2022. Throughout the call, all participants will be in listen-only mode, so there's no need to mute your own individual lines. Afterwards, there'll be a question and answer session. Today, I'm pleased to present CEO Peter Kjellberg and CFO Thomas Pehrsson. Please begin your meeting.
Thank you, operator, and good afternoon, everyone. Slide two, please. Today's presentation will be conducted by myself, Peter Kjellberg, CEO at CDON, and Thomas Pehrsson, our CFO. Next slide, please. I've been CEO at CDON since January this year. I have in my professional life had a fortune to be working with some of the strongest brands in the world, and I have been part of conducting a couple of very successful and transformational brand journeys during the years. One of the main reasons why I want to join CDON was the potential I saw in growing the business, and after two quarters, can I only conclude that my own belief has grown even stronger. I strongly believe that CDON has a great potential to become the leading shopping destination in the Nordics. This will of course not happen by itself.
It's a mix of continue to do what we do well and to change or add new ingredients into our formula for growth. The Nordic marketplace opportunity is very attractive and is up for grabs. Globally, more than 50% of all e-commerce goes through marketplaces. In Europe, the majority of the market-leading companies within e-commerce are marketplaces. As a region, we are in the Nordics a couple of years behind in maturity compared to the rest of the world, not when it comes to e-commerce in general, but to the marketplace model. At the same time, it is this what makes the potential with the CDON so very, very interesting. CDON is uniquely situated to become the leading shopping destination in the Nordics. We have the building blocks in place. To the shoppers, we provide a wide assortment in one place at the best prices with a single checkout.
We have a strong customer base in place. More than 10% of Nordic population have purchased from CDON in the last 12 months. For the merchants, we are the perfect sales engine. We provide access to consumers, to new segments, to markets. We offer an extended online offering, visibility. We improve customer experience. We give access to tech, to data, to insights. We have the shoppers, we have the merchants, we have the assortments, we have the platform, we have the brand, we have the experience internally, and the presence in a way that no one currently can compete with on the Nordic markets. However, we do not deliver the right consumer experience today at all times. The customer is often satisfied, but not impressed.
It is of course not okay only to be okay when we aim to be the best. We are fixing this right now as we speak with a clear objective of getting more shoppers into our site more often. The brand awareness is very high, but the perception of the brand needs to be improved. We have top positions when it comes to awareness in all Nordic markets. The consumers knows about us. Now we are ready to launch a brand that not only will know about, but also will love. Today, we are often found through search engines or comparison sites. With our new brand position, will we increase the organic traffic and thereby lower the cost of acquisition. CDON can react upon changes and opportunities and trends and demands faster than most in the market. I'm really amazed about this.
I'm amazed about the possibilities of being a marketplace. In literally minutes can we curate and create assortments and campaigns that follows the needs and trends in the market. In good times and bad times, can we adjust our offering in real time. This makes us unique, and it's a strength we will utilize much, much more going forward. I think we are all well aware of our strengths, as well, of our gaps, of course, and we work relentlessly to close them. A key component in this work is our new strategy that we have named DO5, and I will talk briefly more about it in a couple of slides. Next slide, please. The agenda for today contains an introduction to CDON, followed by a Q2 update.
Thomas will then present our financial performance, and after that, we will open up for the Q&A session. Next slide, please. Let me first give an introduction to CDON. Next slide, please. We have the right products at the best prices enabled through our marketplace business model in the Nordic markets. We offer currently around 12 million products in core categories on our site. It's everything from simple everyday products to capital goods from well-known, respected premium brands. In many core categories do we have the biggest assortment in the Nordic region. A fact, a strength I think we have not been so good at communicating and working with, historically. A fact, a strength that we will utilize much more going forward in our work of becoming the shopping destination in the Nordics.
