Good morning, everyone, welcome to Rugvista's Capital Markets Day 2023. Rugvista is a leading direct-to-consumer expert within the category of rugs with a strong financial track record, having grown its revenues by a CAGR of 16% in the last 5 years, with an EBIT margin of 11.7% in 2022. My name is Carl Deijenberg. I will be moderating the event today, and we will cover a total of seven different topics. The event is scheduled to finish at around 12:30 P.M., and we will round off the presentation with a questions and answer session. Both for you dialing in digitally and for you here in the room, there will be a opportunity at the end to ask questions.
I think with those short introductory words, I will leave the word over to our first speaker, CEO Michael Lindskog.
Thank you very much, Carl. I am happy to have everybody here in person and those online as well. What we'd like to cover today is essentially the following agenda. I'll kick it off a little bit with a bit of a strategic overview and also focus a bit on us as an investment case. Second is a sort, and you can read the rest. As Carl said, we will have an open Q&A at the end. Let me get started. Oh, here we go. As I said, my name is Michael.
Been the CEO here for about three and a half years now. Have a background in retail, both online and offline, and I think I would characterize myself a little bit as an analytical problem solver with a desire to build things. Let me kick it off with a few basics about us. In sort of one sentence, what we do is we sell our in-house designed rugs through our own online stores. That's basically what we do. Of course, it's a tad bit more complex than that, to boil it down to one sentence, that's what we're about.
We've, we were actually founded back in 2005, so been around for quite a while comparatively, when speaking about e-commerce companies. We are based in Malmö, Sweden, operate 2 warehouses and 2 brands, so Rugvista and Carpetvista. We are about 100 people in total, around 90 FTEs, and we are also listed on Nasdaq First North since actually March 2021, so a bit over 2 years now as a public company.
If I wanted to share a little bit more about us, as an organization beyond sort of the core facts and figures, I'd like to use this, 'cause this is us as an organization and us, to a large extent, also as the people who are part of the organization. Number one, our main purpose is, to help people, to build a home they love. That's, at the core of what we're trying to do each and every day. We've, during the past about two, three years ago, also refined, what we're wanting to achieve, in terms of, our vision.
We formulated really three distinct visions around, number 1, the business, number 2, us as an employer, which is the people vision, and number 3, us as part of the world, which is our sustainability vision. And those three components, of course, is what we want to achieve overall. Then, finally, I think it's worth noting that we see ourselves as a value-driven organization, with, sort of three core organizational values, which are then described in more detail as well. And then let's move on a little bit more to us as an investment case.
If I wanted to encourage you to kind of keep one thing coming out of, out of this session, it would be trying to remember these, this slide or these four, key messages, which is, number one, and that, as we said, we're a leading European digitally native, D2C, rug expert. But why we believe we are a, an attractive investment case is really based on these four dimensions, which is, number one, we are addressing a very large and what we also see, attractive market, that is, in the process of transitioning online. Second, is that, we see ourselves, as well-positioned, to really own this vertical when it comes to online here in Europe.
The third element, of course, is that we also, beyond having the capabilities and also the ambition, we actually have a plan, a clear plan in terms of how we want to realize our long-term ambition, both from a sort of strategic point of view, but of course, also from a financial point of view. Finally, I think as most of you already know, the current economic conditions are quite unstable or challenging. Us having a very solid financial position, in addition to a long track record of profitable growth, I would argue, gives us the flexibility and the muscle to actually continue working on realizing our long-term ambitions.
Not only, sort of focusing on the now, but having a strong focus on the now in addition to the future. Then, in the following slides, I'll go through each of these four dimensions in a bit more detail. Large market, transitioning online. The rugs and carpets is part of the mega category of home furnishing or home interior, which is a huge vertical within here in Europe, about 2 trillion SEK. And about 9% of that is rugs and carpets.
Out of the total space for rugging or the total value of the rug and carpet, at the moment, we estimate around 20% is online. That gives round about a total value here in Europe for online rugs of around 40 billion SEK annually. When we did this market study a few years now, the estimator was about a 10% annual CAGR. Of course, COVID happened, which undoubtedly pushed the online penetration up.
Then there was a little bit reversion back to the mean once the major pandemic restrictions were lifted, which sort of gives us around 20% online penetration, according to our own estimates at the moment. Beyond sort of the COVID effects, I think there's two major macro trends which will continue to support our future growth. Let me start with the first one, which is, it is still a vertical that is very or is behind a lot of more mature verticals when it comes to online penetration. Let's assume we're at the 20% today.
We're still, you know, 10 points behind fashion, we're almost 20 points behind consumer electronics. Then we don't even want to talk about, you know, the travel and the book verticals. Point is, there is an ongoing online transition across essentially all the verticals, both in a B2C setting, but also in a B2B setting. We are part of that. We're behind. My belief, and there's a lot of reasons why I believe this to be true, we will catch up for sure. Second, major macro macro trend is the fact that the digital generation is actually becoming adults now.
We are in a position here today, where we have around, in Europe, around 190 million Europeans who were born in the sort of are part of the millennial generation or later, who are 25 years plus. We're using 25 years as sort of the average when people start setting up their home, depending on the market, of course, might be sooner or later. This generation has, you know, grown up with an iPhone or a smartphone, at least, not necessarily iPhone, always, in their hand, or, you know, a tablet. Been doing, you know, chatting with friends, communicating with the world in general, and also making a lot of purchases online.
Once this generation starts, you know, setting up their own homes, the expectation, and also, to be quite honest, also what we see in the data, is that this generation will continue to make a majority of their purchases online versus what their parents did, which was offline. Beyond the sort of macros, what makes the category, the vertical itself, interesting? Really here, we see that I would, we can argue about it, but I would say that, rugs, to a large extent, is the perfect online product. Why is that? It is a product that the average order value or average item value is quite high, comparative to many, in many verticals.
Second is that it's a product that actually has low inventory risk, really due to two reasons. Number one, the fashion cycles or trends are quite slow. There's an opportunity to sell anything that you actually offer over a long period of time. The second dimension of that, of course, is that the products don't get destroyed while sitting on the shelves. Of course, beneficial with the relatively low return rates. Finally, I think this is the most important one, is that we see the buying experience of a rug in an online setting far superior that of the offline setting.
I don't know if you've ever sort of been in one of these traditional rug shops in the offline environment, but typically what you see is, you know, 20, 30, 40 rugs in a pile on the floor, and you see the top one quite nicely, and then you have to sort of flip through the entire bunch in order to sort of see what's number 2, number 3, et cetera. That's quite tedious compared to a process where, you know, you have great pictures, you have many filter settings that you can apply and quickly identify something that you like and that fits your needs. Then, when you order it, you get it shipped to your home for free.
Of course, we offer free returns as well. Perfect, perfect product in many instances. A little bit cumbersome, of course, but still a very good product for online distribution. Another aspect in terms of why we see the market as attractive is that it is a very fragmented vertical, where on the reseller side, you have many different types and of sellers, both in the online space as well as the offline space. Very, and not that many, to be quite fair, that are specialized and Pan-European. There are some regional specialists, absolutely, but overall, it is quite fragmented.
Really the only sort of major player, Pan-Europe, and to be quite fair, globally, is IKEA. If you're in the space of home furnishing, you always have to see IKEA as the big dog, and they should have all credit for being that. Beyond IKEA, there's really quite a fragmented landscape. The second characteristic of the vertical that we also find quite interesting is that it is one without what I call strong product brands. There are some brands within the rug space, but they aren't strong like you have in fashion with adidas, with Tommy Hilfiger, Ralph Lauren, et cetera.
That is not the case within our vertical, which for us, as a reseller, makes it quite interesting 'cause there's an opportunity for someone to really own that white spot, where you can sort of say that, "Okay, when someone thinks about rugs, they should think about Rugvista," 'cause that's the position we wanna be in, and that's what that is part of our long-term ambition. Talking a little bit about... That's kind of the market and why we find it attractive. Let's talk a little bit more about us. When we talk about us, it really starts with this, which is customer satisfaction.
Customer satisfaction is at the core of what we're trying to do, and it is part of the organizational DNA. We are very proud about the fact that essentially, since the beginning, we have a best-in-class Trustpilot rating, and over the past three years now. We've also measured our NPS score, which you can see on the right-hand side, is quite strong even when you compare it to some of the world's most famous brands. Then you have.
It's always fun on Mondays or over the weekend to read through some of the comments that people leave both in our own in-house survey, as well as the Trustpilot's comments about how the customer experience was. Yeah, it warms us to read how happy the vast majority of all our customers are. The reason also, of course, we, and also me personally, we believe that at the core, happy customers is a prerequisite in order to be a growing, a financially sound organization. 'Cause unless you have happy customers, you eventually will have problems.
Then the second thing I wanted to highlight about us is we, like we said earlier, we are a direct-to-consumer organization. What that really means is that we work directly with producers, primarily in Turkey and in India, to develop our own assortment. We design it, we work with the producers to select qualities, colors, et cetera, and then they produce, and that makes us have an assortment that is, of course, you know, spot on when it comes to the needs of our consumers, but it's also an assortment that nobody else has. That, of course, is quite beneficial overall.
Rugvista Group's business model is characterized by its direct-to-consumer (D2C) approach, allowing for greater control over the customer experience and value chain. Key pillars of its strategy include: * **In-house Operations:** The company manages nearly all aspects of its operations in-house, from product design and purchasing to warehousing and technology development. This vertical integration ensures quality control, cost efficiency, and a seamless customer journey. * **Extensive Product Range:** Rugvista Group boasts a vast assortment of over 30,000 unique SKUs, catering to diverse tastes and budgets. This includes traditional hand-knotted rugs, modern machine-made rugs, and exclusive collections like "Bold and Brave" and "Natural Structures." * **Data-Driven Approach:** The company leverages data analytics to optimize its product assortment, pricing, and marketing efforts. This include
Peter will talk more about our new front end in a later session here today. Then finally, we also do our, we have our in-house marketing, we have our in-house content production, both when it comes to text and image and video. Of course, we manage our own money when it comes to marketing investments, which I think we also had benefits last year, especially when we had to be really focused, really on efficiency, and we had the capabilities and the manpower to actually execute on that.
