CDON AB (CDON) Earnings Call Transcript & Summary

Thank you very much. Hello, everyone. Welcome to this very first quarterly earnings call for CDON as a separately listed company. This is a big day. It's a big moment for me personally. And I'd like to start by thanking you all for your interest in CDON and our journey. My name is Kristoffer Valiharju. I'm the CEO of CDON since a few years back. And with me in the meeting, I have our CFO, Niclas Szieger. He's also been with me during the last couple of years, where we have been working to transform a 20-year-old retailer into a marketplace and a tech provider. For me personally throughout my career, it's always been about how to make the meeting between a buyer and the seller as smooth and as convenient as possible. Why is this important? Well, it's important because it generates value for everyone involved. And the buyer will get his or her problem solved, and the seller will sell more, and everyone is happy. And I joined CDON in 2017. That's a little bit over 3 years ago. And I was amazed because I saw a rare opportunity to actually go and build a company that could improve this meeting between the buyer and the seller. I joined CDON in an age where there was available technology and the right competency to go and do this. In 2017, CDON was just a shell. It wasn't really much to me because it was retail. It was a business model that I've tried for 20 years, and I've failed so many times. But I also saw that there were strong assets in the company that could be used to create this vision of the perfect meeting. We don't have a very strong and known brand since many years in all of our markets, may well be that we were known for being CD records online, but it was very well known in every market that we operate. We also had a huge amount of in-house competency about e-commerce, and I was actually shocked about this fact. That was one of the first things I talked about with my friends after joining CDON. I came from Dustin, which is a very strong Nordic e-tailer. But when I came to CDON, pretty much everyone knew a lot about e-commerce, and that impressed me. We also had a lot of active customers in attractive categories. We had existing product sales volumes and those gave us the insights on customer behavior and product mix strength. And we had this fantastic 4-letter domain that have been worked on for 20 years, CDON. And those short domains are not easy to get these days. What we didn't have back then was a profitable business model. We didn't have the sufficient technological foundation. It was an old platform from 2008 built for retail. We didn't have the right culture. It was very hierarchic. Few people took many of the decisions. Many people made work dictated by a few people. And we didn't have the optimal ways of working. So this is where we started. This is what we started to change. If we fast forward for 3 years, we have accomplished a lot. We've turned the business model. We have improved the financials. We changed much of the technology. And we have improved our culture and ways of working. But now the real work begins. If you move to the next slide, please, that is Slide 3. Today, in CDON, we have over 1,500 merchants selling their assortments on our platform. The majority of these retailers or merchants are local Nordic retailers. Some are smaller, some are bigger and they come to us for different reasons and we're different. To give you a couple of examples, we have a partnership with a major Danish retailer for ComputerSalg. They needed support in their presence and reach in Swedish market. They are very, very strong in Denmark. The [indiscernible] broader into the Swedish market. Another example is Inet. I've known them for years. I worked in IT. They're very strong in IT, specifically surrounding gaming. But when they joined our platform, they didn't need to reach new geographical market. They just wanted to reach new customer groups outside of the specific gaming niche that's in there for market. So we have different merchants with different needs and our job is to serve these merchants the best we can with our technology and our people. They can [indiscernible] in this. And when we develop our future offering of technology commercially, we do this in collaboration with our merchants. So if the [indiscernible]. Moving forward, I expect [ higher ] inflow of European merchants as we're looking to more partnerships with different European marketplace, a few are wider and more relevant [indiscernible]. And the reason for this is because we want to be more relevant on this marketplace. If we move to the customer side, on next slide, which is Slide 4. During this year, we've seen strong growth in number of active customers. And for us, active customers are customers that have made a purchase with CDON in the last 12 months. And right now, more than 10% of the Nordic population of buying age have made a purchase with CDON during this year. This is something that makes me [indiscernible] We also saw a number of merchants joining our platform. This indicates to me that we have a compelling merchant book and that we [indiscernible]. And these customers, they come to CDON after we [indiscernible] from what we need to focus in Europe [indiscernible]. If they can compare prices on the products from different merchants, they can get an e-mail on something missing [indiscernible] They can review price development over time, and they can keep track of what to buy by looking at rates [indiscernible] and also lead their own [indiscernible]. All these functions are actually functions we have added since the last time we've talked about it in October. And here is an area where we see great opportunity for further developing our own [indiscernible]. If we move to the next slide, which is Slide 5. As I mentioned, we have some number of new customers joining our platform, some number of merchants joining our platform. And these merchants and our customers invest in commerce, as they should, which grew our gross merchandise value in the platform by 60% in Q4. And this, in turn, generated an increase in adjusted EBIT by 21% to SEK 28 million. This year has been a year of strong transformation for us at CDON. The biggest event for us was obviously the launch of the technical platform that I mentioned before. We launched it in the end of October, yes, that's right before peak season. I did ask the question whether we're viable, but the trick with this new platform is to [indiscernible] as a maximum amount of data. And during the peak season, our data amount is high. The platform which we developed ourselves is specifically for our marketplace rather than the old legacy platform we had since 2008 that was built for a retail model. And this new platform is very