We have about or more than 1,500 active merchants operating on one or several of the Nordic markets in our core categories. In Q2 we are very happy to note that we have the record high number of active merchants selling on the site. At the same time, we also have a high number of new merchants onboarding to CDON. Really happy about that and good work of the sales team. We are active in all Nordic markets. Sweden is our biggest market by history, but we aim to grow on all markets. We put a focus on Norway in Q2, and in Q2, we made a 65% increase in numbers of active merchants. Now we will put a focus on Finland and Denmark during Q2, Q3 and Q4.
We work with 360 digital marketing, integrated campaigns, focused messaging, spread around multiple points of customer contact. As I said before, the brand CDON is very well known. We have the highest brand awareness in the Nordics compared to our closest marketplace competitor. We have stronger overall levels throughout the whole brand funnel, and managed to convert a higher share of consumers in the lower funnel. We have a model, we have a scalable platform, giving us the flexibility, the possibility to grow numbers of customers, merchants, and products at the same time, which is great. We have today about impressively 90 million visits per year and 2 million active shoppers. Next slide, please. The internationally proven marketplace model is under-penetrated, as I said before, in the Nordic markets. Marketplaces market share globally is about above 50%.
In Nordics, we are only talking about a couple of percentage. This gives us, of course, an unprecedented opportunity to grow. I think, the main reason why the marketplace model is underpenetrated in the Nordics are related to maturity. We are still in the early phase in the Nordics. Bear in mind, we converted to a marketplace in 2019, and we are already the market leader. Amazon launched its Swedish site in 2020. In more mature European markets like Poland and Netherlands, they started 10 years before us, and they now have 25%-40% market share. Our ambition is, of course, to have the same development in the Nordics. Next slide, please. We estimate the total available market in the Nordics to be SEK 415 billion.
Our core categories represent approximately 35% of the total online market. That gives us a target market of about SEK 145 billion. Our current market share is less than 2% of the target market, again, giving us great opportunities for growth. Next slide, please. To sum things up, I think we are uniquely positioned to win in the Nordics. For the shopper, we have the wide assortment in core categories at the best prices. For the merchants, we have instant, easy, cost-efficient access to millions of customers and the Nordic countries. For the market, we are establishing the marketplace model in the Nordics in a similar successful way that has been seen in most international markets. I think CDON is a fantastic opportunity. Next slide, please. With that, we move into the quarterly updates. Next slide, please.
CDON Marketplace GMV grew by 1% to SEK 437.4 million, compared with SEK 433.2 million. The Swedish e-commerce market as a whole decreased by 15% in April and 8% in May, compared with the same months of last year. Net sales for CDON Marketplace increased by 22% to SEK 50.5 million. CDON Retail net sales decreased according to our plan by 29% to SEK 51.1 million. Our gross margin increased by 12.7 percentage points to 51.3%. Profit and loss before depreciation and amortization amounted to minus 20.2 million SEK. Profit and loss for the period amounted to minus 26.7 million SEK. Next slide, please. In the previous interim report, we presented and introduced several activities to stimulate our growth.
Halfway through the year, we are starting to see the effects, which I, of course, is very, very happy about. We can see that the number of active shoppers has increased in comparison to the last two quarters. I think we now have a solid product mix with higher commission levels. The initiative to strengthen organic traffic is showing positive results. We reach a better position in organic search, and our total traffic numbers increased compared to the same quarter last year. I think the enhanced marketing organization is taking form at a fast pace, and that is since April. We have invested capabilities to launch an optimized Performance Max, which is now live in all our markets. Optimization is ongoing. We lower cost per order and reach a higher profitable acquisition.
I'm very happy to see that the rebranding project have progressed according to plan. We have developed a completely new brand direction and very nice visual identity for CDON. Everyone internally are extremely happy with the result. Going forward now, we will focus on, of course, the go-to-market plans, and we want to secure, of course, the maximum benefit from the brand position turned into the new updated product assortment, adding new and relevant merchants, and so on. We are working with that during the whole autumn, and we will launch the result of the whole rebranding process, which is quite complex, quite big, during the beginning of the first quarter in 2023. Again, I'm super happy about the result. This is a crucial step for us.