From a consumer perspective, of course, the benefit of buying from a D2C player is that, what we do, at least, you don't have to do this, but what we do is ensuring that we offer outstanding value for money. Within a given quality range, we will have outstanding value for money compared to, compared to anyone. Let's talk a little bit about the strategy. So the master plan, let's say. We have, essentially a long-term, business strategy, which is centered around four pillars.
We will during today focus mostly on pillar one and two, which where pillar one is about showcasing our assortment, and pillar two around the how do we win the key European markets? Then if we start off a little bit with the with the with the first portion, in terms of showcasing the assortment, like I said, we have an assortment that is unique to us. It is top-notch, offering value for money. It has all the different types, different price points. We need to make sure that the people who visit our web shops get the understand that this is the case, and that it is us who have produced it, we stand behind the products, and all of those things.
The second bullet here talks about content. Part of the reason we are building the new, or we have been building the new platform, is that we understand the future of the online or e-commerce is content. It is content that inspires, it's content that helps, it's content that guides. Our old platform or existing previous platform could not support that. It's not only text, but of course, images, it's videos, and all of those aspects centered around the theme of content. That is a huge focus area for us.
Then, finally, of course, all consumers are not the same, so we've done research on this, so we understand that consumers start their purchase journey from different starting points. Of course, we need to serve all of those user journeys in the most appropriate manner. Yes, of course, there are some who are price-driven, and they should be able to find something within a price range, but there's a lot that are actually driven by inspiration. They want something that fits their personality, or they want to do a room in a specific, let's say, nautical theme. All of those aspects will be built into our new platform or are being built into our new platform.
Then the sort of how do we win the key markets? Of course, that's about really going deep in the big European markets, such as Germany, such as France, the UK, et cetera. In order to do that well and really capture a large portion of that demand in a given market, you need to localize, because consumers make decisions based on what they know within that, their frame of reference. Yes, the world, to a certain extent, is global, being global, but to a large extent, still, they make decision based on their local references, and that's why being local is so important.
Then part of this is also that over time, in the key markets, we want to establish our brand name, 'cause establishing our brand name means awareness, and awareness means trust, and once you're trusted, you're part of the consideration set for a given purchase, and that's why that is also part of our strategy. Then, of course, we are very public with our numbers. We have a very, we have a solid track record of profitable growth. Last year, of course, was a bit of a bump in the road, but considering the macroeconomic environment, we're still quite pleased that we, at the end, actually managed to deliver almost 12% margin.
Over the past three to four years, we've completely changed our financial position. Moving from SEK -80 million in net cash, we now have around SEK 115 million in net cash, which gives us an extreme amount of flexibility. This robust financial health enables us to pursue further growth opportunities, invest in innovation, and navigate market dynamics with confidence. **Our Vision: The Leadin
Of course, we have the financial performance track record in addition to the financial strength to execute on this agenda. Thank you very much.
Thank you very much for that, Michael. I'll take the opportunity now to ask you two questions on the first topic here, and maybe starting off on the online penetration. You have this slide, where you show the category today and before the pandemic and also some reference categories. It would be super interesting to hear your view, sort of, longer term, given your experience from Zalando. Do you see any constraints if we stand here five years from now, that the penetration in the category for rugs will be similar to what we're seeing in fashion, for example?
Yeah, I actually don't see any real constraints and definitely none that are not possible to overcome. Personally, I actually think that the vertical has the long-term potential to have a even higher online share compared to fashion. The reason I say that is really number one around the buying experience online versus offline, where I think it's far superior from many dimensions when it comes to online.
A much bigger difference when it comes to fashion in terms of the fashion offline experience versus the online, 'cause at the end of the day, it's pretty simple to buy a dress in an offline environment and actually take it home, either if you walk home or you're on the bus or taking the subway. Taking a, you know, 2-by-3 rug on the shoulder, carrying, you know, 20 kilos on your shoulder in the bus is not super convenient, to be quite honest. Then the, and I think then the second dimension is really the fact that it is a relatively easy product to buy.
As long as you have clear pictures, the only other thing is you need to figure out, as a consumer, okay, should it be 2 by 3? Should it be 3 by 3? Should it be round, square, or whatever? Compared to, you know, I used to be, like you said, I was in fashion, right? A size small dress will fit very, very differently for all of the small size females because of the fact that the sort of the human body, even if you're a small size small, is very different.
Very well. Secondly, I also wanna touch upon, you highlighted this strategic initiatives that you're working on, and I know we're gonna spend more time on that later on.
Mm-hmm.
Briefly, now, where are you putting your uttermost focus right now internally? You know, out of these key pillars, which ones are the most important to succeed near term in order to get the longer-term picture?
We have spent the past couple of years really focusing on rebuilding our e-com platform. At the end of the day, that is this sort of showcases everything else we do. It showcases our efforts within enhancing the assortment. It showcases what we're trying to do in terms of inspiring and helping individuals. Also, it showcases and helps in our brand-building effort, of course, in our traffic acquisition, then all of those KPIs as well. Having that new platform and what it enables us to do in the future is critical, and that 'cause it is sort of the platform where all of the other stuff comes to life.
Great. By those words, I think we're ready to move to the second topic of today, which centers around the assortment and sourcing, which will be presented then by Carin Terins, Head of Design and Purchasing.
Hi, and welcome to the world of rugs, our world of rugs. My name is Carin Terins, and I am the Chief Design and Purchasing Officer, and I have been with Rugvista for 6 years, starting in January 2018. I'm coming from the fashion industry, and have been working with the textile business and sourcing and production for many, many years, and have also deep expertise in designing textile materials and colors. Today, I will give you an insight in our broad assortment, and also go through sourcing and production strategy that we have, and talk about our own designs and collections, and also that we have a new product category. Our business vision is to be the center of the gravity for the European rug industry, and to be that, we need to be experts.
I'm proud to say that we have that knowledge and expertise in-house. Sorry. With that expertise, we have set up a broad selection of different kinds of rugs in our assortment, and we have a big variety in designs, sizes, colors, and materials, and of course, price range. Our focus is only on rugs. The supply chain differs between traditional and design rugs. Let's start with the traditional rugs. The largest category in that one is the Persian, and there we buy each item is unique, and we buy them one by one, and they are sourced through a number of EU-based wholesalers. For the design assortment or the mass-produced rugs, we differentiate them between machine-made and handmade.
The machine-made rugs are fast and automated production, usually using synthetic fibers and mostly produced in Turkey. For the handmade, we have a lot of different production techniques. There we could talk about hand loom, hand tufted, hand knotted, and flat weaves, for example. Here, we're using mostly natural fibers like wool, jute, and cotton, and the production is done in India. It's also very important to have long-term good relations with our suppliers. That secures our product inflow. It's also good to have large purchases, of course, that we can buy a lot of rugs. That gives us better prices and ensures a product inflow. That have been very important through Corona, for example. We also have independent audits done on all of our suppliers.
For us, sustainability is very, very important, we are want to take that responsibility, more about this Patricia will tell you about a little bit later. All of these are really important key factors to have success in our industry. I will now go through and show you a lot of pictures from our production, assortment, and sourcing, how we work with it. Right now, we have about 22,000 fantastic unique rugs, picked one by one, in stock. This we purchase through, with close cooperation to with our suppliers or wholesalers in Europe. They are sourcing fine objects for us with local agents in villages and in bazaars, mostly in Iran or in neighboring countries. Here, it's really important to understand quality versus price, to pay the correct price.
To do that, it really requires deep product knowledge and expertise. When it comes to unique rugs, most of the old unique carpets are refurbished in some way. It means that they are being washed, shaved, sun-dried for weeks outside to soften the colors, sometimes mended, so to be used to. If they are really worn down, if it's an old carpet and worn down deeply, we can make colored vintage or patchworks out of it. When we do that, it need to be maybe bleached, re-dyed, and shaved again to get a new pattern, and that transforms the colored vintage and patchworks into a more contemporary look. That is sustainable reuse that prolong the life of usage and minimize waste.
This is a selection of the rugs that we have on our site today. In each category, there is a large, many smaller categories under each and every one, and the largest one, but it is within the same family, and the largest one is the Persian traditional. In the Persian traditional, there is a large selection of rugs, and almost everyone has its own. From every city in Iran, almost every city has their own designs and patterns, colors or knots, and a very unique expression. The city becomes the name of the rug. If we're talking about Isfahan, Nain, Tabriz, and so on. Here it is, it is our warehouse or some of the warehouses that we visit in Europe.
Before we go there, we make a wish list of what we are interested in or we have a demand for. They prepare for us during a long time by collecting rugs from Iran and other countries. A few times a year, we visit, and we do cherry-picking, piece by piece. I have to say, I just love this part of my work. It gives so much inspiration, and every time you go there, you learn something new, you see something new, and we work with fantastic experts in their area. Now, let us continue to the handmade production. Oops, sorry. Back. The handmade production includes many weaving techniques, as I mentioned before. Here, I'm gonna deep dive a little bit into hand loom weaving.
Hand loom weaving is a technique that was developed to get the faster production at a better price level for pile rugs, which has an exclusive look and a very nice hand feel. To be able to do that, usually you need to be two or three workers on one loom or one machine, let's say. It takes about the two or three workers who are working on this one, depends on the width. To get from one day, they weave about eight meters in one loom. They are really skilled. They need to synchronize their movements, and they need to work in a really controlled manner to keep the fabric or the rug really consistent in the quality. Weaving is very, very heavy, and it's all handled by men.
Some less heavy work, as opening the yarn or spinning, are done by women. Usually, they only work half a day, and the rest of the day, they take care of farming, kids, and family. It's really, it's a great gift and advantage to work with all these skilled artisans in our production and also our production team in India. Here are the next steps in order to become a ready rug to sale, for sale. You take the loom out when the roll is full, you take it to carpet washing. It means that to clean the carpet by shoveling the pile back and forth with quite a lot of water and a little bit of a detergent to take away exceeding fibers.