scalable, it's highly automated and it's the right technical foundation for us to grow on in the coming years. That's why we prioritized to put this in during the peak season. When we look back at Q4 and 2020, I am so proud of the team because we are putting a very, very strong year for CDON [indiscernible] If we move to the next slide, Slide #6. We talked about marketplace when I joined CDON in 2017. It was on the PowerPoint. We didn't really go for it. During the last couple of years, we really went for it. And we have established ourselves as the leading Nordic marketplace at scale. And during the last couple of years, it went much faster than many anticipated, but we're super determined because we see a great opportunity here. If you're looking at trends in -- global trends or even European trends, marketplaces account for over 50% of the total e-commerce revenue globally and has a much higher penetration in more mature markets. And we saw with this business model and its virtually undisrupted market, we could make a real change and take a leadership position. We're building this on 20 years of knowledge and mistakes, and we built this on 20 years of knowing our market. We are willing to tailor our solutions to meet the local needs, and we take the merchant needs as well as the consumer needs seriously because we want to take the experience for Nordic consumers and merchants to the next level. If we move to Slide 7, I'd like to talk a little bit about market conditions. The Nordic market is a promising one, but it's a tricky one to operate. There are not that many people, 28 million. And those 28 million are spread across 4 nationalities and cultures, 4 different legislations. It's a logistical nightmare. You have mountains in Norway, you have rivers, you have seas, it's 4 distances. But then again, we are the fifth largest economy in the EU, and it's a perfect market for e-commerce because the Internet penetration is over 90%. We have some of the richest people in the world, and we are known to be fast adopters of new trends. Despite all of this, the online penetration -- online sales penetration is actually lagging behind many other European markets. And when it comes to market-based penetration, we're even more far behind. In my belief, this will change over the years to come as it has done in numerous other mature markets. And we, at CDON, would like to take a prominent position in this change. If we move to Slide 8, if there's one word to summarize 2020 for Nordic retail, it's got to be change. I think everyone can feel it. COVID-19 pushed a massive change on our retail industry. And it demanded agility at an unparalleled level. So the quickest ones to adopt to new conditions were the ones that made it the best. It was a rapid change of sectors, travel died instantly and some sectors boomed, like do it yourself and near home product. Everyone started to look after their costs, decorating their homes, building that -- decking that they've been dreaming on for the last couple of years. And all of a sudden, they had money to do it because no one could travel. But all of a sudden, e-commerce wasn't just a convenience, it was a necessity. Because of the social distancing, you had to buy online, which means that new customer groups were forced to go online. So we could see in our data that elder groups were picking up. Because all of a sudden, they had to adopt this new technology and this new way of shopping. Another major impact for us during the year was also the launch of amazon.se. That's been a big unknown, rumored since 2018. And finally, they entered to show their true nature. All of a sudden, every single retailer in the Nordics had to ask themselves the question, should marketplaces be part of my go-to-market strategy? The other question that they must have asked themselves was how do I become more digitally capable fast enough? And what should my role be in this new environment? We have a purpose, and it became more important than ever during this year in trying to help the customers and merchants dealing with this change by utilizing our position, technology and experience. If you look at the marketplace flywheel on this image, it is an elegant business model because it's asset light, it's capital efficient and it can handle scalable growth with less risk, much better than traditional retail. We know it because we've tried it. We've tried both. But it's also able to generate true customer and merchant value if it's executed correctly. Instead of purchases managing aging stock, administrational staff that handles product content and pricing, we can now employ some of the best developers in the market, and we do. And we put that attention to helping our merchants and customers instead. We have large volume, more volume than our merchant, so we can drive traffic to them at competitive costs compared to other channels they use. And we have many products. We have millions of products, 10x the assortment of the local retailers. And with so many different products and offers in one place, we can serve the customers more efficiently, and we can be more accurate in doing this because we get all the insights and the data from all those products and all those customers. With that said, there's a lot to be done. This year, it's going to be a specific focus on customer experience because, as I said before, it's a new platform. We still have a lot to do to kind of trim and optimize it, but the focus will be on the consumer experience on the platform. We also need to work with things related to that, like operational improvements, how do we obtain structure, utilize available data in a more efficient way. The technical foundation sure is established that we need to trim and optimize. And when it comes to added value creation, this flywheel or business model, it has some interesting avenues left to explore. We're looking at advertising. We want to build more merchants' insights to help them sell even more, and we want to look at further integrations to support our merchants because we know that this is an area where they're struggling right now. These services are requested by our merchants and these services they're willing to pay for. We've also the benefit of being fairly late in the game. We can observe others, larger players, more mature players than us and see what they have learned and pick the smartest options. We can avoid the pitfalls, and we can invent solutions that not only solves the problem but solves it smarter than the current solutions in the market. So taking the unimaginable and making it common, that's where I would like us to be as an organization. Those are my words. I'd like to hand over now to Niclas Szieger, our CFO, to talk a little bit about the numbers that we've generated.