Paid traffic costs more and more. It's not sustainable to only focus on transaction and hunt for new customers. We need to add a dimension of entertainment. We need to have emotions be part of the buying process in addition to only price. Great progress for us going forward. We are pleased to see that our communicated focus on increased market presence in Norway, as I said, is yielding result with a 65% increase in the number of active merchants during the second quarter of 2022 versus the same period last year. I also mentioned we will have a similar focus on developing Denmark and Finland in the second half of this year. The number of active Nordic merchants continues to grow at a steady pace.
During the second quarter, we reach a record high, which of course I'm very happy about. In addition, there's a positive trend also with many new merchants coming in. In June was especially strong month with a high number of newly signed merchants. The number of international merchants is also increasing. At the end of the second quarter, we signed BigBuy Electronics, for instance, which we are very happy about. It's one of Europe's largest home electronics retailers. We have started to integrate their very impressive assortment, and we plan to go live with that during the third quarter. Our newly established international partner sales organization have focused upon the deepening their relationship with the larger European marketplace aggregators. As a result of that, for instance, the partnership with Octopia evolved during the second quarter.
For us, it means now that we can offer the potential of more than 14,000 merchants from 70+ countries the access to the Nordic market via CDON marketplace. The outcome of that we will see going forward what that will achieve. Of course, a very positive result from the team. During the second quarter, six-month fulfillment project with selected merchants was completed. The results very promising, and will result in a business case for further development of relevant delivery solutions. We also successfully updated and improved our communication with existing potential merchants according to plan in our markets through a new merchant website, a new implemented CRM strategy. We continue to focus on our core categories winning the home to enable a stronger merchant base, improve assortment in the Nordics.
Our new improved campaign organization have prepared the second half of the year, and I would say packed, well-planned activities related to Singles' Day, Black Friday, Christmas, winter sale, et cetera. Sales preparation towards the merchants have been improved, and we are now preparing to go live with the biggest sales events in the Nordic market. The CDON marketplace gross profit consists from our merchant commission, as you know, and financial commissions from our payment solutions provider. The marketing income from ads are still in a very early phase, and it constitute less than 0.3% of our marketplace GMV. Compared to international player, it's low. We now have, which I'm very happy about, the business development team in place. We have told them to see how we can grow this very interesting business for us.
The newly established category team are now recruited. This is again according to our growth strategy, winning the home. This will have a very positive impact on the customer experience on our site and the loyalty of our customers already from second half of this year. During the quarter, we developed and implemented some great technology to the site. We updated product recommendation, added new filters. The implementation of an improved CDON buy box with our unique identifier CID has now been taken further from the test phase, with a selected audience to roll out in selected product categories. The development of the CDON app proceeds according to our plan. During the quarter, tests were conducted with selected audience.
Approximately, I think it's like 80% of our shoppers already use the mobile device for purchases. This app will of course give them a more seamless shopping experience and we were really looking forward to launch the app during the second half of the year. We have also launched a new platform for digital marketing. The integration has been completed during the second quarter, and we're now working to improve the process and ways of working. It is a scalable email system intended to improve both efficiency and profitability when it comes to our digital marketing activities. Which I'm very happy about, during the second quarter, leadership development has been ongoing. We are focusing on change management and as you can hear, we are doing a lot of activities.
We have a lot of activities in plan, so this is of course crucial that we have organizations that are willing and eager to change. Also very, very happy to see that the eNPS are at a stabilized higher level than before. Next slide, please. I'm also very happy that we are now taking the next step in our strategic development to further strengthen our growth ambitions and to fulfill our vision of becoming then the number one shopping destination in the Nordics. During the first half year, we have done a thorough analysis of necessary development areas. We have identified short, medium, and long-term activities needed to achieve our vision. The analysis resulted in a comprehensive strategic plan which in its term contains a wide range of identified activities.
We have named the strategy DO5, it rests on five pillars. One is then boost the brand. Number two is product is king. Three is to create a flawless shopper experience. Four, to secure that we have a lead in digital. Five, of course, then so that we secure also that we have an internal organization that is aimed for growth. We will talk more about DO5 and the activities it contains during Q3 and Q4. Next slide, please. Now, I would like to give the word to Thomas to present the financial performance.
