the Nordic region. I've been trying to track that back, et cetera. One question I have here is, if you would split that down, if you look only on your apparel side of the business, what market share would you say that you have in just that store at the moment? Perhaps also the online market share would be interesting to know.
We have looked at the full business and not dig down into to that part. Obviously, if we you can, you can do the math and try and...
We don't really know actually.
This, to be honest, is 1%-2%. It is, it is what we assume. We don't know exactly, but we look at it as a full plate, also going into the 10%, we haven't said that Boozt should be this part and Booztlet should be this part, but together. I think you can see that in the recent quarters also, where we used Booztlet to help the Boozt. Like, that will build whatever makes sense for the full business we will drive on. And if Booztlet has momentum, we will drive that one faster, that bus faster, and if Boozt has a better momentum, that we will drive that one.
I think though, I was a bit surprised that it was only 1 to 2, but I think it's basically adding the other categories.
Yeah, yeah.
very small.
Exactly. Yeah.
I mean, I just calculate on the apparel side. I came to like 15% online market share. That's then 30 of this total. Maybe 4 or 5.
It sounds a little high.
, Is that sounds high or?
Yeah, it sounds high.
Sounds high.
Should say smaller?
Looking at it, not higher than 10.
No.
Not higher than 10? Okay. Okay, that's a good indication. Thank you.
There's a lot of players not disclosing their numbers, so it's not totally easy to-
Yeah.
to get it.
I think it's kind of obviously 10% is not a Science-Based Target. , it's like-
No.
it we didn't say 9.9 or. It's kind of, it's an ambition. We think it's realistic because historically, you haven't had any departments or kind of being a regional power player. You have had local champions in every country, . Denmark has its own, Sweden, Norway, and Finland. We think now is the kind of we are the first ones to be truly regional, and we're still small, and it makes a lot of sense if you look at the total ecosystem. I think that kind of in our categories, it's quite realistic that you will have 1 or 2 very dominant players that will probably combine, maybe have 20%-30% market share of the total market.
which is why we said, okay, our ambition is kind of start by having 10% of the online market and then 10% of the total market. If that's the first part is in 10 years and the second part is in 20 years, then it's a 10, 20. This is kind of what we believe is that there's a huge opportunity to grow still in the Nordics because you tend to get very impatient and say, "Now, cannot grow in the Nordics anymore. Let's conquer the world." We say that would be the biggest mistake we did because there's still a lot of growth in the Nordics, and we just started. This is why we just say that we will have 10% market share. When it will be, we don't know.
That's also key to the profitability. having at some point, you can't invest in more offline marketing in a geographical market, you will get scale efficiencies on that. You have one warehouse, you get scale efficiencies from not having distribution all over the world. It goes both for the market share and for the profitability.
Yeah. Yeah, because it seems like just you, like you were into that, it tends to be like one or two players take the entire market. You seem to be the players in the apparel space then. I think I saw some data a few years ago, then they estimated you were like 10% of the Nordic and Zalando was like 20, and then that's a few years back it should be higher now. I just think on the other categories, because then you have other players that caught much of that market already.
Yeah.
I'm just thinking that might be more difficult to get to the same kind of levels in those categories.
As Peter mentioned, this is like an add-on, so we're never gonna be better than the best beauty specialist, probably, . It's the add-on effect that gives us the extra value. Of course, we're looking at them, so we're trying, because I know Mads will be upset with me if I said, "We're not gonna be as good as them," because we will try. But it is the mix effects that will give like the extraordinary.
Okay, great. Then just a follow-up question here on the margin side also. Reaching 10%, seems fully realistic, but I was a bit surprised when I saw the marketing and the fulfillment cost because I thought the fulfillment cost would be a bit higher and the marketing a bit lower probably. I think that the trend you have seen in other online players has been a few years ahead or a bit larger. If I start with the marketing side there, was it 10%?
Nine.
9. How do you... I mean, what is, would that be? How much would be to keep top of mind awareness, and how much of that would then be like a performance marketing investment? Can you how do you think about, how do you come to that number?
It's a good question. I think again, going back, we were in the U.S. three, four weeks ago, and meeting U.S. Investors. In their view, what they thought what had been the most disappointing thing about e-commerce is that all the promises made were that eventually marketing would come down to close to zero because you had bought the customers, and then profitability would come on its own. They were all disappointed to say that marketing has not come down, and we've seen that marketing has not come down. You cannot rely on business on marketing giving all the savings. Thank God that we have such high basket size and that we have low complexity of business, so our business model is not relying on marketing to giving all the gains.
obviously being an old marketer myself when I was advising brands, and I have been the advisor for McDonald's, Nordea, SAS, et cetera, et cetera, carlsberg they tend to spend maybe 2%-3% of their revenues on marketing just to maintain the brand. obviously we will kind of say, "Okay, that might be the case," but of course in a dream scenario, it's down to 5%-7%, but I think it's just too optimistic to dare that it would come down now. You should not bet your horses on that marketing savings will get you all the way. Of course if marketing ends up at 5%, then of course the investors will be happy because then the EBIT is above 10%, right? Fairly, fairly.
