Ladies and gentlemen, thank you for standing by. I'm Constantinos, your conference call operator. Welcome, and thank you for joining the Hepsiburada conference call and live webcast to present and discuss the second quarter 2021 financial results. At this time, I would like to turn the conference over to Ms. Helin Celikbilek, Investor Relations Director. Ms. Celikbilek, you may now proceed.
Thanks, operator. Thank you for joining us today for Hepsiburada's second quarter 2021 earnings call. I'm pleased to be joined on the call today by our CEO, Murat Emirdag, and our CFO, Korhan Öz. The following discussion, including responses to your questions, reflects management's views as of today's date only. We do not undertake any obligation to update or revise this information except as required by law. Certain statements made on today's call are forward-looking statements. Actual results may differ materially from these forward-looking statements. Please refer to today's earnings release as well as the risk factors described in the safe harbor slide of today's presentation, today's press release, the 6-K, in our prospectus filed with the SEC on July 1st, 2021, and other SEC filings for information about factors which could cause our actual results to differ materially from these forward-looking statements.
We will reference certain non-IFRS measures during today's call. Please refer to the appendix of our supplemental slide deck, as well as today's earnings press release for a presentation of the most directly comparable IFRS measure, as well as the relevant IFRS to non-IFRS reconciliations. As a reminder, a replay of this call will be available on the investor relations page of Hepsiburada's website. With that, I will hand it over to our CEO, Murat.
Thanks, Helin. We are so excited to have our first earnings call ever as the only NASDAQ-listed Turkish company. Before we dive into the second quarter results, I would like to take a moment to give an overview of our Super App ecosystem and focus on some of the key fundamentals that contribute to the success of Hepsiburada. Hepsiburada is a homegrown company that has played a fundamental role in the development of e-commerce in Turkey over the last 20 years. Our name, Hepsiburada, literally means everything is here and is synonymous with a seamless online shopping experience and benefits from very strong brand awareness. Our vision is to lead digitalization of commerce. To that end, we have evolved from an e-commerce platform into an integrated ecosystem of products and services centered on making people's daily life easier.
We operate in an attractive market that has a large, young, urbanized, and tech-savvy population. The Turkish market is at an inflection point, with a growing e-commerce penetration expected to exceed 20% within total retail by 2025. That said, roughly 90% of total retail is still offline, offering a large opportunity for growth. Our Super App is at the center of our value proposition and acts as one-stop shop for customers by offering a broad range of products and services and by creating differentiated user experience. Today, we are a one-stop shop for customers' everyday needs, from products and services to groceries and payments. We constantly seek new ways to differentiate our customer experience with value-added services such as frictionless return pickup, expedited delivery services, cart splitting, instant customer loan, and our loyalty club offering.
Also, we continue to expand into new strategic assets, including Hepsiexpress, our on-demand grocery delivery service, Hepsipay, our digital wallet companion solution, Hepsifly, our airline ticket sales platform, and Hepsiglobal, our inbound and cross-border business. With our growth-oriented business model, we recorded a GMV growth at 64% CAGR between 2015 and 2020, as we disclosed in our IPO prospectus. Our solid operational execution, capital efficiency, robust logistics network, deep technology capabilities, household brand name, hybrid business model, and integrated ecosystem have positioned us as a homegrown company to emerge as the first ever NASDAQ-listed Turkish company. Let me stop here and now turn to our second quarter results. Next slide, please. In the second quarter, our GMV grew by 38% compared to the same period of last year to TRY 5.9 billion, in line with our plan.
This performance brings the first half GMV growth to 58% on a yearly basis. Total number of orders in the second quarter were 13.1 million, which is the highest we have recorded to date in a single quarter. It is important to highlight that these results have been against a strong baseline effect of COVID-19 pandemic last year and are driven by a greater active customer base, order frequency, active merchant base, and total number of SKUs compared to the second quarter of last year. HepsiJet, our in-house last mile delivery service, achieved presence in every city in Turkey by the end of June 2021. Parallel to our Super App ecosystem value proposition, we continue to invest and scale our strategic assets, particularly Hepsiexpress and Hepsipay, which are well positioned for strong growth. Within that context, we launched our digital wallet, Hepsipay Cüzdanım, embedded in Hepsiburada in June 2021.