Thank you, Peter . Let's move to the financial performance then. Next slide, please. Group income statement. As Peter Kjellberg said, despite a market that decreased during April and May, CDON Marketplace GMV grew by 1% for the quarter. The combination of increased commission levels and a solid product mix has led to gross profit, which was 25% higher than the corresponding period last year. According to plan, we are phasing out our retail business, and as a consequence of that, the net sales and gross profit for this segment decreased. Since we have been investing in activities for future growth, such as marketing and product categorization and attracting key expertise, we have recognized somewhat higher expenses in this quarter compared to the same period last year, which is in line with what we communicated at our last call, the last quarter.
This means a lower EBITDA and EBIT than the second quarter last year. Next slide, please. Group balance sheet. Last year, we acquired shares in the associated company Shopit as well as a majority stake in xales and Commerce 8, so our fixed assets have increased compared to the same period last year. As I said, we are phasing out the retail business, and this leads to a lower inventory. We have a cash balance of SEK 118.8 million, and the total equity is higher than the end of the first quarter last year due to the rights issue that took place in the third quarter of last year. Next slide, please. Group cash flow statement. We recognize the low operating result versus the same period last year, mainly due to specific initiatives to enable growth as mentioned. We are not content with the result.
However, we have a cash balance of SEK 118.8 million going into the financially strongest part of the year. While we are accelerating several of our ongoing growth initiatives, we are in parallel adapting our spending to the challenging market situation, which in turn will have a temporary impact on our paid traffic moving forward. In summary, we are content that our marketplace GMV has grown throughout the year and to be able to launch the new brand platform and the related improvement initiatives, we will focus on profitability for the remaining year. Thank you, and over to you again, Peter.
Thank you, Thomas. Next slide, please. With that, I will say thank you all for listening, and I would like to open up for the Q&A. Next slide, please.
Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name has been announced, you can ask a question. If you find your question has been answered before it's your turn to speak, you can dial zero two to cancel. Once again, that's zero one to ask a question or zero two if you need to cancel. Our first question comes from the line of Nicklas . Please go ahead, your line is open.
Thanks, operator, and good afternoon, everybody. I'd like to kick off by asking you on site traffic. Effectively, this is the first quarter with even though it's slight but still positive growth year-over-year since Q4 2020. Could you give us an idea of how your integration of Shopit online's technology perhaps has impacted or whether there are some other main factors explaining this breaking trend, please?
We have, as you know, we have been working with Shopit now for a while. I think we are close to 100% of our assortment is now categorized through Shopit.
Would you say that that is the key driver behind the sort of sustained site traffic data in this quarter year on year?
I would say it's a vital contributor, but not the only one. I think we have done the right things both when it comes to our paid and organic traffic. It's a combination but of course it has been an important step for us in the work in total.
Thanks for that. My second question, besides product mix, are there any other drivers that explain the increase in the take rate, year-on-year? I estimate that at about two percentage points, actually.
Yeah, Nick, I would say that, except the product mix as such, it's also that we have more qualitative merchants than last year in the comparable period.
Sorry, you broke there, Thomas. Could you repeat that, please?
Sorry. I said except for the more favorable category and product mix, it's also due to more quality merchants than last year, and those three in combination make up the higher take rate.
Excellent. Thank you for that. My final question for now, how do you plan for H2 this year, the second half? I mean, do you assume that the e-commerce market growth will improve, deteriorate, or remain flat compared to the first half this year?
As you know, we do not comment on future predictions. You know the market situation, how that looks currently, and you probably have seen a lot of reports the latest days and how they have been actually performing. Of course, we are careful with how we see the future and how we will act in the future. We don't comment on our projection for the e-commerce market for the future, so to say. Of course, we should be.