I think that kind of for now, that marketing probably will stay at a relatively elevated level because especially in dire times with performance marketing and the beautiful model of Google and Facebook where the buyers basically bid the price up. So that's why you just cannot depend on marketing to give all the savings. Also, I think this is why you have seen these disappointments from most e-commerce players, because they're just not able to deliver profitability because marketing costs are still way too high.
Okay, great. Thank you. Just finally then on the fulfillment cost side also here. What I think tends to be the case is that the last mile cost comes down a lot because you get better deals from the providers, et cetera, and then you get a bit of leverage on the, warehouse and all that, but that tends to, like, level up quite on high level. I'm just thinking now, do you still see better pricing with the last mile, PostNord, et cetera? Do you have volume discounts still on that? Where does that efficiency from now on come from to get down to the level you're targeting?
Distribution is quite stable and has been quite stable. Obviously, with increasing fuel prices there's some pressure on the cost. But looking at that, it's balanced quite good, so obviously we get better deals if we have buyer, better, higher volumes. Then there are some in-increases in some. It's rather stable. We expected it to be rather stable, maybe up and down a little. We expect efficiency mainly to come from fulfillment, and as I said before, I think that's more than doable.
Mm.
I think if I can add one thing to that. Now some of you have the great privilege to go and visit our BFC today, and I think that will also help the understanding a little bit, because sometimes when you say AutoStore, you have an idea that the whole flow that we are, how we are handling goods is automated. This is only a goods to person solution, so you need someone feeding this technology, and you also need someone to do the packing of the shipment.
It's of course, looking into the future, it's not unrealistic that you will get more technology that will help you with some of these processes. So investments in the future will also go into automating to a further extent what we do at the, at the warehouse today. I think it will be...
It's much easier when you're up there. It's impressive, but there are still things that can be automated.
Maybe just follow on to that also. I mean, what you also see is like you start to compete on same-day deliveries and city that you go down that route, that that becomes a competitive weapon. I've not seen you offer that anywhere yet. I mean, Zalando is doing that in some markets. Have they started to do it in the Nordics? You've seen anything like that?
No. We believe that their delivery is actually slower than ours. A few years ago, we expected a pressure on that, but nowadays it's nothing that consumer asks for, and it's something that's less talked about also in the talking to the distributors, right?
Yeah. , if you look at the basket size-Comparisons we did, during my slides, . Imagine that you have a basket size of 45 EUR. There's no way in hell that you can afford to offer a same-day delivery for free, right? The customers, they're just not willing to pay for that. A next day delivery for free or the second day is fine. As long as you have a free delivery option, then of course you can add, and I think there's more push towards the industry to start charging for delivery and for returns than vice versa. We have no incentive in doing that because we are our business model is fine. Our basket unit economics are fine.
I think that with regards to kind of improved quality in distribution, we actually have the upper hand because we have much more flexibility and room to maneuver than all of our peers with a low basket size. That's why in the end, it all comes down to basket size. If your basket size is too low, you are in dire straits.
Mm-hmm. Perfect. That's all my questions. Thank you.
Niklas or Benjamin.
Benjamin Walseth, ABG. This is a bit of a nitty-gritty question. Bear with me. Looking at other companies selling similar products to your home segment, gross margins are well below your group average. If fashion is set to be about 30% of your business in the long term, you have to assume the home will grow quite significantly. What categories will sort of counteract the dilution from the larger share of home sales? This is obviously assuming that you also see a lower gross margin in the home segment, which you may or may not do.
Well, I would say that we may not do that.
Okay.
We probably don't agree that it has a lower gross margin than the rest. basically home and beauty for us are quite good categories.
actually.
Yeah.
further down the profit line
Yeah.
due to the lower returns, it's very profitable.
Yeah.
Yeah.
We have. Yeah.
Yeah. Perfect. Another nitty-gritty question. Talk a bit about the fair use policy. You mentioned a level of like 1.6% of potential customers being essentially shut off. What is a mature level here? Or, or am I thinking about this the wrong way? Are you sort of shutting people off as you go?