Hepsiexpress, our on-demand grocery delivery service, has expanded its partner network to over 40 brands across over 1,800 stores. Overall, these results indicate our ability to deliver strong growth across the ecosystem. Let's have a detailed look into key assets. We operate a large, fast, and scalable in-house logistics network with last mile delivery, fulfillment, and operations capabilities powered by our proprietary technologies. We believe that our nationwide logistics network is key to our success. We operate six fulfillment centers covering more than 120,000 sq m strategically located across Turkey. In the second quarter, HepsiJet achieved presence in every city in Turkey, reaching 137 cross docks, whereas Hepsimat, our nationwide pickup and drop-off network expanded to more than 1,500 branded pickup and drop-off points across lockers, partner local stores, gas stations, and retailers.
As a result of its expansion, HepsiJet conducted more of retail deliveries and more of marketplace deliveries in Q2 2021 compared to the same period of last year. With HepsiJet, we are able to offer a variety of value-added services, including same-day, next-day delivery options, delivery by appointment, including weekends, and frictionless return, which is HepsiJet picking up your return from your door at your preferred schedule. In line with our efforts to enrich value-added services, HepsiJet also began rolling out two-man cargo handling service in Q2, addressing the need for high quality and reliable service in relevant categories. We believe that our robust logistics network gives us a significant competitive edge in offering strong customer experience. Let's take a look at another strategic asset, Hepsiexpress. At Hepsiexpress, we aim to become a mainstream grocery shopping destination.
Embedded in Hepsiburada Super App, Hepsiexpress offers both instant and scheduled delivery options, addressing grocery needs for on-demand and planned grocery shopping. By the end of second quarter of 2021, Hepsiexpress has become one of the strong players in this market with around 2,600 outsourced picking and delivery agents and has expanded its ecosystem to over 40 brands and roughly 1,800 stores with presence across more than 50 cities in Turkey. We believe Hepsiexpress will be a key enabler to attract new customers, to engage our existing audience, and to unlock further synergies across services in Hepsiburada. Let's take a look at Hepsipay. Hepsipay is designed to be a companion wallet to spend, save, and mobilize money in a flexible way across online and offline channels.
Having acquired its license in 2016, Hepsipay marked an important milestone by launching Hepsipay Cüzdanım, which I will refer to as Hepsipay Wallet, as an embedded digital wallet product on our platform on the 10th of June. Its daily penetration amongst eligible audience has been faster than our expectations. Hepsipay Wallet enables instant returns, cancellations, and cashback. Along with Hepsipay Wallet, Hepsipay also introduced HepsiPapel, a cashback points program that allows customers to earn and redeem points during purchases with the wallet on the Hepsiburada platform. The HepsiPapel program has been instrumental in the rapid growth of Hepsipay Wallet. Hepsipay will enable peer-to-peer money transfers and will constantly explore new use cases across online and offline. I will now leave the floor to Korhan, our CFO, to run you through the financial performance in Q2.
Thank you, Murat, and hello. What inspires us in our mission of being reliable, innovative, and sincere companion in people's daily lives? In our view, this broad mission boils down to focusing on key three aspects of online shopping: selection, price, and delivery. On selection, with our compelling value proposition, we doubled our active merchant base as of June 30th compared to the same day a year ago. This is reflected in our offering to customers as almost doubling our SKUs on our platform during the same period. On pricing, we seek to provide the best value for our customers by offering competitive prices, which we have continued to uphold in Q2. On delivery, our large, fast, and scalable in-house logistics network stands out as one of the key strengths, which we have done by increasing our overall footprint across Turkey.
These key strengths have been instrumental in driving continued customer growth on our platform, as well as higher order frequency on a yearly basis. Our total number of orders grew by 38%, reaching a record 13.1 million in the second quarter. A combination of these factors has resulted in 38% GMV growth in the second quarter. This performance was achieved against an already strong second quarter of 2020 due to baseline effect of COVID-19. To normalize this effect on growth figures, we have shown here two-year compounded growth rates. For the first and second quarter of 2021, compared to the same period last year, compounded two-year growth rates were 68% and 86%, respectively, indicating a continued quarter-over-quarter momentum. It is worth mentioning that we will continue to see the baseline effect of last year on the growth figures for the upcoming two quarters as well.