Thank you, Kristoffer. Starting on Slide 10. On this slide, we can see the transformation that CDON has done in the past year. Not only have we built the marketplace with third-party sales that have grown very, very fast, we have also successfully phased out our CDON retail business. Looking at the quarter, we can see a continued strong growth -- GMV growth, from CDON Marketplace, amounting to 60% or totaled SEK 641 million. CDON retail further accelerated outphasing during the quarter and declined GMV with 48%. Moving to Slide 11. The strong GMV growth of 60% from CDON Marketplace resulted in a net sales of SEK 75 million, an increase of 41% and our gross profit that increased with 45%. The commission from merchants grew nicely with 76%. However, lower advertising revenue is the main reason for gross profit not growing as fast as GMV. Full year GMV growth from third-party sellers amounted to 86%. This growth is mainly driven by successful integration and onboarding of new merchants during, I would say, the second half of 2019 and 2020 and, of course, favorable market conditions. CDON Retail declined with 50% net sales, but we saw an increase in gross margin as the remaining of the business have a higher margin structure. As a result of the rapid change in business model, total net sales declined by 38% in the quarter and 28% for the full year. This, of course, also impact our gross margin as we see increasing very high-margin, third-party volumes, and we reduced the lower margin retail business. This resulted in a gross margin that increased with 15 percentage points and amounted to 35%. We are very pleased to see a continued positive profitability development. We now have 11 quarters in a row with improved profitability compared to the same quarter the year before in terms of EBITDA. Looking at the quarter, EBITDA grew with 21%, amounting to SEK 28 million. And for full year 2020, adjusted EBITDA grew 126% to SEK 34 million. The costs adjusted for are related to our NASDAQ listing and incentive program from -- to management, which in total amounted to SEK 10.1 million. Adjusted EBIT was SEK 23 million in the quarter. And for full year, EBIT was SEK 4 million, which includes a write-down of intangible assets of approximately SEK 7 million during Q1 2020. If we move on to Slide #12, and we'll look at some of the drivers of our business. We saw a continued high inflow of visits during the quarter, which is following the same pattern that we've seen throughout the year. Lower conversion rates resulted in a 16% growth of number of orders. During the quarter, we also saw a decline in average order value, which is mainly related to lack of supply within certain high-value item categories during Christmas period. We are very pleased to continue to see high inflow of new customers to our platform. By the end of the quarter, we had 2.25 million active customers, which is a net increase of approximately 500,000. Moving on to the next slide, the cash flow and the balance sheet. As a result of retail being phased out, we continued to decrease our inventory. And for end of December, it amounted to SEK 25 million, which is a decrease of 76% versus last year. The cash flow from operations during the seasonally strong quarter amounted to SEK 130 million, which is mainly driven by working capital. And for full year, cash flow from operations amounted to SEK 30 million. In the year, we continued to invest in our platform and total investments amounted to SEK 23 million compared to SEK 29 million in 2019. And this results in a total fixed assets of SEK 62 million, which of all -- almost all is related to intangibles and our technology. We had an ending cash balance of SEK 170 million, which we believe gives us the resources to continue to invest in profitable growth. We are in a solid financial position. We are very asset light, which reduces the risk and capital needed for our day-to-day business. So with that, I hand over back to you, Kristoffer.