Yeah, what you also can say, Nick, if you look at the nature of our business, I think we have a good assortment for good times. We have a good assortment for bad times. We have capital goods with premium brands. We have good low-ticket products for everyday use. There is always a market for. I think we are well-balanced both when it's, again, good times and bad times. One segment just to mention is the used segment, because that is growing quite fast. We actually also have a quite good assortment of used products. That is something that I would like to look into personally going forward to expand that business, and we are already quite big in it.
As you have seen, we have outperformed the market so far this year. That, yeah, that's what we can say.
All right, guys, thank you so much. I have a few more, but I'll come back later in the call if there's an opportunity. Thanks.
Thanks.
Thanks. Thank you.
Thank you. Our next question comes from the line of Brad Hathaway. Please go ahead. Your line is open.
Hi, Peter and Thomas. Thanks for the helpful presentation. Peter, you made a comment early on about kind of the frequency, kind of customer purchase frequency on the site. How do you think about, I guess, kind of where you are today and the path forward with purchase frequency?
I mean, as you heard, our ambition is to become a destination, the national shopping destination. That is our long-term objective. To become a destination, you also then has to be a place where you frequently come in. Otherwise, you are not a destination. We need to work with our offering towards the market to become a more frequent provider. It should be natural to go in the best case, a couple of times a week. Let's start with the ambition a couple of times a month at least. That is what we are working. That is part of the strategy now going forward with DO5.
Okay. Got it. I mean, I guess my understanding is I think right now it's a couple of times a year. The idea is eventually maybe a couple of times a month or a couple of times a week at some point is kind of what you're hoping for.
That's the end state. That is not done, of course, overnight. That is, you know, from a strategic standpoint, that is what we are working on as an end goal.
Got it. Have you seen anything in the beta test of the app that kind of suggests that you know the different behavior of those customer cohorts?
Sorry, it was breaking up. I think you asked about the app.
Yeah.
We see,
And whether you're-
Yeah, sorry.
I'm sorry, whether you're seeing any different behavior in those kind of early tests?
What we see is it's the same pattern. It's a younger target group. It's a more frequent purchase, so that is perfect. Again, what I'm-
Mm-hmm.
I'm really interested in is since times is what times is at the moment, it goes in quite fast, especially in this area here where we have inflation, interest rates.
Mm-hmm.
... rates, food prices, fuel prices, energy prices, whatever, that is getting a quite complex situation. Used product again are super interesting for us to look into, and app could be perfect for that. Let's see.
Excellent. Great. You mentioned kind of that the Nordics remain very under-penetrated. You know, if you would look at other European markets, obviously marketplaces tend to take a much larger share. Is there anything structurally that you've seen now in your six months that suggests that there's something different about the Nordic? There's some reason why the Nordic shouldn't look like other European countries?
No. It's mainly a maturity thing. We are a couple of years behind. Secondly, it's also about what I talked about before. People are okay with the shopping experience, but it's not perfect. If we can balance things up, coming into also the frequency discussion, then I think we have the perfect mix. The main thing is it's a maturity. The marketplace definition still is quite unknown. You know, as you know yourself, the e-commerce we are highly penetrated. It's just a matter of keeping going on what we are doing right now, and it will come.
Great. Well, I appreciate all the efforts and the progress in the first half of the year. I'm looking forward to starting to see some of the benefits of some of the things you've put in place.
Yeah. Thank you, Brad Hathaway.
Thank you. We have one third person in the queue. Just as a reminder to participants, if you do wish to ask a question, please dial zero one on your telephone keypads now. Our next person is Adam Wyden. Please go ahead. Your line is open.
Hey, guys. Thank you for taking my call. Couple things. Housekeeping first. You mentioned on the first quarter that you had some elevated G&A expense from talent recruitment and I guess maybe severance of other people, but you know, kind of stuff that you know, kind of transactional G&A, kind of restructuring type stuff that you expected to be elevated in the first half. Do you think most of that's behind you? Do you think that your kind of G&A levels are gonna be kind of in line with as a percentage of sales? Do you think that they're flat on a dollar basis? Do they come down? I mean, how should we think about G&A going forward?