Let me now walk you through our hybrid business model. Our hybrid business model offers a healthy combination of retail and marketplace. Having launched our marketplace six years ago, we have gradually increased its contribution to GMV, bringing it to 69% in the second quarter of 2021. The GMV shift to 3P is expected to have strategic advantages on our business in the long term, facilitating a wider selection, availability, and with competitive pricing. Since our launch of the marketplace, we have always regarded our merchants as our long-term business partners. With this mindset, we have focused on creating value-added services for our merchants. We empower them with our comprehensive end-to-end solutions to thrive digitally. Our set of advanced tools and services include the merchant portal with merchant store management tools and advanced data analytics.
In Q2, we upgraded our merchant portal by introducing new modules that further contributed to overall efficiency by increasing self-service actions. We also offer them advertising services through HepsiAd so that they can effectively advertise inside and outside Hepsiburada to drive their sales. We give them access to our last-mile delivery service, HepsiJet, as well as our fulfillment service, Hepsilojistik, where we can take care of storage, handling, and packing of the merchandise on their behalf. We also help them get better with e-commerce by providing comprehensive training sessions through our training portal. Last but not least, we provide them with financing options to help them in their effective working capital management. In 2020, our financing program exceeded TRY 1.3 billion in volume with an 11.4 times growth in merchant and supplier financing from 2018 to 2020.
All these value-added services have contributed to Hepsiburada shaping into one of the most attractive digital platforms for merchants to access 33 million members on our platform as of last year-end. We will continue to work towards growing our merchant base through these capabilities. Let me elaborate on our GMV and revenue growth in the second quarter. As we have stated already, our GMV growth was 38.2%, whereas our revenue grew by 5.2% in the second quarter compared to the same period 2020. Our GMV refers to the total value of orders, products sold through our platform over a given period of time, including value-added tax, without deducting returns and cancellations, including cargo income and excluding other service revenues and transaction fees charged to our merchants.
Our revenue consists of sale of goods, which is our retail model, and we refer to it as 1P, plus marketplace revenue, which is our marketplace model, and we refer to it as 3P, plus delivery service revenue and other revenues. In direct sale of goods, which is retail, we act as a principal and initially recognize revenue on a gross basis at the time of delivery of the goods to our customers. In the marketplace, revenues are recorded on a net basis, mainly consisting of marketplace commission, transaction fees, and other contractual charges to our merchants. Our revenue grew by 5.2% in Q2 2021 compared to the second quarter of last year.
This was mainly driven by a 67.2% increase in our delivery services and other revenue and a 2.3% growth in our marketplace revenue, whereas the revenue generated from sale of goods, which is retail, remained as flat, also detailed in the next slide. On the upper part of this slide, we show the dynamics and factors that have had an impact on our revenue growth in the second quarter. While our GMV grew by 38.4% in Q2 2021, our revenue growth was 5.2%, reflecting the 11 percentage point rise in the share of marketplace GMV. Please note that marketplace revenues are recognized on a net basis, i.e., representing commission and other fees, whereas the direct sale of goods, that is the retail, is recognized on a gross basis. The contribution of the electronics domain to overall GMV was around the same level as the same period last year.
However, we sold more electronics, including appliances, mobile, and technology, through marketplace in Q2 '21 than the same period of last year. We continued to widen our selection with expanding merchant base and competitive prices in the market by our strategic margin investments, as well as discounts given to our customers for temporary marketing campaigns. Accordingly, we invested in certain non-electronic categories, such as supermarket, to drive order frequency, and also invested in electronic categories to fortify our market position. Additionally, we observed higher customer demand for lower margin products across different categories, such as digital products, gadgets, and appliances, including accessories, Bluetooth devices, and robot vacuum cleaners. There is 60% increase in delivery service revenue compared to the second quarter of last year, was primarily attributable to 38% rise in number of orders, as well as higher delivery service revenue generated from third-party operations during the same period.
At the bottom part of this slide, we disclose the EBITDA as a percentage of GMV bridge between Q2 2020 and Q2 2021. EBITDA was negative TRY 189 million, compared to positive TRY 71 million in Q2 2020. This corresponds to a total 4.9 percentage point decline in Q2 2021 compared to the same period in EBITDA as a percentage of GMV, which is driven by 2.4 percentage point decrease in gross contribution margin, 1.5 percentage points rise in advertising expenses, and approximately 1 percentage point rise in other OpEx items, excluding the cost of inventory sold and depreciation and amortization. The 2.4 percentage point decline in gross contribution margin is driven by strategic margin investments, the shift in electronics GMV to 3P, and the discounts given to our customers for temporary marketing campaigns, offset by other revenue streams.