Thanks. We're now at the final slide, Slide 14, and where are we now? Well, first of all, CDON is the leading Nordic marketplaces in the Nordic. We indeed are really proud to do that. We're also leading in a very favorable market. It's been super favorable during 2020, but we think it's going to be favorable going forward as well because the low penetration of marketplaces and that trend is picking up because the Internet penetration, the online sales penetration is still increasing. So we're really positive about that. We see strong demand from our merchants. We see strong demand from our customers for better solution. And we feel that with our technological platform in place, we can go and execute on that and deliver a stellar customer and merchant experience. As mentioned, we will focus on the customer experience and with customers, I mean both consumers and merchants. We're going to continue to grow our assortment in order to become more relevant for the consumers, but also because it drives growth. And we will do this with a lot of new merchants, but also with a lot of new partnerships. And we will go and strengthen our operations and also add new services relevant for our merchants. When it comes to operations, we still have room to improve on marketing efficiency, we have room to improve on way we work with data and we have room to improve in the way of operating our company. When it comes to new services, I'm super interested about the integration, I'm super interested regarding insights that we can help our merchants with and I'm very positive towards the opportunities around advertising. We had to suspend advertising for a short while during the platform change, which impacted us slightly, but we see great opportunity in getting back on that track with much more advanced solutions and driving further opportunity in this area. With that said, that's all from us. I hope you enjoyed listening to us, and I hope you enjoyed understanding a little bit more about CDON. Now we would like to open up for questions from the audience.

[Operator Instructions] Our first question is from Alan Whiting (sic) [ Adam Wyden ].

This is Adam Wyden. I don't know if I got my name right, but a terrific quarter, guys, really, really impressive and really like for me being an American investor of getting kind of the story and how you're looking at the business, think you guys are looking at it exactly the right way. And we've had terrific experience in investing in tech turnarounds and it looks like you guys are well into it. So just kind of qualitatively, as Americans, we don't -- we're not consumers of CDON and, obviously, all we have to rely on is kind of stuff we read on Twitter and stuff that we talk about with people. I mean there's this perception that CDON is this old company that sells CDs. It was public. It was not very successful, in merging this holding company spun it out. How do you feel -- how do you think about changing the perception locally such that millennials and younger people start consuming it and they know that more of the 3P marketplace as opposed to like a book reseller? I mean Domino's did an interesting thing several years ago, and they basically came out and said, look, our pizza was c***, so we've invested enormously in technology, similar to CDON. They've developed their own in-house tech platform, which is best-in-class. They improved the quality of the food and now Domino's is like the fastest-growing franchise. I mean how do you think about kind of coming out and saying, hey, this is what we were, this is what we are now and kind of doing a new brand like from a marketing perception point because there's this flywheel, right? Like when people understand what it is and grow sales, they have a good customer experience, they keep going and the thing goes. I mean how do you think about changing that perception locally about what new CDON is?

Well, first of all, I think that your example regarding Domino's is a very good example because they approached it the way that I'd like to approach it, which means that basically, first of all, I need to lay the foundation. I need to have the foundation in place in order to be delivering a great customer experience. That is exactly what we have done. That is exactly why we have invested in a new platform that is built around being in marketplace rather than trying to kind of put lipstick on an old platform that was built for retail. But that is the first step. The second step is actually to kind of do all the good stuff that you can do when you have the foundation in place. That is improving the customer journey, improving the features needed from customers of today, listening to your customers, analyzing your customers and understanding what exactly are they missing and what exactly are they loving with the current experience of CDON and then build on that and go and have something that is above market. On top of that, you need to, in parallel, educate the market and the consumers regarding what are the benefits of what we're doing right now. But I don't want to just do education, I want to make sure that if we tell a customer, come to CDON, it's a great experience, it has to be a great experience. I hope that answers your question, but that is...