How many crooks are there out there?
Yeah.
I don't know, it's a fairly small group. Peter, I don't know if you have a good question or not. It's.
I think we are at a level where we don't have too much.
Yeah.
There's no doubt that you probably increase that the same so the ratio stays the same. They are crooks.
Yeah.
We know about them.
Yeah.
They are going to do that.
Right.
It's also very exciting. You get very upset.
We have a team of criminologists who actually kind of go into the behavior, and you would be amazed how kind of. Our chief scientist, he came and said, ", we have this person who has claims." He said, "Imagine that you would take all the sand grains in the entire world." I said to you, "Okay, I want you to pick this, find this one specific sand grain." I said, "Yeah. Okay. This person's bad luck, there's a higher probability that you would find the sand grain than she would have this bad luck." and different. One has tried with 27 different profiles, so it's detective work, but it it saved us not only, but it saved us a lot of money.
I think that's also one of the secrets why we are more profitable is that we have the data, we've been able to identify, because also there's no doubt that these people travel around. They are bad customers with other shops who might not even know that they are bad customers, right?
If we sort of zoom out on the returns question, what are some initiatives you're working on right now to reduce your returns rate? Is that something you are working on?
Well, we don't. , fair use is probably the only magic thing you can do.
Yeah.
that have a huge effect. Looking at it's working with the product description, it's working with the data, it's working with the pictures. Over the last couple of years, we added more on the third and fourth picture, big pictures from the brands to see the length of the, of a skirt and whatever. We're working on all these different things, data from. Now we do a lot of online returns, then we can get more accurate data on why people do returns. It's these small incremental things, but we don't believe that there's one. , if you can read in the media about, so now you can scan your body, and then there's no need for returns, and they will solve all your problems.
That's just not working because the brands are not at that point where they have the same measurements, and the exact measurements because they're being produced in different warehouses. There's not magic. You need to do this persistently and thoroughly and continue to do it, and that's what we do.
Fair enough. Thank you very much.
Niklas from Carnegie. Can I ask about your view on the medium term? The medium term, because you.
We're probably not gonna guide on the medium term.
Yeah. No, that's short, that's the short term. The medium term, you're not... Are you dropping your medium-term target? Are you still targeting margins of 5%-7%? I assume you still expect to outgrow the market, but are you still targeting margins around 6%? When we look at the 10% margin target, is that kinda going to be back-end loaded, or you do expect a gradual transition? Basically, do you expect margins to more or less consistently increase from here? Do you expect when growth starts to slow, then you will see a sudden pickup in operating margins? I'm trying to see.
Yeah.
Where you're going on the medium term.
Do you wanna start or should I?
This is normally when I look at Ronnie, and he says-
Okay.
Don't say anything," , but of course we don't expect like it goes from 4 and then suddenly it's 10. It has to be a gradual kind of increase with the fluctuation we'll see, . I think that kind of where we are now, ideally, we would kind of grow from there and grow gradually into 10%, but it kind of goes. Again, we have to adjust to the market there is. I can show you that we will be profitable, we will fund our own growth, and, yeah, we intend to return money back to shareholders. But we think it's kind of. Of course, we are going to grow more than the market in general. That goes without saying.
Ideally, we'll make this kind of gradual growth into the 10% so that it makes sense. , it doesn't make sense for us to kind of have one year with like 4.5%, then next year, like 9%. It will be kind of gradual.
Yeah.
Is that okay?
If you just look at the history, you see that it doesn't come in the perfect way, it will depend our own performance, our own inventory management, the market, and different things, and how we will scale the different categories, how fast Peter will be able to grow, get people from one category to two to three. It's not gonna be a straight line, but obviously not huge bumps.
Mm-hmm.
Drops.
You'll probably be disappointed if we're not within the band that you are implying, right?
Yeah.
Did I say too much now?
No.
No?
I think you.
Yeah.
You are right on spot, Hermann. The reason why we how to get to 10%, the way we showed it, was also leverage on other cost lines. The kind of dynamic you're talking about, where we all of a sudden take a big jump, would more be if you have the marketing approach, that one day I spend 10%, tomorrow I spend 5%, now I'm a household brand, things are good. Here you actually have cost lines where we assume to have leverage as we go along and we grow into a larger business.
Mm-hmm.
Very good. Thanks. Second question, when you talk about the Nordic Brand Hub, you still talk about this growing from less than 3% to 5% to 10%, but you're not talking about M&A. Are you organically looking at growing private label?
Yeah. I think it's a way for us to say that it's going to be a very small part of our business. We're not going to be a first-party brand business. We're going to be a third-party business, just like it's rounded numbers. It looks good to say 5%-10% so that's the case, .