When you're done that, you need to take it out to dry in the sun. You preferably, you put it on pebbles, so it comes a little bit air underneath as well, the rug will dry in just a few hours. Then it goes to the binding of edges. That means that you stitch around the carpet, all four sides or only two. If you want fringes, you have fringes on two of the sides. To knot fringes, that's really, it's really not easy, but they're really quick. They take four or five threads at a time, they secure it with a knot and do that the whole way through the carpet. After that, they try to correcting if there are any faults on the carpet. They do that from the backside.
After that, they put a thin cloth outside in outside the unit in in the nature, they take the rug, they put it with the pile down, use nails to make the perfect shape, add some latex, let it dry in the sun, that will fix the perfect shape until later. It need to be shaved to get the perfect surface, to be really shiny and nice. They do 1 more finishing detail, that is to go through it again with a small brush and a scissor if there is some small thread sticking up. It's time for packaging and labeling. Let's move on to the contrast with machine-made rugs. This is from some of the factories in Turkey that we work with.
Here, the machines are really, really huge, and they're fast and automated, and they run 24/7. The yarn bobbins, these are the yarn bobbins, and that's the yarn going into the machine. For one quality, you need thousands of those. Normally, it's around 10,000-15,000, depending on the quality. That's quite a lot. So you don't want to change the yarn that often because it takes 2-3 days to shift the yarn for one machine. You see the power loom machine in the middle, that's really, really fast. You can hardly see the shuttle moving back and forth when the weave, when the weave is on. After that, they take it out.
The weave is coming out double, you need to separate it by the pile, so you get 2 carpets. If the design can't withstand mirrored, you need to avoid that. You can't do, like, text or numbers and so on. It goes into a latex machine, after that, it goes to a heating machine to fixate and make the shape of the carpet. You do the overlocking of edges, same as binding, edges in India, with a machine, they have help of a air table to get it less heavy. In the end, of course, labeling and finishing and packing. Here, it's quite a lot of similarities with the Indian production, it's all automated. Now to the work with our collections. Design and product development is a very important part of our work.
To know what trends is going on, we go for fairs and trend seminars, we look at social media, we create mood boards. We have Rugvista Design Competition, which gives us a lot of inspiration as well. We also have some collabs with designers. We have large in-house data expertise that provides us insights on customers' preferences and trends. We're listening to our customers, get a lot of good answers and questions from customer service. Also, of course, we're listening to our suppliers, which are experts in our area. That takes me to our design strategy. It's important for us to have in-house design and exclusivity on designs from suppliers.
That is a really key factor for the future, we working on that more and more. To build an interesting assortment and collection by producing own designs or exclusive design rugs in the right quality and price, that will enable a best-in-class value for money. Own designs also helped us building the brand and makes it easier for us to target the prices and keep our strong margin. Now to collections. Collection is a name of a theme or style or inspiration for which a set of designs have been developed and put together. The benefit of that is, that it's easier structures, better structure for us when we're building the assortment, and it gets more inspiring, and customer friendly online.
It also supports storytelling, because it will be easy to set the scene, when it's centered around the collection concepts. The collections will be added on the new site. It's not ongoing right now. We have differentiated our assortment into 3 different sub-brands, and that is essential, core, and premium, saying good, better, and best, and that is in regard to quality and price. The benefits of that is that our collections will contain a mix of the sub-brands. It also helps us structure our assortment in regard to quality, pricing, and purchasing. We think it's really important that there shall be rugs for every wallet and every stage in life. Rugvista Essentials is an affordable story, and we successfully launched it in 2022.
We have been targeting customers that are buying for the first home. They have a limited budget, early adapters to trends. They're digital natives, the younger generation, as Michael also talked about, and they usually have no car, so the home delivery is important. This is a growing target group, so we are constantly developing our assortment. Right now, we're gonna add more structures and also focus on washable and pet-friendly, easy-clean carpets and kids' rugs. Essentials is always with value for money in mind. The mood board. This is our base mood board, and that means we use it for a broader range of the collections we do. Right now, nature is the big source for inspiration for us.
Nature eases our senses and makes us feel good. Especially when the outer world is shaking a little bit, we go back to nature. We have especially worked with natural tones, which is easy to adapt in most homes. We are focused on the warm shades, going from brown, beige, to ivory. It's less grays nowadays. Materials are also important to have this feeling. You want to bring nature into your home. You use the rattan wood, jute, leather, cotton, and so on. The shapes are also important. Round and chunky shapes, which make you feel embraced and more comfortable. Most important, we think, to make your home warm and cozy is to add a rug. That will bring the room together like magic. Now, a sneak peek to our collections.
Our first collection, we call Natural Structures, that one is one of the strongest trends, as I just said. In this collection, we mix different kind of surfaces in the same rug. Like, it could be bubbles, high and low pile, loops together with flat weave to make it become a modern and tactile feeling of the rug. We have used the natural color shades because it fits in to almost everyone, it looks really natural, it also gives a timeless look. All the subcategories are included in this collection. Since it's a really important collection for us, this is really easier for us to work with, and I think that's going to be benefits for the customers.
The next collection we call Bold and Brave, and it is, as you can see, something totally different with strong colors, which is really a big trend. Here, we have worked with a eye-catching colors, bold patterns, and you mix them together to get a very personal style. The round and uneven shapes are also very important and a big trend. That's also for interior, but especially for carpets, the uneven shapes and round shapes are important. These rugs gives a really strong statement to any room or any home. For the kids, that is a collection and also a category that had grown a lot. Here, I use colors as well. They're a little bit more dusty and down. They're a warm, color-coordinated collection.
We also, the styling of kids rooms has been really important lately and become a really commercial thing, I think that's driven by a lot of influencers, for example, which make this to be a really growing category. We put extra efforts into the development of this one, we have added cotton rugs and even shapes here as well to make it more playful. Interactive designs like play tracks, hopscotch, or maybe numbers to train the kids to count, for example. Focus here are in the lower sub-brands. This is the last one, bathroom rugs, which is a new category for us that we successfully launched in March this year.
We wanted to stand out a little bit, so we focused more on the personal style, more colors, more fun, and added a few classics as well. Here it is washable cotton rugs with or without anti-slip, and it's all OEKO-TEX certified, and we're gonna add more qualities and different rugs as well, very soon. All this is within an affordable price level. Now when you get me started, I can stand here talking about the assortment collection for many hours, but this was my last slide. Thank you.
Very well. Thank you very much. I wanted to ask a question on the assortment and the product strategy and bringing new products to the market. Maybe from a competition standpoint, when you're comparing yourself with your strongest competitors, let's say that, what is the most important parameters to compete on, you know, from a customer perspective? What are the customers mostly prioritizing when looking for a new rug?
I think it's most important to have a wide selection with different colors, sizes, and materials, and price levels. Since we are only focusing on rugs, I think that's the biggest advantage and the most important for the customers today.
Yeah. I also wanted to ask, also, given your experience previously, also from fashion, maybe a bit on different trend shifts.
Mm-hmm.
You described it a bit in the different categories, but how important is it for you to, you know, constantly bring new designs to the market, or have there been any clear, you know, trend shifts over the past years or?
It depends if you look at the traditional, unique carpets or the designer rugs. That's a difference, of course. For traditional, it doesn't differ that much. We can see a little bit more focus on Moroccan maybe, and Kilims and colorful Kilims, which has a really good price level. Otherwise, I think the trends are more slowly in what we are doing than compared to fashion.
Yeah.
It doesn't change that much.
Yeah.
Of course, designs, are important.
Yeah. Okay, great. Thank you very much.
Thank you.
I think we'll move over to the third topic of today then, which centers around the brand-building strategy, presented then by Ulrika Klinkert, Head of Marketing.
Thank you for that, Carl. Yes, now we've seen Michael present the framework of our strategy. We've seen Carin present a very tangible and I mean, you are here in the room. You can see all the beautiful rugs we have around us. My topic might seem a bit more soft, but I would like to explain to you why branding is not the fluffy pink unicorn on top of the cake, but rather the scene upon where our story is told. Brand building is actually foundation of our future growth. Why I can say that is because I've been working with branding for many years in different companies, Betsson, Kjell & Company, Cloetta, and these are all brand companies that have strong brands that are future proof for growth.
Topics I will cover today is why do we do branding? Isn't it only about spending money? Rugvista brand position, who are we? At the end, next step, how will we make this happen? Why branding? I think most of you are aware of that if you are not seen, you cannot be perceived as a choice. First part is always about getting as much reach as we can, as many eyeballs as possible. The next step is as Mike said, if you are a known brand, two things will happen. First of all, you have more cost-efficient traffic coming into the site, meaning organic traffic, direct traffic. The second part the traffic who actually buy will be more efficient.
If you know the brand, where you see an ad, you're more likely to click on that ad, which means more efficient marketing. The third part is, if you have a strong brand, and this, you might not always think about it, but a strong brand is actually securing that you can have better margin because you're less price sensitive. These are 3, really important parts why we need a strong brand. Coming into the important things who are we as a brand? Branding always starts with the customers, and when I will not go into the different customer segments, you can read that in our annual report. When looking into our customers, we have our brand strategy, starting with the customers and 3 key values that we want to own.
Our brand position, and when I say we want to own it, is that these are not the only thing we are. We're a lot of things, owning it means that we are better than our competitors in 3 factors. We want to be the most convenient brand within the rug industry. We want to be the rug experts, as Carin just described us. 3rd of all, we want to be trustworthy. Why? If you ask the customers, what's the benefit for them? Of course, if you're convenient, it's much more practical. Not only that, it's easy, you can sit in your home, just choose your rug. As Mike described, it's quite inconvenient to carry your home, carry your bag home. Rug experts, of course, and experts are different depending on what customer you are.
Some people needs help, and some needs inspiration. Last of all, trustworthiness is all about e-commerce, because if you can't go to store, you really need to trust the e-commerce where you're shopping from. That is the foundation where we've been the brand strategy around. Upon that's just theory. How will we then make that happen? We need to find some attributes to which we are associated. Attributes could be a color, a logo, a font, a picture, something you recognize when you see us. When we shaping this world as we're doing as now, there are four key factors which we need to look into. First of all, the attributes need to be very distinctive, because if you're distinctive, you're being memorable when you talk about it in different channels. Second of all, you need to be unique.