Hi, Adam. Thanks for the question. Yes.
Thank you.
As we said, in Q1, we had some one-off costs. We also said in that call that we should continue with part of those in Q2, and that's it. We should be at a normal level, so to say, in Q3 and forward, and that is what we are looking for right now. The same high level, so to speak, as you were referring to, that will not continue.
That's on a gross dollar basis. Like, I'm just trying to think about, you know, because what's so interesting about this business, you saw it here, is you saw the increase in take rate, and you saw how much gross margin that you generated. I think one of the things that I think, you know, maybe perhaps Nordic investors seem to not understand relative to global investors is that, you know, your ability to manage margin in the marketplace is far superior and that there shouldn't be the same dollar for dollar cost.
You know, I'm just trying to think out loud, you know, about how we should think about, you know, incremental margins and, you know, basically, you know, in the event, like, let's say, you know, God forbid we grow 50%, I don't know, this year, next year, whenever, some point we do. Like, do you think that you expect G&A to grow as a percentage of sales? Do you think that, you know, it should be fixed? I mean, how should we think about kind of, you know, G&A going forward? I mean, do you feel like there's a lot more G&A coming as a function of investment or, you know, obviously, you know, you're gonna have some one-time stuff that came off in the first half, but do you think that gets replaced with something else?
I mean, I just wanna know how you think about G&A in kind of the next intermediate term?
Yeah. No, the G&A in relation to sales should, of course, be lower. We are, as you know, a very scalable business. We should be able to run this business on, of course, some kind of half-fixed cost that has to move with sales, but that should be quite limited. You shouldn't expect it to be the same percentage of sales or close to in the future. Should be much lower.
Okay. Yeah. You know, look, I think in my calls with previous management, you know, I think, you know, there was some argument around the increasing cost of paid traffic, and that obviously we know that organic traffic is good for two reasons. One, you know, it's cheaper, obviously, and B, you know, organic site visitors end up probably going there, and they get the loyalty app, and they get, you know, whatever, the Prime, and they buy more. You know, I'm really interested, you know, in kind of your comments around, you know, the growth of organic traffic and, you know, is your comment around paid traffic really more of a defensive posture, or is it because-
Is that because you have confidence that the organic traffic is gonna come and you don't need to buy as much sales?
I think this answer is twofold. If you start with the paid traffic, as Peter was mentioning before, getting more expensive to buy traffic due to a harder climate, so to say, or competitive landscape. There are more companies competing for the same buyer, so to say. Also it's higher price levels of buying that traffic. We have to be smarter when working with that, meaning being a better buyer of traffic, meaning lower cost for that traffic, and that is really a masterpiece of art to do, and we have some really good expertise in this area. Secondly, coming to the organic traffic, of course, that is the same. We also need to be better in that.
Shopit helps us, as you know, but also a lot of other SEO initiatives that will make us better in organic traffic. We also have very good expertise in-house of working with that. Those two factors will make us more efficient in marketing spend going forward. That is, so to say. Yeah, as I said, that is a masterpiece of art of doing that, and it takes some time to maneuver in that and be the best. If we succeed in that, we should be, I must say, one of the best, at least in the Nordics, working with both SEO and SEM, and that's what we're striving for.
Yeah. Okay. Moving on. On the take rate front, you went from 7.8%- 9.3%, which was, I think, I'm getting the number right. That's pretty impressive. You know, obviously, you didn't break out mix. At least I couldn't see it in the interim report, like, how the category mix changed. But I know that you did purge a bunch of big merchants in the fourth quarter. You know, again, I know it was meaningful. I don't know if you spelled it out on the call in the fourth quarter or whatnot, but I got the sense, you know, based on kind of the scuttlebutt we did that that could, you know, that merchant or those merchants could be as much as 10% GMV.
Have you guys, you know, tried to quantify internally how much? Because, like, in my head, I'm like, thinking about it, I'm like, okay, they're an electronics merchant, right? Maybe they were lower commission rate, lower take rate. You know, is some of the take rate increase a function of getting rid of that merchant, and then at the same time kind of, you know, also shows the drag on GMV? I mean, have you quantified how much GMV, you know, was kind of voluntarily, you know, purged merchants from the fourth quarter and, you know, how that kind of flows through the take rate?