Negative 1.5 percentage point margin impact through advertising expenses was to accelerate key growth drivers in core business and also to scale new strategic assets. We consider this expense as an investment in our long-term growth while strengthening our market position. Negative 0.7 percentage point margin impact through shipping and packing expenses was mainly driven by change in some of our delivery partner mix to improve customer experience and around 23% rise in unit costs. Negative 0.4 percentage point margin impact through payroll and outsourced staff expenses was mainly due to additional around 1,200 employees over the past year, along with the impact of annual salary rise in February 2021. As a result, EBITDA as a percentage of GMV resulted as negative 3.2%, amounting to negative 189 million TL. Let's have a look at our net working capital and free cash flow generation in the next slide.
This quarter, we generated a strong operating cash flow through effective working capital management. Accordingly, net cash provided by operating activities increased by TRY 595 million, reaching TRY 749 million in Q2 2021. This increase was primarily due to increase in changing working capital through change in trade receivables of TRY 355 million, which is mainly driven by credit card receivables, change in inventories of TRY 301 million, and change in trade payables and payables to merchants by negative TRY 97 million. Our net CapEx is TRY 44 million in Q2 2021. During this period, our investments were mainly in product development across app, website, and mobile platforms as a result of our growing operations, and purchase of property and equipment mainly consist of hardware and intangible assets arising from website development costs.
As a result, our free cash flow increased to TRY 569 million as of Q2 2021 from TRY 136 million year-on-year. I will leave the floor back to Murat to share our guidance with you.
Now let's look ahead to the second half of the year. As the second half of the year began, the Turkish e-commerce market had encountered several challenges. These included the nationwide extension of the bank holiday period during the celebration of Eid al-Adha in July, and the lift-off of lockdown measures as of July 1st, both of which adversely impacted consumer behavior in online shopping. The tragic wildfires on the Mediterranean coast of Turkey, and later the devastating floods in the Black Sea region, have altered the priorities of the public agenda in early August. While these adverse circumstances impact the market, we will continue to prioritize GMV growth in the second half of 2021. We believe this to be especially important given the seasonality of our market, which favors the second half of the year.
Our key principle remains to prioritize growth to create long-term value by attracting more customers, increasing order frequency, adding more merchants, expanding our selection of catalog, maintaining price competitiveness, and scaling our new strategic assets. We are committed to invest in and delivering strong full-year GMV within TRY 28 billion-29 billion range. We end our presentation. We can now open the line for questions. Thank you for listening.
The first question is from the line of Cesar Tiron with Bank of America. Please go ahead.
Yes. Hi, good morning or good afternoon, everyone. Thanks for the call and the opportunity to get questions. I have four questions, sorry about that. The first one is on the outlook for the market in 2H. By reading the press release and also from your comments, do I understand correctly that the outlook for H2 seems to be a little bit tougher than what you expected probably one or two months ago, and that you need to invest more than expected to achieve the same GMV number? Just wanted to check if I understood that right. My second question would be on the take rate. For 2Q, can you please give us some indication on the take rate? Also help us probably understand. It looks like it dropped a little bit. Third question would be on the contribution margin comments from the press release.
Just wanted to understand better the mention of discounts that you've given to your customers for temporary marketing campaigns. If you can help with that. The last question would be on the mention from the press release that you've observed some increased demand for lower margin products. Just wanted to understand if that has reversed into Q3 and what you attribute this to. Thank you so much. Sorry for the many questions.
Thank you, Cesar, for your questions. For the first one, whether outlook looks tougher or not. While the recent trends we observed in Q2 and early Q3 are reflected on the outlook as well as the seasonality of our market, which favors the second half of the year. The Turkish market is an inflection point and this is the right time for us to prioritize our growth. That is why we raised capital and are focused on investing in and delivering long-term value creation. In terms of the take rate, our growth contribution margin declined 2.4 percentage points to 8.3% compared to the second quarter of last year, mainly due to underlying dynamics in revenue growth.