You need to stand out, so we're not confused to any of our competitors. Fourth, we need to be relevant, of course. I mean, we can talk to everyone, but we need to be relevant to our customers. Last but not least, we need to be likable, because if you're not likable, you're not considered as a choice. Where will this happen? The third part of the brand strategy is the brand experience. Of course, the brand experience happens on our site. It's really important to understand that before the customer come to our site, the experience in all platforms, that could be in Facebook, Instagram, Pinterest, when we're using influencers, all these platform need to have the same attributes. And of course, the products as well. The products need to be trustworthy.
It needs to see that we are experts when we are designing our rugs. When looking at this, if we take a fingerprint of who we are, we help people create inspiring homes. That is our promise to our customers if they choose us. Now we're coming to some examples. Here you see different channels, of course, different channels, they have different advantages, why you choose them. In each channels, we see that we have a distinctive view of how we look, it's still unique compared to our competitors. Also, we need to be relevant and likable.
In previous, we've been more in channels that are text-based, but now when we're rolling into other channels that are more emotional, film and photo is a very important part of a new brand platform. These are examples of new platforms where we haven't been before. Now we're coming into a film version, so you can see for yourself, who are we as a brand? This is what been done this springtime. As you see, the different ads are very different, depending on what platforms they are. The short one, that's very, we're starting to experiment with ASMR, meaning that it's not only the visual part, also the sound is very important when you look at the ads. Next step, how will we make this happen? What happens next?
What you need to do, of course, is to reach as many potential customer as possible. For us to do that, we've been very Google-faced up until now, but with this platform in hand, we will be able to be present in other platforms than we've been before, especially social media. This is an opportunity for us to grow. Second one, we want to build brand broad brand awareness. What's the reason for that? Well, it's twofold. First of all, if of course, you reach new customers that don't know that we exist before, and the effect that we said that we're more efficient in ads, we actually are already running. Also, customer that already are customers. Maybe they bought a rug 5 years ago.
They didn't really remember us since then, we need to always be there in the customer's mind. This is an example of why we need to do this. Here is the brand funnel, as you see, we have quite low, brand awareness, both when it comes to, help brand awareness and unaided. But if you look more further down in the funnel, if we have the brand awareness, we're quite, suitable to do the conversion. That's why brand awareness in broad scale will work for us. Last but not least, we need to be better at create customer-relevant content. When I mean content, it's in all our platforms, but as the next speaker will talk about, our site will be where this content will actually come alive. With that said,
Very well.
Thank you.
I'll take the opportunity to ask a few questions here as well, and maybe starting off here a bit on the returning customer process.
Mm-hmm.
You mentioned it briefly, and the brand awareness after a longer period of time, but could you describe a bit, how often does a customer regularly return to you, after the initial purchase, and what do they usually search for then?
It depends on what category you want to buy a rug. If you like a unique rugs, the cycle is about 4-5 years. If machine-made rugs, meaning more cheaper rugs, it 2-3 years.
Yeah.
What they look for, we can see the customers that are returning are more likely to stay in the area where they purchased before.
Yeah. And, maybe a question on this slide here, maybe a few of the competitors listed here, a few generalists, maybe we can call them that.
Mm-hmm.
I know that you have another few pure online competitors, but, from a branding perspective, what we just talked about this, in this section, what are the most if you would boil it down to three bullet points, how do you want to differentiate with against these competitors, your most important or maybe your strongest online competitors?
Yeah, I think we're really suited with the 3 key values that we talked about, depending on what competitors we compare with. Experts, if you compare to the online, I would say, competitors, we are by far the most expertise, meaning-
Yeah
we have the widest range, and we also do all our designs ourself.
Yeah.
If you look at maybe the ones that are, offline, so you have a store, we're far more convenient. I would say convenience and expertise are our, so to say, shields towards our competitors.
Very well. I think with those words, we'll move over to the fourth topic of today, which centers around the new e-commerce platform, which will be presented then by Peter Rosenfors.
Hi, everybody. Peter Rosenfors is my name. I'm a CTO at Rugvista, and I'm in the middle and end of December 2021. Previous, I was at BCE the same position, and I've been working as a leader now for tech departments and tech companies here in Stockholm area the last 15, almost 20 years now. Today I'm gonna talk a little about our tech platform. When we talk about tech platform, one part is the site, but the tech platform as it is a much bigger thing. Going into a history, peak of the previous tech solution, also have an overview of our new e-com platform, of course, and also talk a little bit about the next step.
As Michael said, the strategic priorities to drive growth, showcase our own assortment and win the key European markets. We need to merchandise our assortment really great. We will need to build content to inspire and help users in finding their rugs they are searching for. We need to serve more user journeys effectively in our platform. To be able to win the key European markets, we also need to have a better end-to-end customer experience, and also localization is something that we're gonna talk about during this presentation. Also, build a known and liked brand, a place where we can showcase our brand. To do this, we need a solid e-commerce platform that we can work with and not against.
We need to have something that can help us do this. That's why we took the decision to build upon our existing platform and create a new platform for the future. We go right up to the current status here. We are in our internal versioning. We call it 0.8 in our existing version of the new platform. We lack two major components in the new experience. We have them in place, of course, because we have it live, but we're gonna improve our checkout experience, our My Pages experience, both very important part in e-com stores, of course. We are now live in five numbers, five markets today on the new platform, on the new e-com front end.
We started with Croatia for over 1 year ago and went live, followed by Austria some months later. Now we are ramping up, and in the latest weeks, we have Switzerland, UK, and yesterday we went live with our home turf, Sweden, on the new e-com store. Still, we got some stuff to do to get it out to our all markets. We have 20 domains today, approximately, and we aiming for having all the major markets live during this year. A peek back why we chosen to do this. Now it comes a little bit more tech part, but our previous platform, it's a homemade, a robust platform that still drives a lot of traffic.
We have it live in many of our markets. It's built in a very good way. Everything that's built in a very good way 15 years ago gets a little bit old. It's built also in, like you build, it was the state-of-the-art back in those days. It's very easy and fast to build in 1 way, but as you put things on top, it gets kind of out of hand. It's hard to maintain and difficult to add features, and we have 1 single point of failure when we're talking about the monolithic architecture, like our previous version of the platform was.
We took the decision to build the new platform. The new platform is much more efficient when it comes to service-oriented structure, meaning that we don't have a one single point of failure in our structure. We also got much more efficient way of scaling efficiently when it comes to money also, because we can turn many more knobs when we need to kick the traffic up. It's much better availability than uptime also on the new platform. We have a great uptime on the previous, it's much less sensitive and can keep much better uptime in the new platform. The new is big or built for a totally different world than it was 15 years ago.
Google sets the rules now, and we need to optimize for much different things than for many years ago. We got new user behaviors, like Ulrika talked about. We have other customer platforms we need to expose on, and other customers and other customer behaviors we need to present our assortment to. New world, new platform. Three major parts in our platform that we can talk about. It's the first one is the backend solution. The second one is the content management. Content, as we talked about, really important to be able to win European rug industry. Everything boils down to the new e-com site. Let's look a little bit more into the backend solution. We have strong technology in the company.
We have experts in what we do. We are having a big number of developers with high number of years experience in the developing this previous platform and also now in the new platform. We also always choose to build where we can make a difference, build where we can really stand out against our competitors, and buy the rest. This one is a home-built solution, and it's, if you look at it as a platform foundation, it, we have put in a lot of time in enhancing the product model. The product model, meaning all the products have attributes, all the products have a structure where they should be, like also Carin mentioned, we have a structure and a hierarchy in our data model.
We have enhanced that a lot to be able to, in the end, show the rugs, the right rugs for the customer and help the customer find the right rug. Everything boils down to data quality and data structure in our rugs. Also, it's a localization enabler from the backend. Manage things like price, discount, campaigns, localized. Really important for us to be able to do that in the future. Offer campaign and send out to target right customers will be possible or are possible now in this platform, in a much more efficient way. Our platform is backend part is much more than this. It's, we handle the whole order structure, the whole purchase for Carin's team to purchase the rugs.
We handle all the customer and the customer sendouts in our platform, so it's big. The second part, it's our content management system. Our content, content, we have talked about it a lot now, but it's really important. We've chosen a third-party solution for this, a headless third-party solution. Or back to, we build what we want to be experts in, and we buy what we can be use. It's heavily customized to fit our assortment. Not everybody that builds a standard solution have rug sellers as customers. This is also a really big localization enabler, where we can have different online merchandising between countries.
We can also localize the site experience, because if you look at the patterns when the customer is buying our rugs, it's totally different kind of rugs in different areas of the world or different areas of Europe. Really important to be able to showcase and show products in an efficient way. Catch country seasonality assortment, of course, is really important, so we can differentiate when we are pushing certain campaigns. Regarding functionality, the solution is a flexible content creation factory, and it's built upon a totally different SEO-optimized site structure. That's really important because users, when I say users inside, like, Rugvista, we can create design pages, design on-site journeys through this platform, that will really benefit our customers.
We can also add all kinds of content, text, image, video, everything we need for all platforms. Content management system, a really important part together with the back end. What's shown to the customer is the last part, the front, and the online shop. This is what we have released now in the five countries already. The other parts already are there in the existing domains that are not over to the new platform in some ways. When we talk about the new site, the new front end, again, we've chosen to build our front end ourselves. We think that we need to be in, handle our front end to have the experience of the user experience far best in the business, and it's really important to have the control of that.
We don't want to be in a standard e-commerce platform with our front-end part, because then we are kind of stuck. The vast majority of all our traffic is coming from mobile devices, so this front end is, of course, much more responsive. We have a mobile-first approach in everything, and that was not the case when we started building a platform 15 years ago. It's, of course, built for site speed optimization and for the Core Web Vitals that we have to take in consideration. We have put in a lot of effort in having a user experience that's really important to be able to help the customer in a great way.
One key thing is also the search engine optimization and the machine and human content value that we can add in this platform, because that will make it possible for us to have a much more efficient traffic acquisition. We don't need to buy in all the traffic. We can earn traffic, we can build organic traffic in a much more efficient way. Some short things. Before we started and during the journey here, we have put in a lot of effort in understanding why the customer makes choices, what the customer makes choices of.