Yeah, we have. Interesting question. You're not that far away in your estimate, actually. It was around 8% when we excluded that.
Right. Basically, you know, 'cause I'm just trying to think about, you know, kind of, look, this. You know, and again, you know, I don't know a lot of people think I like to hear the sound of my own voice, but I think it's, you know, sometimes it's helpful to kind of think about where we were. I mean, this business went through this hyper growth phase for the first five years, and then we went through this platform change where we went from renting someone else's technology to implementing our own, and obviously that had some adverse consequences. You know, I don't know if that meant, you know, bad merchant acquisition, whatever you wanna call it.
I think, you know, for me, what I think is super interesting is trying to understand, you know, what is the kind of core business improvement as a function of kind of this restructuring turnaround, however you wanna call it, re-acceleration plan. You know, for me, it's like if I back out that merchant, it looks a lot more like 10% GMV growth. To me, that actually is quite impressive in the context of where the market is. That's really helpful for me. You know, can you talk a little bit?
You know, Thomas made a comment about quality of merchants, and you know, I guess my question is, like, as you onboard these, that big bicycle guy and the sporting goods guy, like, is it that you have less chargebacks, or is it that the commission level or take rate is higher? I mean, how? When you think about the composition of take rate as that, as the quality of merchant improves, is it that you're able to charge them a better commission because they have better scale and better efficiencies themselves, i.e., they themselves have a higher gross margin so they can pay you a higher take rate? Is it, like, you know, less chargebacks? Like, what is it that allows you to make more money on higher quality merchants? I'm just curious.
It is a combination of the merchants itself and the product they are offering, which of course more qualitative ones have more high-end products out there. Therefore, commission could be higher. We don't comment on any category mix or I mean, merchant mix and category levels. That is, as you said, the main reason.
Yeah. I mean, I think it's somewhat intuitive. I think everyone knows that, you know, low ASP electronics is a lower ASP, so subsequently there'll be less money to go around for the distributor and the marketplace. Sporting goods and furnishings, and these are all great categories, so that probably makes sense. Can I ask you something else? You made a comment about advertising, you know, in terms of being very low. Can you talk a little bit about, you know, how you kind of think about advertising. You know, I kind of put these in the other bucket.
Like, if I think about the composition of take rate, I would say kind of commission rate, and then I would say advertising, loyalty, you know, partnerships, you know, whether it's like, you know, Amazon doing a deal with Hulu or, you know, the free shipping or what have you. I mean, how do you see that kind of what I would call the ancillary revenue stream kind of evolving?
We in all honesty, we really haven't had anyone working with
Focused before. Now we have a small business development team in place with a history of working with the same topic for our biggest competitor in Europe. They are on board now. We are working now with the conceptualization of it, price settings, communication plans and so on. The foundation is there now, and then we need to start to roll it out during the autumn. You will not see
Do you-
Instant impact of it, but it will come.
Do you think I guess my question is if you think about the composition of take rate, do you think there's a lot more room on commissions, or do you feel like, you know, your 9.3% or 10% or 11% or whatever the number is, do you think that that's the upper bound of commissions and, you know, the kind of the delta between 10% and 11%, is really the ancillaries? or do you think that there's more room on kind of the traditional mechanisms that you have in place?
I think we have more room. There are additional services that we will add. We have segmented the merchants in a way we haven't done before. We have then defined also those additional services. I see a positive effect on that. I don't want to quantify it at this point, but of course, it's in our action plans to make it happen.
I know I've been going on for a while. No, I got two more. One is on logistics. Can you talk a little bit about, you know, I think a major, you know, kind of, you know, it's interesting, you know, what we've gotten from our focus groups is people say, "Well, you know, people in the Nordics don't really care about logistics.