Yes, that was -- that's wonderful. I mean, look, there's a wonderful book that we like and for you to read and maybe others to read, which is basically about Vernon Hill and Vernon Hill's journey at Commerce Bank, and he sold it to TD Banking. Commerce Bank is -- banking is a commodity business, right? Everyone has money. Anyone can buy products. What basically Vernon preaches was if we're open 24/7 and you have dog treats and you have the cash machines and all the stuff, effectively, you're creating fans, not customers, right? You're creating people that love your products, right? And if people love the product, if they love the experience, you can make something commoditized, have a very, very large moat. And I think you have a very large moat to begin with. So I totally get what you're talking about. I think you guys are doing wonderful things. I'm very happy to be a 7% shareholder in the company. We followed many marketplace businesses, Mercado Libre, Sea. And once you kind of get that tailwind and people -- I mean the flywheel is crazy and so for you guys to be able to do this so early and profitably, it's super interesting. So let me keep going for a minute. So if I just kind of think about where this company can be in the intermediate term, right now, you did SEK 2.4 billion of GMV. If your sales growth is effectively constant in 2021, you're looking at something that's going to be close to SEK 4 billion of GMV. Today, you trade at a fraction of that. You trade at like 0.64x GMV, just kind of back-of-the-envelope math. And most marketplace businesses that are not even profitable and they have sales growth a fraction of what you have trade at 3x or 4x, 5x GMV. I mean in our mind, right, you guys can grow much faster if you guys were to burn capital, but you don't have that cost of capital. What do you think the process is to kind of getting your valuation in line with the peer group such that you have a cost of capital that allows you to invest for growth? I mean if you guys -- I mean you guys could do all types of converts. I mean software companies in the United States do all types of converts. I mean if you were able to get your cost of capital in line with your peer group, we're looking at a stock that's several multiples higher than what it's trading at now. I mean how do you think about that valuation convergence and your valuation relative to your peers?

It's very hard for me to comment on valuation. I'm super focused on where we are, and we're super interested in listening to your input. Regarding how to invest going forward, I can't tell you which levels we're going to be at. I can tell you that we have invested in our technology in the last couple of years. We have invested in building the right organization to become a marketplace and many other things. And we will continue to invest because we will not give up. We want to truly revolutionize Nordic e-commerce with something that is up and beyond where we are. Where will this lead in terms of market growth, et cetera, that's very hard to say, but we should be better than market, I can tell you that. So if the market is growing X, we need to grow X-plus, for sure. Capitalization and all that, let's see how this plays out.

That's wonderful. Can we talk a little bit about take rate? I mean I know you guys slowed down advertising, but if we look at 3P marketplaces, I think one of the things you mentioned in your comments is that you're able to observe successful 3P. And you have men to work them [indiscernible] The -- I mean all of these companies have take rates probably approximating 15%. I mean, obviously, you want to deliver value to your merchants and customers, but, I mean, how do you think about share of wallet expanding in the near term as it relates to take rate and, obviously, your advertising platform as you ramp it back up?

Today -- first of all, today, our take rate is mainly compromised of the actual marketplace commission. So advertising and anything else would be added on top of that, but there's room for improvement.

There's lots of room on take rates for sure.

There's a lot of room for improvement.

Yes. Perfect. Perfect. I mean last question, then I'll get back into the queue. So obviously, as an investor, when you're kind of thinking about a steady-state, you're looking at TAM, right, and what the TAM is and what your penetration is. I mean in your mind, is there any reason why CDON can't get over SEK 10 billion of GMV? I mean we've talked -- we've spoken to many former employees and people in Sweden. They basically laughed at us when we say SEK 10 billion of GMV. They're like, we can be much, much bigger than that. I mean how do you think about the total addressable market in kind of Swedish kroner GMV terms? And how do you think about kind of getting there? And -- I mean, obviously, from a marketplace perspective, you don't have the supply chain and logistics necessarily underneath it. Now in Sweden, you probably can do that stuff to get closer to the customer, but how do you think about kind of broader European penetration beyond just the Nordics once you kind of have your sea legs under you?

Let me first start off saying that I love your ambition because I hear that you're so ambitious, and I am ambitious as well. But I'm also very occupied of taking it in the right steps, building something that is solid and that is sustainable. So -- I'm a carpenter originally. When someone comes to me and say, I'm going to build the nicest house ever, you need to know how to build. Otherwise, it's just the dream. We are good at building, and we have started building now. But keep in mind that despite the fact that we're over 20 years at the company, we're only a few years at the marketplace. So this is really early days, and we have so much left to be done. Right now, the focus will be on improving the customer experience, to take care of our customers a little bit more. We're going to continue to expand our assortment to be more relevant, and we have a lot of operational and commercial avenues left to explore. So that takes us to 10, to something else, we will see. But let us work on this and we'll see where we get.