I'm part of this, but we have a much better navigation experience, where the customer can find the products through all the visuals or the things that we have found out that they are really putting a value into, in the navigation, so by shape, color, room, style, and so on. We also got the whole site based on our filter functionality, and that means that we are using all the product attributes from the back end and put it into the filter functionality. This really can make it easy for us to build a site that the customer can find, but also for the customer to find exactly the rug they want to find.
Everything boils down to how we present the product in the final step before you go through the checkout and do a good visual experience in how to choose size, color, and so on. To wrap things up, what we need to do now in the future, I talked about getting this platform out to more markets. That's a priority 1 now, but we are still continuing to improve and implement new stuff on the platform. The new checkout experience, the new My Pages experience is worked on as we speak. That's something we have in focus now. Also to enhance the on-site algorithms to make it even more easy and efficient for the customer to find rugs on our site.
We should help them not make it harder. That's really important. The final part is create content. We are now in a phase where we have a platform, we can fill it with content, and we are doing it as we speak with our internal resources. We can make it in the long run, drive traffic much more efficiently to our site.
Great. Thank you very much for that.
Thanks.
Maybe a couple of questions. First, starting off on the rollout. You talked about now having 5 localized domains on the new e-commerce platform. Could you share anything on the timeline of the remaining ones that you're running on the old one currently?
Our main goal is to have all our domains over to the new platform in 2023. Of course, everything is based on data. Yesterday, when we went for Sweden, it was our biggest existing market we went on, and we're really monitoring closely now. We've prepared a lot, but we're monitoring closely now to see how the traffic is going.
Yeah.
First days feels nice, but it's, we need to have more data on it.
Yeah. Have you already noticed any differences with the new platform? Is it too early? I know, you know, Croatia, you've been live for quite some time. Any differences in conversion rates or customer behaviors or...
The-
That you can see already?
That's a little bit-
Yeah
... a little bit why we want to be in a bigger market-
Yeah
because getting data and trusting the data, we need more traffic.
Yeah.
I think after this release, it will give us much more insights.
Yeah.
We have insights from the other markets also, but it's not in that amount of data, so we can trust it. It feels good.
Yeah
and looks good.
Yeah
We can't trust the data to give it out.
Yeah. Maybe, finally, was maybe a new information for me, but you talked about driving quite a lot of traffic through mobile. Out of curiosity, have you had any plans to launching an application for mobile? I know Boozt, for example, has been very successful with that. Is that something that you will be looking at?
Of course, we talked about it. Of course, we looked into it. One difference between us and Boozt, for instance, is the, like you mentioned, Ulrika, is the time between each purchase.
Yeah.
It's easier to have, go back to the same application when you have a purchase within 2, 3 months, than 2, 3 years. Of course, we looked into it, and it's much easier to do that on the existing platform.
Yeah
... with the structural data we have. so it's not up for now-
Yeah
because we are focusing on releasing, but it's absolutely in our eyesight.
Yeah. Okay, great. Thank you very much for that. I see now it's 11:22 A.M. We have scheduled a short break, so we will be back at 11:30 A.M. for the second part of the presentation. Thank you.
Thank you.
... Welcome back everyone to Rugvista's Capital Markets Day here 2023. We're now entering the second part of the event. We have 2 more topics to go through before we're doing the Q&A session. That will be the sustainability part as well as the financial part. Starting off with the financials, will be presented by Joakim Tuvner, CFO of Rugvista.
Thank you, Carl. I will start to give a short, brief description of myself. I have been working in mostly in fast-moving consumer goods, in Oriflame abroad, and then in companies mostly involved in fast-moving consumer goods. I have been CFO for Rugvista since the ninth of January, so I'm 4 and a half months into this saddle. I will talk today about our financial targets, and I'll try to give you a little bit more flavor and body onto the targets. Our three financial targets are: to have an organic net revenue of approximately 20%. Then you hear us all the time to talk about profitable growth. Our second target is to have an EBIT margin of at least 15%. Of course, we wanna have a cash conversion, so we can convert that profit into dividends to our shareholders.
Our third target is to be able to pay a dividend as a percentage of net profits of up to 50%. If you start with the first one and go back a few years and look at the time when we made the IPO. We went with a prospect, with these numbers, with a CAGR of 20%, and in the first year, between 2020 and 2021, we grew 30%. We all know about the pandemic boost that we got, short term, but we also had a long-term pandemic boost effect, which is the migration that Michael spoke about from offline brick-and-mortar store onto online. We have the low consumer sentiment that we're all aware of.
We've spoken about that in the last few earnings calls, that made us drop a few percentage points in sales in 2022. Still, over this period, as Carl already mentioned, we have a 16% CAGR. I'll give a little bit more body into our foundation for growth, or I'll actually repeat a lot what earlier speakers have said. Starting with Michael, he spoke about the SEK 30 billion market that we're already in, the online carpets market, which is at only 20% penetration online. It's growing with a CAGR of 10%, 11%. Like Michael said, it's the perfect online product. We have a good average order, a relatively low returns, and we can say, let's call it, decent margins or even good margins.
Michael also mentioned the other macro trend, where we have all these digitally native people that are building their first home. 77 million people during the course of this decade that will come into this market that are 100% digitally native. Michael showed you our strategy for how to capture that growth. Further on, we had Carin. Carin, you spoke about the world of rugs and how we extend our assortment, for instance, in Essentials, how we extend the assortment in Essentials to gain access to the lower price points. We need that to reach the millennials, for instance, to capture opportunities in other marketplaces like Amazon, where the low price points are really, really important. Carin spoke about new categories, bath mats. We have the bath mats here.
For those of you who are in here, you can take a look at those. For the rest of you'll find them on our webshop. Also, Carin spoke about sustainability and how we incorporate that, and you will hear Patricia later to talk about that as well. You heard Ulrika talk about our brand foundation and how we, with our brand foundation that is in place, how we can extend the reach and reach out now to new formats, which will enable us to reach new customer groups. She spoke about building brand awareness and she said in selective markets, in key selective markets, and this will, of course, enable us to get a better conversion to capture new customers.
We have said it before in earnings calls, is it's not about adding a new corporate branding marketing budget on top of what we already spend in marketing, but it's rather to reinvest what we gain from the efficiencies that we believe we will get with the new platform, into corporate branding in selective markets. Last but not least, we heard Peter to talk about our new platform. If we take Michael's point about localizing, so this new platform will enable us to localize content in a totally different way. We will be able to do content management, very important for our marketing team, with completely new tools. We have a new customer journey with much better selection, filters, much better journey, checkout, and my pages.
We believe that with all this in place, with the macro trends, we have a strong foundation for growth. On to our second target. You hear us talking about profitable growth and to have an EBIT margin of at least 15%. When we went it, with a prospect in the IPO, we had 18.5%, and in the first year, we delivered 18.1%. If you look at the fundamentals of our costs, no cost is 100% variable or 100% fixed, but overall, 70% of our cost base is variable, the goods for resale. If you compare us to other e-com peers, bear in mind that for the goods for resale, we include the freight out to the customers as well, including return freights.
The marketing cost, we consider being able to manage that as a variable cost as well. With that fixed cost base, we see clearly from history that when we get the growth, we have a good leverage, and we can deliver a good EBIT margin. We also see that when sales turns and we don't get the growth, we are quite resilient to downturns as well, and can deliver a fairly decent profit margin of 11.7% for last year. On to the third and final target. If you talk about being able to distribute cash to our shareholders, then it's cash conversion that is important. What is cash conversion? It's working capital management.
By far, the biggest item in our balance sheet, apart for the goodwill, which doesn't move, it's not cash implied in that, it's our inventory. If you take a look historically over the past few years, inventory, these are the percentages of the last 12 months of sales. The ending inventory balance as a percentage of the last 12 months of sales. A year in which we, like 2020, we had a pandemic boost of sales, we had difficulties in product replenishment, we had difficulties in rebuying from our suppliers because of the pandemic. Of course, we had an amazing cash generation in that year. On the contrary, in 2022, if sales decline, we build inventory, and we are now at 26.3%, our inventory level.
As we said in the last earnings call, our target is to be between 17.5-22.5 percentage point of the last twelve months of sales. We have a job to do in getting the inventory down to the level where we want it to be. Overall, you have to look at our cash conversion ability over a longer five-year period to get a fair measure of what is our cash conversion. It is 84.5%, which is a very good figure. You have to bear in mind that this figure is in light of years of increase. It includes the investment we make in fixed assets, and it is also with an ending point of inventory, which is higher where we want to be.
What else do we need in order to be able to pay a dividend? Well, we need a good balance sheet. Do we have that? Yes, we do. We have a high solvency, we have no interest-bearing debt, and we have a good cash position. Like Michael said, we have SEK 142 million in cash when we closed the last quarter. Just a brief look at the history as well. As a listed company, for the 2021 profits, we distributed in 2022, 2.5 krona per share to our shareholders, which is the equivalent of SEK 52 million and 52% of our net profit. For the profits of 2022, the board has proposed for this AGM this afternoon to pay a dividend of 1.5 krona per share.
That would be SEK 31 million, and that would be the equivalent of 53% of net profit. So far, so good as a track record. I think we have the fundamentals in place to being able at when the growth comes, when our EBIT will be in place, and we will be able to convert that into cash. That was it, Carl.
Thank you very much. I can ask first, maybe a question on the margin target. I think if we ignore the seasonality of your business, we can say that you've achieved this 15% EBIT target in the last three quarters, more or less. Could you describe a bit, maybe have you sort of reasoning of, you know, obviously, you've not proven this margin target. Is there any reason for going back to growth mode? You know, we're in a slightly weaker market now. Is this a good opportunity to gain market shares where other players are maybe holding back a bit or anything on that would be very interesting.
Okay. During the quarter one and quarter two of last year, we were fighting the headwind in marketing, and we found that to be the marginal cost for capturing that growth was very high, which we particularly saw in quarter two. Michael said that in the earnings call that we would go back to profitable growth, and we would focus on profitable growth. I think you can always say that we've tried it. For the moment, it is not the right thing to do.