This 2.4 percentage points decline in growth contribution margin is driven by, as you said, strategic margin investments in certain categories like electronics to fortify our market position and in non-electronics to drive further frequency by our customers. Also into CRM, which we call this as temporary margin investment, and t his will be gradually reduced throughout the time. Also shifting electronics GMV into 3P, meaning marketplace. We sold more electronics from the marketplace unit and therefore this affected our growth contribution. Finally, the discounts given to our customers to widen, sorry, to continue widen our selection with expanding merchant base and competitive prices in the market by our strategic margin investments as well as discounts given to our customers for temporary marketing campaigns. In terms of lower margin products, those lower margin products are mainly gadgets, appliances, Bluetooth devices, and robot vacuum cleaners.
Also once the electronic products shift into the GMV, mostly those products consist of appliances, mobile devices, and technology devices, which has lower margin compared to non-electronics.
Well, depending on the market evolution, we expect this trend may continue in the third quarter as well. We have always been prioritizing our growth to create long-term value by attracting more customers, increasing our order frequency, and adding more merchants, expanding our selection of catalog, maintaining price competitiveness, and scaling our new strategic assets. Thank you.
Thank you.
The next question is from the line of Adisa Miriam with Morgan Stanley. Please go ahead.
Hi, everyone. Thanks for taking my questions. Just following up on the take rate. You mentioned that you've seen a shift from electronics from 1P to 3P. Just wondering what has been driving that, do you see that specifically as a permanent shift? Also just on the discounts that you also mentioned as well, how much of this was driven by any competitive pressures? Were there more competitive pressures than you anticipated at the start of the quarter? If you could just comment on the current competitive environment that you're seeing at the moment. Finally, just on the payments, I think you mentioned there that the development was ahead of expectations. If you could just give a bit more color on that would be great. Thank you.
Thank you, Miriam. For the take rates, well, we continue to widen our selection with expanding merchant base and competitive prices in the market by our strategic margin investments, as well as discounts given to our customers for campaigns. Accordingly, we invested in certain non-electronic categories, such as supermarkets, to drive our order frequency. Also invested in electronic categories to fortify our market position. Please note that we are very strong in electronics. In electronics, the biggest opportunity comes from offline. On the competitive environment, let me hand over to Murat.
Thank you, Korhan. Let me just quickly address competition, and then we take next question. I mean, let me remind you that we operate in this attractive market that has a large, young, urbanized, and tech-savvy population. We have been operating in this market along with several players for many years and proven our growth trajectory. The Turkish market is at an inflection point with a growing e-commerce penetration expected to exceed 20% within total retail by 2025. That said, roughly 90% of total retail is still offline. Hence, our largest opportunity is offline retail. We would like to capitalize on this opportunity and create long-term value by expanding our customer base, order frequency, merchant base, our selection, and maintaining our price competitiveness, and scaling our new strategic assets.
Of course, our solid operational execution, capital efficiency, robust logistics network, deep technology capabilities, household brand name, hybrid business model, and integrated ecosystem well positions us for success. Third question, if I'm not mistaken, is about Hepsipay. Hepsipay, is it correct?
Yes.
I think it's correct. Hepsipay is designed to be a companion wallet to spend, save, and mobilize money in a flexible way across online and offline. Having acquired its license in 2016, Hepsipay marked this important milestone by launching the Cüzdanım, Hepsipay wallet, as an embedded digital wallet on our platform on the 10th of June. As said, as we mentioned, the daily penetration amongst eligible audience has been faster than our expectations, yet it's too early to disclose numbers. Hepsipay Wallet enables instant returns, cancellations, and cashback. Along with Hepsipay Wallet, Hepsipay also introduced HepsiPapel program, a cashback points program that allows customers to earn, redeem points during purchases with the wallet on our platform. Hepsipay will enable peer-to-peer money transfers and will constantly explore new use case scenarios across online and offline.
Actually, in line with our Super App value proposition, we'll continue to invest and scale our strategic assets to the benefit of our customers, including Hepsipay, which is well positioned for strong long-term growth.
Got it. Great. Thank you very much.
Thank you.
The next question is from the line of Tuncay Aslan with Goldman Sachs. Please go ahead.
Hi. Thank you very much for the presentation and congratulations on the first set of results post your IPO. I have a couple of questions. First on the active user base, are you able to share some sort of granularity around the actual growth rates? As it will be important to track. Anything anecdotal would be helpful as well. I know that there were a couple of questions on the take rates, I couldn't hear clearly. My line was breaking up. The implied take rate for the second quarter is quite low. Is this a pure mix effect, or is there any change in the take rates across categories, potentially due to competitive pressures? Is that something that will imply lower take rates going forward for the rest of the year and potentially beyond that?