It wasn't even McKinsey who did this.
No, no. Yeah, it's just to say that we really like it and we think it's interesting, and actually we think that the Rosemunde brand is a really, really good brand, and it can grow. How big it can be, we don't know, . Depends on us, and then we have the small things, but we are getting approached every week by someone who has something to sell, and we're not really interested. it's.
we would like the opportunity to.
Uh.
If there's a good brand that ends up in financial difficulty, we want to be able to pick it up, but it won't be SEK 200 million acquisition, then it would be like a few million SEK.
Okay. Makes sense. Earlier today we talked about pre-season buying, where you used to be at 80% and now you're below 50%. Is there a risk with being at that level? I think in this market it's great because there is a lot of campaign buy opportunity, but in a market like we had a year, a year and a half ago, it could be bad to have low pre-season buying. Is there a risk?
Yeah. I can answer that. Yes, there's a risk. Now we have met Mads, next year he might be standing here and say, "You have to be 80% again." That's the beauty about it because we have no dogmas, we are basically aligned to the market and extremely flexible, and the team knows that kind of we need to adjust. , we like football, we always say there's a new match tomorrow, even though we set a new record, something was happening. At the current moment it's been very... , it's been extremely useful for us to have gone into the market very conservatively with 50%. In Two years time, Mads may come back and say, "Guys, I feel it in the air.
We have to be like 70%, 80%. It will be, I think one thing is sure is that Mads and his team, they are extremely good at matching stock with consumer. We have never had a write-down, right? We managed to sell 99.5%. This is. Now a stock issue kills all businesses, right? Because you have so much kind of. You have, you have warehouse that is filled, you have. Your mind is filled with old stuff, it just, it destroys an organization. This is why, he has kind of, he has the pulse of the market, and at the moment, 50 is right. It might be 60 next year. It probably won't go much below 50, right? There's too much risk. It might go up again.
I don't know if Mads agrees with me, but I've been working with him for like ages, so I know this is how he thinks.
Yeah. Okay. Super. Thank you very much.
Good. One last, maybe two questions.
Okay.
That's it.
Two very quick ones from me.
Be on time.
Yeah. The first one was, it's Carl from Carnegie. First question was on the follow-up on Niklas' question on the campaign buys. I think that was quite a substantial margin contributor in 2020 at least. I wanted to ask as a longer term, do you plan for increasing campaign buys as the share of total, and are the opportunities for campaign buys progressing or increasing as you're growing larger? Is that something that will be sort of margin supported longer term?
I think the answer is the same as we had to the previous-
Yeah
question. That depends on how the market looks like.
Yeah.
We're not buying everything we can to get the best margin ever. We need to make sure that we buy the right stuff, and how much of the right stuff that is available depends on the market situation.
Yeah.
That will fluctuate. If we can use that to hedge our margins and maybe decrease some product margins on other things, we will do that, but that's day-to-day business adjustments.
Yeah. Yeah. Yeah. Final one from my side, longer term, if you manage to reach your longer term ambitions with the market shares, do you see any need of sort of capacity expansion or fulfillment expansion for example, closer to central Stockholm or any fulfillment expansion outside where you're present today, reaching those volumes?
Ideally not. We know we like simplicity, right? Complexity kills business and we kind of want to reduce friction, so we even talk about that kind of the next warehouse will be within somewhere between 500 meters and 10 kilometers. That's already give us, okay, that's going to be an issue. Not an issue, but that's a task we have to manage, right?
Yeah.
Ideally we will stick to the campus strategy and not having the satellites, because the thing is that we are selling seasonal goods. You risk ending up having to kind of either do internal cross-docking or you have to send two packages, right? That's bad economics and bad customer experience. As long as possible, and as long as we're staying in the Nordics, we will probably have a one warehouse and or a campus strategy, right? Because it doesn't really make a sense to have a satellite because let's say we had a satellite of maybe 20,000 square meters in Stockholm, what would we put into the warehouse? Because it's extremely difficult to forecast demand when 90% is seasonal stuff, right?
Yeah. Yeah. Fair enough. Yeah, that was all for me.
Simon Granath, Nordea Holdings. We agreed we would split the last one. I just have one question. Your competitive cost advantage longer term, how would you encourage investors to think about that? I imagine it's related to the basket size, to the distribution scale advantage, and to the local procurement scale advantage relative to brands, but it's hard for me as someone who don't know your business that well to think about those three elements and how important they are longer term.