Yeah. Okay. Secondly, you touched upon it as well, with regards to the balance sheet. Net cash position, almost growing bigger and bigger for every quarter, given the conversion and the margins, and would be interesting to hear. I mean, obviously, you're distributing dividends, but what kind of other alternatives are you looking at to utilize the balance sheet with?
Yeah, I mean, the short answer is what you said yourself. It's to pay dividends to the shareholders, right? If we take a look a few years back, when we got listed, I think it was quite common that companies that got listed had a net interest-bearing debt, net debt to EBITDA of about 2 times, 3 times, something like that. With the turmoil, they're down to maybe half of the EBITDA, up to debt levels of 4, 5, 6, their EBITDA. With the raising interest rates and with that level of gearing, you would reach interest rates today, where you would not only have a financing risk, and you would also have probably double digits interest rates.
I think, overall, I think our shareholders, or many of our shareholders do appreciate that we have the position we have, and that we don't need to necessarily change that in the short term.
Yeah. Okay, very well. Thank you very much. I think we will move over to the final topic of today, which is around the sustainability agenda and the sustainability target before going into the questions and answer session. That will be presented by Patricia Widgren.
Thank you, Carl. Welcome to this presentation of sustainability efforts at Rugvista. My name is Patricia, and I'm the Chief Organisation and Sustainability Officer here at Rugvista since 2020. Prior to that, I've been working within the retail industry for many years, with retail brands like Biltema and Granit. I'm going to introduce you to our sustainability vision, strategy, long-term goals, our achievements so far, and finally, our planned actions going forward. As Michael mentioned earlier, our sustainability vision is to lead the rug industry towards a socially and environmentally sustainable future. With our vision, we are committed to driving behavioral changes across the whole value chain and the industry as whole.
This is not only important for our shareholders, but also for our customers, of course, our employees, who all want to be a part of a company that actively contributes to a sustainable future. In 2020, we launched our sustainability strategy, LEAD.CHANGE. The strategy serves as a foundation for our 2030 goals and focuses on 3 areas: planet, people, and business. The focus areas guide us in developing a circular business model, reducing our environmental impact, and promoting sustainable social development through responsible business practices. We have also identified 5 change levers that will enable us to achieve and scale our sustainability efforts. We have set ambitious long-term goals, I'd like to highlight a few of our achievements so far.
Firstly, I'm thrilled to say that Rugvista's climate goal has been approved by the Science Based Targets initiative. By 2030, our goal is to reduce our greenhouse gas emissions by a minimum of 46% in Scope 1 and 2. We are committed to measuring and reducing our emissions in Scope 3. Secondly, in 2022, we performed a life cycle assessment with the top five materials used in our rugs. These findings prompted us to expand our Scope 3 measurement to include the climate impact of rug materials as well. It will also help Carin and her team when designing new sustainable rugs and collections. Finally, we want to take responsibility for our entire footprint. Ensure compliance with a code of conduct throughout the whole value chain. We have started, and so far, successfully mapped 67 of our tier 2 suppliers.
Our value chain provides an overview of sustainability priorities, activities, and impact, and by analyzing our footprint within the value chain, we can effectively manage both positive and negative consequences. This approach helps us to identify opportunities, mitigate risks, evaluate impacts of different parts of the value chain, and of course, create value for all our stakeholders. In the next few slide, I'll delve into each focus area, beginning with planet. At Rugvista, we are committed to fighting climate change and minimizing our environmental footprint in our own operations. In our own operations, Scope 1 and 2, which you can see on the left-hand side, we successfully reduced our emissions by 69% over the past 4 years....
That is mainly thanks to our switch to renewable electricity and also LED lighting in our facilities, like this warehouse and also the other one in Limhamn. The achievement means actually that we already reached our science-based goal target for reducing greenhouse gas emissions by 2030. However, our main greenhouse gas emissions come from our indirect emissions. That's Scope 3, representing over 99% of our footprint. It's crucial to intensify our efforts in reducing emissions throughout the whole value chain. This task is challenging, though, we need to rely on a good collaboration with our suppliers to drive change. The impact of our suppliers' operation, including our rug materials, accounts for 96% of Scope 3, during 2022, we reduced the CO₂ emissions in Scope 3 by 18%.
A large selection of our rugs are designed to be used for many years. Some last for several generations and can be reused in different ways. Lifespan is an important key in our work towards circularity. We have, for instance, unique rugs that are more than 20, up to 100 years old, and both patchwork and vintage rugs, like Carin mentioned before, are made by old, worn-out rugs. Last year, we launched Rugvista RE.USE in partnership with Tradera, and that's a circular marketplace enabling us to give defective rugs a second chance and also to help our customers prolong the lifespan of their Rugvista rug in a new home. For the people area, I would like to highlight some key points regarding our social responsibility and the crucial role our supplier relationships play in us driving improvement.
Through collaboration, education, and support, we work closely with our suppliers to achieve a positive change. To navigate the complex audit processes in the rug industry, we have established strategic partnerships with two NGOs. Firstly, we collaborate with Amfori, focusing on centralized production units, mainly in Turkey and India, to ensure responsible practices and adherence to social and environmental standards. As you can see, to the right, there are significant improvements in the audit results through the BSCI Amfori auditing system, both in terms of ratings and the number of suppliers included. A large part of our products are actually audited through this system. Secondly, we have partnered with Label STEP, an organization dedicated to support our tier one and two home weavers and decentralized production units, mainly in India, Iran, and Pakistan, and Afghanistan.
This partnership allow us to promote fair and ethical trade practices within this specific segment of the rug industry. Let me share a quick but important update about our organization. We prioritize creating an inclusive and diverse work environment, striving to be a great place to work. To evaluate the employee satisfaction, we regularly measure our Employee Net Promoter Score, and by the end of 2022, we achieved an eNPS result of 47, bringing us closer to our long-term goal of 60. This demonstrates our commitment to continually improving our employee value proposition. In terms of business focus area, it's worth noting that all our suppliers have committed to our code of conduct, and that we have successfully integrated all suppliers into our auditing systems.
On this final slide, you see our key priorities moving forward, and I want to highlight a few of them. As 99% of our greenhouse gas emissions come from Scope 3, we want to ensure that our major suppliers have robust emission reduction plans ready by 2024. To support that, we will implement amfori BEPI, a system focused around improving environmental performance in the supply chain. Utilizing recycled material has great potential for reducing environmental impact, and based on the insights of the LCA, our design team, in collaboration with our key suppliers, will explore the opportunities to increase the use of recycled materials and the design of recyclable rugs. In our commitment to people, we will continue to build close relationships and support our suppliers to continuous improvement.
Education, we believe that education is the key to driving positive change and responsible business practices throughout the entire supply chain. As we move forward, we are committed to strengthening our brand positioning by building a trustworthy relationship with our customers, providing them with the knowledge and inspiration they need to make a conscious and sustainable choice. With the introduction of our new platform, we have a powerful tool to enable that support to drive a positive change. Finally, by pursuing these initiatives, we strengthen our commitment to sustainability, we drive positive change in our value chain, inspire our customers to more sustainable choices, as well to others to join us in building a more sustainable rug industry. Thank you for your attention.
Thank you very much.
Thank you.
I had a question on... or I wanted to ask, with regards, you touched upon it, but maybe if you could describe a little bit more on this, we can call them tier two suppliers. I know you have a very diverse, supply chain.
maybe we can call them more high-risk countries, like Iran, for example. How do you ensure, for example, equal working conditions? Could you maybe describe a bit the evaluation process also there?
Of course. As I mentioned before, we have a cooperation with Label STEP, an NGO that is very active in these countries that you mentioned. We do audits both in tier 1 and actually in tier 2 there as well. Together with them, we do our best to ensure that also the sub-suppliers have equal conditions. It's not only the audits, that's only 1 part. What we believe is even more important, and what we also do with Label STEP, is actually that we support the suppliers and educate them for improve continuous improvement.
Yeah. Yeah. Maybe on that on the topic, I think you had, you can correct me if I'm wrong here, but I think you said 67% of tier two suppliers being audited last year. Could you
No, mapped.
Mapped.
Yes.
Sorry. Yeah. Could you give us, sort of a flavor, how has that figure developed over time, and maybe why it isn't higher today?
Mm-hmm. To map sub-suppliers, it's quite complex.
Yeah
especially in countries like Iran and Afghanistan, where many of the sub-suppliers are individual small contractors. We started actually in 2021 to map, and we have so far mapped all our major suppliers, I would say the key suppliers, especially in India and Turkey. During this year, our ambition is to map, to reach 100%.
Okay. Yeah. Great.
Okay.
11:59, good timing to start.
Thank you.
... the Q&A then, and maybe we can bring all the presenters to the stage.
Sure.
Again, as I said in the beginning of the presentation, we'll have a 30-minute Q&A session now. For those of you that are dialing in on the webcast, you can write your question in the chat box, and I'll make sure to read it out loud. Of course, we'll have questions in the room here as well. Maybe I can start off to you, Michael, with a first question, and maybe a bit on the topic of what I asked Joakim before as well. I mean, obviously the market has changed a lot since the pandemic, and 2021 and 2022 has been a completely different year.
I wanted to ask, when it comes a time when the market improves again, how easy would it be for you to sort of, reinstall your mood of growing again and then sort of switching, you know, from focus on profitability back to growth?
It's quite easy. It's essentially from one day to the next. It's quite possible with the sort of responsiveness and direct impact that our marketing setup has. Of course, you know, let's say if we talk about driving a car at a given speed, going from, let's say, 50 to 100, overnight isn't necessarily the always the most optimal way of achieving that.
What I can say is that we continuously keep track in terms of what with the data sources that we have internally, in terms of how do we see the total market and the total demand that's out there, and continuously evaluate how do we ensure that we always get sort of the best marginal ROI on our next euro invested. Then, depending on how that equation evolves over time, we are definitely ready to do it whenever we see the time is right.
Yeah.
Um,
Maybe a question on the, similar topic. I know that this is a very fragmented market, and there are quite a, limited number of pure online players, so to say. Could you say anything if you've seen any sort of change in behavior among your competitors, during the last year, what we've seen? I mean, obviously, you have a very strong balance sheet and good margins, but I guess smaller competitors maybe have a, let's say, tougher time than you. Have you seen any changes in... Have the competition- ... eased a bit as a result of the market environment, or?