My next question is, what are your expectations on profitability for the rest of the year? Where do you see most of the pressure coming from? Related to that, how's the profitability profile across your new business lines, especially Hepsiexpress?
Thank you, Aslan. For the active user base, unfortunately, we do not share our active user base on a quarterly basis, but we will share the increase by the end of the year as a year-end figure. However, our active user base and frequency keeps on increasing. I can give you this guidance. On the margin investment and the take rate effect, I can say our gross contribution margin declined by 2.4 percentage points, reaching 8.3% compared to the second quarter of last year. This is mainly due to dynamics in revenue growth. There's a 2.5 percentage point decline in gross contribution margin driven by strategic margin investment and because of CRM, which is we call as temporary margin investment. Those strategic margin investments are done in electronics to fortify our market position, and in non-electronics to drive frequency to bring additional GMV for our company.
We continue widen our selection with expanding merchant base and competitive prices in the market by our strategic margin investments, as well as discounts given to our customers for temporary campaigns. Accordingly, we invested in certain categories, non-electronic and electronic categories such as supermarkets and some electronic categories. Please note that we are very strong in electronics, and in electronics, there's the biggest opportunity comes from offline. In order to capture these offline customers, we have been making on and off basis margin investments to gain additional GMV. On the third question, expectations about the profitability. The Turkish market is an inflection point, and this is the right time for us to prioritize our growth. That is why we raised capital, and we are focused on investing in and delivering long-term value creation.
As a result, our key principle remains to prioritize growth to create long-term value by attracting more customers, increasing order frequency, and adding more merchants on our platform.
The next question. Maybe I can take the next question. It was about the profitability for new businesses, right?
Yeah.
Let me remind you. At Hepsiexpress, we aim to become a mainstream grocery shopping destination. For Hepsipay, it is designed to be a companion wallet to spend, save, and mobilize money in a flexible way across online and offline. With this strategic mindset, we will certainly prioritize growth for our strategic assets. In line with our super value proposition, we will continue to invest in and scale our strategic assets to the benefit of our customers. Hepsipay and our Hepsiexpress are particularly important to us because they are well positioned for strong long-term growth.
Okay, thank you. Basically, from my understanding, these strategic margin investments, the temporary discounts, they could continue as long as you see the growth opportunity from these.
Exactly, Aslan. Exactly. If we see the growth opportunity, we can continue those campaigns and margin investments.
The key principle always will remain that we're going to increase our customer base, merchant base, frequency, selection, and that is our core principle.
Okay.
Thank you.
Going forward, from what I understand, sorry for the follow-up. You will be tracking, we will be tracking growth in GMV obviously, but we will be seeing disclosure from you on the total orders rather than a breakdown of things like active user base and the frequency. We will see the total order numbers.
That is true. By the year-end, we will be sharing our customer base increase and the frequency numbers in detail. On a quarterly basis, we don't disclose. We only give the overall growth figures.
Okay. Thank you.
Thank you.
The next question is from the line of Kate Kirhan with JP Morgan. Please go ahead.
Thank you for the presentation. Majority of my questions were asked, but I have some more. The first one is about competition. How are you planning to respond to accelerated last mile and fulfillment investments by Trendyol? I think they are now much bigger than you on the fulfillment side. How many merchants have been already on board for fulfillment services? Because you have given some sort of statistics during the IPO, and I just wonder the development here. What is the share of total orders delivered by HepsiJet? What is the progress here? You also mentioned about some share incentives to management, I think, which is now included in your payroll cost in the second quarter. Can you please give some details about this? Finally, about your working capital.
There was a big release in the second quarter, so how should we think about these developments in the second half from a cash flow perspective? Thank you.
Would you like to take?
Yeah. Let me take the first question. Maybe let me just first remind you our well-defined use of proceeds plan. As you remember, we have a very strong well-defined use of proceeds, which includes acceleration of our growth flywheel, scaling of our strategic assets, investing and scaling our operations, logistics and technology infrastructure, and of course, driving further talent. Within that context, as we discussed briefly so far, we also definitely invested and scaled our capabilities across these lines. We operate a large, fast, and scalable in-house logistics network with last mile delivery, fulfillment, and operations capabilities powered by our proprietary technology. As you remember, we mentioned, as a result of its expansion, now HepsiJet achieved presence in every city in Turkey, reaching 137 cross docks, whereas Hepsimat, our nationwide pickup and drop-off network, expanded to more than 1,500 pickup and drop-off points across the country.