, firstly if you have this competitive cost advantage, that means that it's extremely difficult to compete against us. I think the first ones to suffer are the physical retailers, because there's no way, there's no chance that they can kind of match our cost structure. The second will be the subscale e-commerce players in the region. The savings we're making, to be honest, a big part of that will probably go back to the consumers. If we manage to keep just a small part of the savings, then I think we all will be well off. I think that. We don't fool ourselves by thinking that all the cost savings that it will go down in our pockets because I know this is.
it, a lot of it ends in the consumer's pockets, right? That is kind of. I think that the cost savings will benefit us in having an attractive offer and then it could also benefit the EBITDA line.
Right. Very quick question then from me. Christian Gordison from SEB. You touched upon the opportunity with Nike. I was just wondering what is the opportunity there and maybe you could elaborate a bit on why they are unwilling to work with you.
I know Mads knows exactly how much revenue he would gain from Nike, but he doesn't allow me to say that, so neither does Ronnie. We know that I don't know what they're thinking about, but as we were the last ones to launch, so we came in later into the market. When we launched boozt.com, they had started the strategy of reducing number of stores and working with selected retailers. That is the thing. Also, I think that there are strong forces telling them not to work with Boozt. We know that there's another sports brand that was told not to work with Boozt, but came to the bright side finally.
I think that kind of, it takes time, but eventually they will join us because we have become such a strong force in the Nordics and I think that they will join. What I understand is that a lot of these brands who opted for a D2C strategy during Corona, they're finding limitations in the D2C strategy and the need to have kind of broader platforms. We think that we are getting into a position where it's difficult to kind of avoid working with us. It was long answer to a question where the basic answer is I don't know.
If they would come, we would treat them as VIPs and do a lot for them.
They are included or excluded in the long-term ambitions?
We don't assume anything we don't know. Well, well, maybe we do, but not in that regard. No, they're not included.
That's a potential... additional upside?
Yes.
Thank you.
That's it for questions.
Yeah. It's me now?
It's you.
It's me? Yeah.
I will be done.
Yeah. Yeah.
Round it off.
I hope that as many as possible will come to the BFC. It's for those of you who've not been there, it's quite interesting to see the operation. I hope that we've managed to come across, that we believe that we're in a strong position, that we are probably stronger than ever before. We think that our position in the market is strong, quite unique, and that the Nordic Department Store is strong. There's still a lot of growth to be had in the Nordics. Our tech is very strong, it's very scalable.
You can imagine frustrations, in general, that if you want to grow, that if you have typically third-party platforms that limit growth, we don't have that problem, and also I think that our fulfillment infrastructure is strong, and ready to grow. Yeah. We have a strong organization. Finally, you meet someone else than other than Sandra and myself. I hope that it has shown you that kind of the breadth of our team, and we have many more very, very good Boozt people. I was asked during the break what do you see as your biggest challenge? , I think you, someone asked Sven about that, but if, . I was asked, what is the biggest challenge?
I think, our biggest challenge in a kind of, at least short-term, is to avoid complexity and to avoid friction. typically as you grow and sometimes you regard yourself as being bigger than you are, and then you start to add complexity. My main mission is to make sure that we are easy, frictionless, and non-complex. I'm a simple guy from the northern part of Iceland, so I just can't overview, have an overview of a very complex structure. With that, I think that's the main thing, avoid bureaucracy and making sure that we have a very lean team, . We have a policy of being one to a few. There's no, if you want a job done, give it to a busy man, and we will stick to that. Yeah.
We expect to have a temperate market here, when I'm done at least, or we are done, and that we will be have a profitability of exceeding 10%. In general, we are fairly, we are optimistic. We believe in the business, believe in ourselves, have confidence, to be honest. It's not an easy ride. It's going to be tough, but we have a strong team. Again, if it was easy, then it would be easy for the rest. We like when it's difficult. That was the famous last words. I hope not.
Thank you to the Boozt team. Not everyone is used to talking to some of the smartest people. This has been a pleasure for us. We have really been looking forward to this, to share more insights into our business and why we are happy to come to work every day to try and create this leading Nordic Department Store. We hope a little bit more about the business now. There will probably be a few follow-up questions, I assume, also from this day. Thank you to the people here in the room, also to the ones listening in online. Thank you also for respecting that we took a long-term approach today, and we didn't talk so much about current trading.
We will be back end of next month, and we can consider that. Thanks a lot to everyone. The ones who are going to join for the tour to the warehouse, we will meet outside. You probably need to go to the restroom or pick up something. We will meet out here, gather, and then we will go to the bus, united, so to say, so we don't lose anyone on the way. Thank you very much.