You know, there's more retail stores, people are more comfortable going, and, you know, blah, blah, blah," and that they don't really value the logistics. Other people are like, "Oh, but they don't have same-day delivery." You know, I'm just curious, like, in a world where we might be going into a recession and, you know, we just I think everyone in the United States just lived through Prime Day. I'll just use it as an example, right? Live example relative to CDON. Prime Day was yesterday and the day before. My wife went and just went ham on that thing. Why?
Because we pay for the Prime subscription, and the delivery is free, and they're like, "Oh, I've got to front load all this stuff." Like, this concept of free delivery and loyalty packaged, I think gives you that kind of, you know, as you said, passion, enthusiasm, you know, buying. And more importantly, I think as you go through this period where if we're going through a bad economy, I think, you know, people tend, and we saw this in 2008 and 2009, right? Like, in 2008 and 2009, you know, Amazon and some of these internet retailers actually did very well because, you know, the e-tailers, you know, didn't have fixed rents and inventories, and it was much easier for them to, you know, be the lowest common, you know, price.
You know, when I think about kind of the environment that we're going into right now economically, you know, it kind of portends, or at least in theory should portend to an environment that would really favor CDON, right? Because you're selling stuff for people that don't necessarily have the retail and the labor and all the rest, so they can be the lowest price. If packaged with the right logistics and the right delivery and whatnot, you know, it could actually allow us to gain a lot of market share. I mean, do you think you're making progress on kind of that, what I would call that logistics loyalty kind of, you know, offering?
We are definitely not underestimating the importance of delivery, Adam. We have a few various initiatives on that, fulfillment and so on, which can also be seen and read in the report, on the last report. We are working heavily on that. We just did a pilot of a fulfillment concept that worked out well, and we will roll that out. It takes some time, of course, because a huge project, but also before that, improve delivery. That is, in the Nordic countries, it's very important, for many reasons, but it's also a little bit complicated because we are few people in long distances, and that should be handled. It's definitely high up on our priority agenda, to be a really good delivery company.
It has to happen, otherwise, we won't succeed, so.
Yeah. The other thing I noticed and I was curious about, you guys posted something about CDON Business Intelligence, which it looked to me that it was an app for your merchants, and I was curious, like, it kinda got my mind thinking, you know, in addition to improving the experience for the customer, and obviously, I know your kind of, you know, this iPhone app and all that is gonna. You know, new website is gonna come out in the back half of the year.
I'd be curious to hear what initiatives you're doing to kind of improve the merchant experience, so it makes it, you know, and how this app applies to getting them to put on more products or, you know, making the merchant acquisition strategy faster and SKU strategy faster, how that kind of all works.
I think the app that you're referring to is a very specific app that we have developed for connecting merchants that are already operating on certain aggregator platforms. It's smaller merchants that now we are making it easier to enter also into CDON. It's a new app. It was launched, like, a month ago, something like that.
Mm-hmm.
We need to then evolve, of course, then follow it closely to see the outcome of it.
Right. Yeah, look, it's very exciting. You know, the only thing you know, I would add is, you know, you mentioned the market, you know, being SEK 450 billion, I mean, you know, and being 2% penetrated. I think the other thing that I think is interesting to us and perhaps doesn't apply to today is that, you know, because of that lower penetration in marketplace, it also is a lower aggregate e-commerce penetration. You know, look, I'm hopeful that all these initiatives are in place by the time, you know, e-commerce in the Nordics goes back to growing 15%-20% because I think the underlying dynamics support that longer term.
It's almost kinda like you're able to put all these pieces in place today when things are a little bit slower. You know, thank you, and this was super helpful.
Thank you, Adam.
Thank you, Adam.
We are burning the midnight oil.
Thank you. Appreciate it.
Thank you.
Thank you. Currently there are no further questions in the queue, so at this time, I'll hand the call back to our speakers for the closing comments.
With that, I say thank you. Thank you for listening. Thank you for all the question. Really positive. With that, Thomas, I think we say thank you from our side.
Thank you.
See you again soon. Thank you.
Thank you.