As a result of its expansion, Hepsijet conducts more of retail deliveries and more of marketplace deliveries in Q2 compared to the same period of last year. Also with Hepsijet, with our logistics capabilities, we are able to offer a variety of value-added services, especially frictionless return, delivery by appointment, same-day and next-day delivery options. Also, let me remind you, at International Business Awards in 2021, we were awarded with a Gold award for our frictionless return service in the Best User Experience category. We believe our robust logistics network gives us a significant competitive edge in offering strong customer experience and will continue to do so.
Murat, thank you. Is it possible for you to share some statistics there? I really want to understand the upside in Hepsi. What is the current status on the last mile? What is share of total orders delivered by HepsiJet? How many merchants have you already onboarded for the fulfillment services to understand the potential growth?
Yes. Thank you so much again for the question. Let me tell you. HepsiJet actually, as you remember also shared in the prospectus, is in the early phase of its journey, and it keeps scaling the number of merchants getting onboarded. On the other hand, with HepsiJet, it kept increasing its contribution to retail deliveries as well as marketplace deliveries compared to the same period of last year. It keeps growing year-over-year with respect to Q2, both in 1P and 3P contribution-wise in terms of number of deliveries. Hopefully, this was helpful. The next question, Korhan.
The next question is about management incentive plan and how much we recognize in our P&L. Is it correct, (azadeh)? Yes.
Yes, Korhan Öz.
Okay.
That's correct.
Okay. In total, we have TRY 132 million recognized in our P&L as management incentive plan expense. Out of this, TRY 98 million Turkish lira is based on discounted cash payments, which is projected to be done within 2021. The second part is TRY 34 million. It's based on share-based payments, which will be made within the next 18 plus 12 plus 12 months according to our plan. In total, we recognize TRY 132, and discounted cash payments, TRY 98, share-based payments, TRY 34. This is recognized based on vesting plan disclosed in the agreements. On the working capital side, yes, our working capital will keep on improving in the second half due to the fact that our GMV will continue to grow in the second half. With a better management, we expect to improve our operating cash flow in the second half.
Okay. There shouldn't be any seasonality impact in the working capital, right? In the second half of the year. We can assume the similar type of working capital management.
There is always a seasonality in the second half, especially in the fourth quarter. Having said that, our procurement increases significantly, and we are growing significantly in the third quarter. Based on the seasonality experiences in the past, we expect a better net working capital by the end of Q4. It will improve gradually.
Thank you very much. Can I finally ask about the Hepsiexpress? You mentioned about new brands to be on board in grocery delivery. Is there any national brand here that you managed to onboard recently?
Because we are referring to Q2 results, we cannot actually disclose any future or forward-looking plans at this point. I can tell you Hepsiexpress already actually achieved over 40 brands and roughly 1,800 stores across more than 50 cities. Also, as you remember, we launched water service, water delivery service as well.
Thank you very much, Murat Emirdag.
Thank you.
Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.
Thanks, operator. I would like to recap what you have heard from us today. Our vision is to lead digitalization of commerce. Today, we are a one-stop shop for our customers' everyday needs, from products and services to groceries and payment solutions. Our solid operational execution, capital efficiency, robust logistics network, deep technology capabilities, household brand name, hybrid business model, and integrated ecosystem have positioned us as a homegrown company to emerge as the first-ever NASDAQ-listed Turkish company. We operate in an attractive market that has a large, young, urbanized, and tech-savvy population. Again, let us remind you, the Turkish market is at an inflection point, with a growing e-commerce penetration expected to exceed 20% within total retail by 2025. That said, roughly 90% of total retail is still offline, offering a large opportunity for growth, and this is the right time for us to capitalize on this opportunity.
Our key principle remains to prioritize growth to create long-term value by attracting more customers, increasing our order frequency, adding more merchants, expanding our selection of catalog, maintaining our price competitiveness, and scaling our new strategic assets. With the use of funds raised in our recent IPO and our strong balance sheet, we will continue to invest in our visions. Thank you, everyone, for your time today, and we look forward to speaking with you again next quarter.