To a certain degree, it has during the past quarter or so, eased off a little bit, and we can see especially, you know, in the auction processes that we are involved in on a sort of a second-by-second basis. It's not necessarily so much driven by the smaller players out there.
It's I would argue more the multi-channel players, in addition to the what I sometimes call the sort of online home improvement department store or so, whatever you wanna call them, and that have to a certain degree eased off a little bit and focus a bit broader, especially with the multi-channel players, of course, with their offline network coming back in play, and they're spending again more resources in those areas versus online.
I think I'll stop there if we have any questions from the room. Please go on.
So for the-
Yeah.
Thank you. Is it on? Okay. Carin, if you could talk a bit about how fragmented the sourcing market is. Has it consolidated over the years? In terms of your sourcing, how large are the largest suppliers for you?
What do you mean with how large is...?
Is there any particular supplier of rugs that you depend on, that fills up 10% of your annual buys on an average basis?
Some of the suppliers are quite big for us. It has also shifted over the years. We're trying to spread out, not to have all the eggs in one basket. No, not really, I think.
Have you seen any consolidation in terms of suppliers? Is it as fragmented over the years, or has there been consolidation on the supplying side?
Not really, I would say. No. Not that we have seen-
The past 5, 10 years, it's relatively stable. I mean, if we look at sort of the let's call it the nearshore sourcing options available, yes, beyond Turkey, there's some production in the Benelux area. It's some production in Eastern Europe, and also in sort of the Egypt is fairly large as well. Those are opportunities we have been evaluating and continuously evaluate. Right now, our sourcing is very focused on India and Turkey. Like Carin said, we're looking at, of course, expanding that. Within, let's say, Turkey, there's a lot of different machine-made producers down there.
Yes, it's Turkey as a region, but we also have a lot of production sources or suppliers in that area, which we don't work with.
I have... Can I?
Yeah.
I have a question on the Scope 3 reductions, since they are the major part of greenhouse gas emissions. Could you tell us what are the main, like, low-hanging fruits, or what are the main challenges for in Scope 3 to be reduced over the time period?
I guess the low-hanging fruits is to work close also with our transporters, to make them lower their emissions, which is, of course, happening quite a lot for the moment. I would say our materials, this is where we can do a lot: to look at the materials, to see if we can use more recycled materials, and also to prolong the lifetime of our products.
Thanks.
Great. I think, Benjamin, you had a question as well.
Thank you. Hello, this is Benjamin from ABG Sundal Collier speaking. I have a question on the market development. You showed a few market slides. I believe they were prepared in 2019. Is it possible to give us any flavor on the market size development and also the e-commerce penetration during the pandemic compared to today, maybe?
Yeah, I was actually last night reading another one of those sort of bigger scope reports, and current estimate is that the sort of total home furnishing is growing about 5% annually over the next 5 to 5 some years. Online penetration, of course, is on a sort of larger scale, somewhat difficult to be quite certain about. What I could say is that, yeah, during the pandemic, there was definitely a boost, and that's quite natural since since the offline industry, to a large extent, had to shut down. Sweden, of course, was not sort of as restrictive as most other European markets were.
There was a little bit of a revert, reversion back to pre-pandemic, but around 20% is kind of our current estimate in terms of the online share.
I guess what I'm trying to ask here is: Is it fair to assume that the current e-commerce rug market is larger than in 2019?
Yeah.
Yes. Perfect. another question on CarpetVista.
Mm-hmm.
Obviously, you're pushing the new Rugvista brand quite hard now.
Mm-hmm.
What is the plan for CarpetVista as a brand?
I mean, the reason we have two brands, of course, is historical, where CarpetVista was the showcase for where actually the organization started, and the organization started from the traditional, handmade, unique rugs. That is also what Rugvista, the Rugvista brand focuses on. For us internally, of course, managing two brands and also now managing two tech platforms, 'cause CarpetVista is still on the existing platforms, over time is quite complex.
As we already sell the entire assortment, so also the unique from the Rugvista site, or the, via the Rugvista brand, the focus is on ensuring that we can sell all portions or all parts of the assortment effectively through that shop. Then once we're able to do that, we have more options to do, to figure out what we wanna do with the, with the CarpetVista brand long term.
Another more strategic question. Thinking about the Amazon strategy going forward, is there anything you could share here for us, please?
Yeah, Amazon is, of course, as you all know, the powerhouse when it comes to global online retail, at least in the Western world. Being present on Amazon, we've been there for many, many years, actually. We see that as something that is good, 'cause especially when Amazon manages to get their customer to become a Prime member, research and also what we've seen is that the Prime customers have a tendency of buying a large portion of their entire online buying is done via Amazon, so not in only in one category, but in multiple categories.
Of course, if you have a marketplace or a brand with a very captive audience, in order to capture some of that demand in your specific product category, in our instance, rugs, you need to be present on that platform. Of course, that's the reason we are there. The Amazon customer, of course, is or as sort of rumor has it, but it's also true, is quite price sensitive. Of course, in order to compete towards the other or with the other options available, we need to have a very affordable price point on the Amazon platform. Rugvista Essentials, like we mentioned earlier, is part of that.
Of course, having Prime, the Prime badge or Prime certification, in terms of your delivery, is also something that we've piloted and then we'll continue to look at in the future.
Thank you. Yeah, I have a couple more questions. Shall I just go ahead?
Maybe one more, and then we can rotate.
All right. I'll pick the best one then. It's on, it's on conversion. Over the past year, you've improved your conversion rate by roughly 20 basis points, currently at 0.8%, roughly. What, what's a mature level here? And what part of this improvement is going to come from front-end res, and back-end improvements, respectively, please?
Conversion rate as a KPI, of course, is important, but it's also one of the most complex KPIs out there when it comes to e-commerce, 'cause so many different factors actually affect your actual value in terms of what your conversion rate over a given period of time is. And if we just kind of look back over the past 12 or so months, a big portion of why our conversion rate has improved, I would say, is, number one, that we've been focusing on buying higher quality traffic, which, of course, is, was driven by us wanting to be efficient.
Of course, you start focusing on channels and auctions that have the highest potential to convert at that given point in time. The second portion in terms of the conversion rate is that we've extended our assortment into the little bit more. For us, historically, we were very much pre or, yeah, mid to upper premium, I would argue. With Rugvista Essentials, we have a price point available, and that is much easier for a first-time buyer, in addition to also a slightly younger buyer, to actually try us out, versus instead of having to, you know, historically having to pay, let's say, SEK 4,000-5,000, and now they can buy a similar size rugs for about SEK 15-2,000.
That, of course, helps conversion.
Thank you.
I think we had a quest- just behind you.
Maybe before the next question in terms of, okay, what's a future steady state? 'Cause that was sort of the second portion of your question, actually. Of course, I have, we internally have a sort of a little bit of a benchmark, and me personally, I have a sort of number in mind in terms of where I think efficient scaling can be done at sort of at scale. We're not talking about, you know, several billion SEK, and it's a bit higher than we are at today. At the end of the day, it's really about all of the traffic acquisition channels that you have, ensuring that they convert as effectively as possible.
The new platform is the big enabler for that, 'cause now we can start building inspiration or landing pages or entry pages, whatever term you wanna use, that is optimized based on the entire end-to-end journey. If you're coming from, let's say, a social media platform, and you're clicking on an inspirational image or a room setting, of course, your next step in that journey, needs to sort of emulate that experience. That we can do with the new platform, we couldn't really do that with the old platform.
Hello, Handelser here, TIN Fonder. It's nice to be here today. Great to see the actual things here and all the rugs. What I was thinking about is considering the most important market for you is Europe, and new GDPR rules, and now moving to a new technology stack. There's been a lot of e-commerce websites that have been talking about that they lose data about their customers, and have a problem pinpointing how to market into, in the future. How is that affecting you, and what is your strategy going forward?
Yeah, I mean, GDPR, of course, has been around for a few years now, and it was a few days ago, Facebook got quite a big fine or Meta, a really big fine. It is true, certain channels have been affected by the GDPR technology or the rules around that. Especially, you know, what Apple did was it about a year and a half ago, in terms of, you know, securing all of the browsers on Safari and Apple devices in general.
For us, that impact was to be quite fair, relatively limited, due to our channel mix. In the future, what our focus will be is on building a stronger first-party data foundation. Part of what Peter talked about, the My Account experience, is that's one part of it, 'cause today, we don't really have a very strong My Account experience, which means people don't necessarily log in. Of course, it's more difficult to track them when they are unknown. Having the My Account is a push, part of our first-party data, and also, of course, then our ability to leverage different channels, but also existing channels more efficiently.
A quick follow-up question, if that's all right. I guess most of these people are people that haven't bought carpets before. Is that right?
Mm-hmm.
Yeah. Do you feel like you miss any data that you would have three or four years ago, that you will not be able to access today, to be able to efficiently market against these people?
Yeah, I mean, things changed over time. You know, I've been doing e-com now for a bit over 10 years, actually. You know, the capabilities and the sort of data availability one had back then, compared to now, of course, is different. With the sort of, yeah, the Facebook remarketing engine and the way it was and all of the data that was available back then, and also on other platforms, that's not the same today. Everybody needs to adapt to it. That's also why, you know, channels such as...
Why first-party data and channels such as, you know, content, CRM, so email marketing, all of those things are becoming more and more important for everybody. Second, why it's actually there's a need to also in these sort of reach, what I call reach channels, to have better landing pages, entry pages. If you have a visual, you at least know what visual drove the click to the site, and if you can continue that same journey, there's of course, a more optimal or a higher probability that the person will convert. Thank you.
Great. I see we have quite a few questions coming in through the webcast. I'll take a few of those as well, the first one is to Peter, relating to the new platform, and actually a number of questions relating to that. Maybe the first one, what has been the most challenging and time-consuming parts in building your new platform? That's the first question.
One of the most time-consuming parts has been building the content management part. It seems easy, but to create the content management part where we not only can add text and some image, but use that part in the platform to design the customer journey, has been time-consuming. I think also that one thing that will really give us value in the future, both for the customer that can easily funnel down to the product they want to see, but also for us to be able to use our knowledge and use our expertise. That part has been the most time challenging.
Yeah. relating to that, which are the key metrics that you collect data on when you launch a new platform in a new country?
Important things are, the obvious, conversion rate is 1, but as Michael said, it's kind of complex because it depends on the traffic mix.
Yeah
... a lot. average order value, of course, to see that we display and sell the same product mixture, so we get the same average order value.
Yeah
... to make the same kind of money, and of course, number of orders. Average order value, bounce value, bounce rate, one important thing to see how many customers are staying on site when they're touching our surface.
Yeah.
bounce rate, conversion rate, those normal-
Yeah, yeah.
e-commerce scores.
Obviously, very early days since Sweden, but still a question relating to that. I mean, you were, briefly, mentioning that it looked good initially, and the question here is relating, could you give us any sense of what you're referring to, with that statement?
The statement is only that there's always a risk when you go in and take a total takeover of an existing market. When you do that, you kind of switches the same campaigns you have driven to a new, totally new domain and a new site.
Yeah.
The risk is that you kind of have a dip, and then come back up. What we saw yesterday, talk about early, one day, we should need weeks and months, but we didn't have that dip yet.
Yeah.
That made me smile when I woke up to see in the morning.
Yeah. Question from another participant here on the link, I guess it's on the same topic. It's: Have you seen any difference in the mix of traffic in the market where you have launched your new platform? Any difference in SEO in a market like Croatia, for example?
Oh, I, Toku, you can take Croatia. Yeah.
Croatia is a very small market, and sort of getting organic traffic through search is an effort where, you know, I was sort of leading Zalando when we entered the Nordics. We went live on, you know, day one in, let's say, Sweden, which was April 2012. We had a portfolio of, I think it was about 100,000 keywords that we were trying to rank on, day one. It still took us 6-12 months before we really started getting significant traffic out of SEO. That is an effort.
We, of course, now have the technical platform to start that journey, but it will not be a 1 day to the next type of journey.
Yeah. Another question here from the webcast is relating to the marketing budget. The question is: How do you optimize your marketing budget from day to day, and your more long-term plans? What is a more longer-term, realistic marketing in percentage to sales target, around 25%, is that realistic, or is it too ambitious?
I think again, that comes back to the topic of profitable growth, right? Over a, any given, at any given point in time, from day one to day two, we could, go from, let's say, you know, we were, last quarter was about 31% of sales in marketing. Next day, we could choose to be at 0%. We just turn everything off. Then, of course, from that day forward, we will have 0% marketing invest. Whether that's the smartest thing and when also trying to grow, not so sure. There will be a balance between the two.
What we see, though, with what we're trying to do and with our ambition in terms of utilizing content to drive organic traffic and an organic engagement, and also using that content in our own channels, such as, you know, social media presence as well as CRM. Of course, the ambition is over time to change the mix, both from a traffic and, of course, profit contribution between the paid versus, let's say, the earned channels. Once we do that, we have the option to either re-invest that money into growing faster, or moving it to the bottom line.
Of course, we would invest some of it, into building an overall brand, increased brand awareness, which we actually see as a maybe not day one positive ROI, but over a little bit of a longer timeframe, that will be good for the entire ecosystem that we're trying to build.
Yeah. Thank you very much. Yeah, Rebecca?
Hi, Rebecca Gustafsson, Carnegie here. Thanks for a good presentation. A couple of questions from my side. Firstly, you mentioned the potential for a larger online penetration within your market. In addition to the obvious opportunities for you there for increasing growth, are there any particular challenges that you could expect associated with that? I'm thinking one such thing maybe could be relating to pricing power, if it's easier for customers to do more comparison between different alternatives and such. Could you talk a bit about that, please?
Absolutely. I actually want to start from a slightly different angle, though. How do we get to the next sort of S-curve in terms of online penetration within our vertical? Really there, I see augmented reality to be quite fair, as critical, and doing that well. 'Cause at the end of the day, our products need to fit into the environment of a given room, right? Augmented reality has a lot of potential for that purpose.
once that becomes better and more accessible, then more people are getting used to using those type of features, see that that can really boost the sort of overall penetration. The sort of topic on price comparison and those things, I mean, at the end of the day, it's a product vertical without sort of strong product brands, which is kind of the basis. The basis of price comparison to historically and to a large extent today, is that, okay, you have Nike, a given Nike shoe, and that retailer 1, 2, 3, 4, and 5 are selling the exact same SKU.
rse, the PCs or the price comparison sites, okay, here are your 5 options. They have it at EUR 105, the other one has it EUR 103, et cetera. And that is quite difficult for the price comparison sites to do within our space, since the SKUs, to a large extent, are unique. But doesn't mean that, okay, a 2-by-3 white, fluffy rug is not available on a PC site from retailer 1, 2, 3, and 4.
There, I think the opportunity or the sort of challenge and what we're wanting to do is ensuring that also sort of trust brand, which is branding, the convenience, in terms of the delivery experience and the buying experience, are part of the equation and not only absolute price points.
Excellent. Thank you. The second question for me, customer engagement is a factor often associated with successful D2C brands. The home improvement market, I would say it's a high engagement market, but as you mentioned, rugs are not a very, like, brand intensive category. Could you talk a bit about the engagement within the rugs category compared to overall home improvement market? Also, how you as a company strive to drive engagement?
I mean, often, when sort of speaking to customers and doing research, a lot of the, so if you think about a sort of tabula rasa or a blank room or an empty room, it typically starts with the furniture. If we take, let's say, a living room, it kind of starts with the sofa often. Then you sort of build from there from a consumer perspective. That's, you know, something we have to live with. What we are, however, trying to do when trying to convince people with, is kind of the set the scene topic, which is, okay, start from the ground up.
Uh, so you start with a, with a sort of, uh, rug as the starting point in terms of the atmosphere and feeling you want to create within the, uh, within the room, uh, and then, uh, and then build from there instead. Uh, uh, and I think it's a strong point of view, and, uh, you know, Rik and the team has worked, uh, um, uh, to develop that, uh, that point of view, and I think has a lot of potential. But, but of course, um, we, uh, we need to be aware of how things are like right now, uh, and, uh, and that of- often includes other elements in the, uh, in the room as well, beyond the rug. But our point of view, at least, is that you start with the rug, and you build from there.
Great. Thank you.
I think, Emmanuel, you had a question. Maybe we can limit it to one or two, because-
Yeah
... we had one here as well.
Yeah, I guess we are running out of time. Emmanuel here from Danske Bank, a question on the, on the strategy on winning Europe. Which markets are you primarily targeting? I guess, the DACH region is a really important market, but you're also quite big there already. Is there other markets you are targeting? Could you also maybe give us a flavor on which market you see that you already have a market-leading position in?
Absolutely. I think, let me kind of start with the, with this last portion there, being the, where we're the market leaders. I'd say overall, in many markets, we are the leader among the online specialists. We're, if we're not number 1, we're 2 or 3 in essentially all of the European markets. In terms of where we, where we see, of course, yes, DACH is a big region for us, but Nordic at the moment is about the same. The population size between those two regions, you know, the DACH region is almost 5 times bigger. Of course, there's. That, of course, gives an indication that, to be quite fair, we're under-penetrated in DACH, and that is the case.
of course, being the biggest market there, will continue to be a high-priority market for us. Then other individual markets, of course, the high-population markets are important, such as France and the U.K. And we spoke a little bit about it in the last earnings call, about the U.K. being one market that is going really well for us.
Yeah, excellent. In order to win these markets, you have two fulfillment centers here in Sweden, in Malmö. With the current structure and logistics, you feel that you will be able to reach a good enough customer satisfaction in those countries with this structure at the moment? Or you feel like you need also to implement maybe a fulfillment center in Germany, for example, which also maybe will support the sustainability and ESG agenda as well?
Mm-hmm. I mean, that is, of course, sort of our warehouse footprint is something that we, of course, are looking at as an organization. Also, thinking about, you know, a few years ahead. In the shorter to midterm-ish, we're quite fine in terms of where we are. But if, of course, we think 5+ years in the future, having a presence on the continent, of course, will enable us to have shorter lead times for our since most of our customers already are and will be down there.
The one thing I do want to stress is sort of absolute lead time from time of purchase to time of delivery isn't always the most important. Yes, it is important for some customers, but predictability on the lead time from time of purchase to when it's delivered, is more often than not more important than absolute lead time.
Great. Maybe a final question from my side.
Quick one.
You recently added the bathroom rugs and also the outdoor carpets to the assortment. I guess that's also a measure of getting customers heading back to Rugvista earlier than maybe the 3 or 5 years period that you previously mentioned. Should we expect other products categories to enter the assortments in their time also to improve this situation?
Let me start with sort of the outdoor portion there. Outdoor is something that we've had always during the lifespan of the organization, essentially. What we've done for this season, and we'll continue to do, is improve the selection and the assortment within that sub part or subarea. Where previously we, to be quite fair, did not have a complete assortment in terms of what consumers were actually valuing when looking for to sort of put a rug out in either, you know, the patio, et cetera. Some of those aspects were sort of the water resistance and easy to clean and those things.
That's a big portion of what we've been doing, is increasing the selection and the appropriateness of our assortment in those, in that area. In terms of the bathroom rugs, it is for our point of view, we want to be, you know, the center of gravity within the rug space. Bathroom rugs is a rug that's part of that space, which we previously did not carry. Of course, we want to ensure that we have a complete assortment for all needs, and thus, we did introduce the first portion of our effort in that area.
There are, of course, as anyone that visits our shop, can see there are other types of, rugs which we don't carry today. Of course, over time, we will look into adding those as well.
Perfect. That's very clear. Thank you very much.
Thank you.
I think we're... Are you fine? Okay, I think we're, yeah, we're already a bit over the time. Thank you, everyone, and Mike, and maybe a few final remarks from your side before rounding off.
Absolutely. Number one, happy to see the see you guys here who ended up coming in person, and thank you very much for the attention for everybody that's been online. We also, as a team and organization, want to thank you, Carl, for excellent management.
Thank you.
of, the event. A small token of our appreciation.
Thank you very much.
Thank you.
Thank you. I guess, a round of applause, then.