I mean I guess from our perspective, the Nordic total e-commerce spend is $1 trillion, right? I mean if you think about Amazon, Amazon got into grocery. I mean $1 trillion in Nordics, not including beyond Europe, I mean it's -- we got a lot of money to work with. So -- I mean, look, I love your ambitious -- ambitiousness. I see you're on LinkedIn, many of the guys are young. You've got great shareholders and right ventures. Look, I'm all about innovation and energy and constantly evolving the customer experience. And so look, this is music to my ears. And I look forward to building our position from here.

Thank you very much for the confidence in us.

Our next question is from Brad Hathaway of Far View Capital Management.

I just had a couple of questions I was curious about. First off, you kind of mentioned -- you talked a little bit about this, but I'd love to hear more about some of the, I guess, the headwinds that the technology transition created in the business in the fourth quarter as well as also, I guess, some of the headwinds you saw from lack of supply in the fourth quarter?

Well, first of all, -- I mean -- I don't know if you've changed the platform, but a platform change is always -- it's always hard to anticipate exactly what's going to happen. But during the -- we launched a new platform in the end of October, and the new platform is fully automated. It's automated on personalization and recommendations and many things like that. So just getting everything trimmed in, in the beginning has been a lot of work for us. So we are making real progress here, but sometimes it's very hard to anticipate exactly what's going to happen, and that's the situation we've been in. Not to say that it's negative because I don't think so. But I think it's been a good period for us because we could pour so much data into that, as I mentioned. The more data we feed it with, the better it works. If we're looking at supply of products, it's been a pressurized market for many. Not everything has been available due to the pandemic. So some of the supply in Asia hasn't been available. And maybe those allocations of supply have been given to more major markets than the Nordics. Some players were able to absorb more early on whereas some players weren't. But this has affected many, including us.

Okay. Great. And you spoke a lot, I guess, about your -- kind of the opportunity you see ahead of you. I mean I'd just love to hear about some of, I guess, the lowest hanging fruit you see in terms of improving the platform so you can kind of delight the consumer and also be a really strong partner for the merchants.

Yes. We're working on a lot of things here. But I mean one of the things that we need to get better is the data structure. We need to improve on the data structure. The way we absorb data from our merchant, structure that data and use that data to create relevance in the platform. So that's an area that we're going to go and work with. Another area that we need to work with, which still remains is the whole checkout flows. We have a checkout flow that is very much the same checkout flow that we had in the old platform. And now we need to go and work on that checkout flow to optimize it because we can see that it will be a great benefit for us and for the customer experience. That is things like delivery options. Today, we offer very few delivery options, but there are actually more delivery options available behind the curtain, but those are not reflected on the platform. So being able to offer, for instance, last mile deliveries and things like that are super important for our customers. And we do deliver with last mile today, but it's not visible on the platform. So things like that are super important for us to kind of get done during this year.

Got it. Great. I love the focus on kind of all the things you improve. That's very helpful. In terms of penetration, I guess you have 1,500 merchants currently and, if my memory serves, there's something like 60,000 in Sweden alone. So obviously, your penetration among merchants is incredibly low, and that partially explains why marketplaces have such a small share of the total e-commerce GMV. So I guess, can you talk a little bit about what you're seeing from the merchant community in terms of their awareness in marketplaces and their interest and potential willingness to move over to a marketplace solution?

Well, first of all, the overall awareness and interest has increased. I think it's partially driven by the fact that Amazon entered, and all of a sudden, everyone had to start thinking about marketplace that was very hard for us to drive on our own. So we've got a good help from Amazon on that. But secondly, also, we see that our work on PR branding and kind of repositioning of CDON has led to some interest in the market. So we've seen greater inflow from Nordic retailers, and we've also seen greater inflow and interest from merchants and retailers outside of the Nordics. And we still have a lot to do here. We still have a lot to do here. There's a lot of aggregation happening in the market through different types of partners, other marketplaces, et cetera. And so -- we're early stages, I would say.

Got it. And then final question, and then I'll cede. In terms of -- so obviously, you mentioned Amazon, I mean, everyone is worried about Amazon. But in terms of the rest of the competitive environment, I mean do you see other players do a competing 3P marketplace in the Nordics?

I think that the overall interest and awareness for marketplace is that the business model will increase. And I think that more and more players would look into this to see if they can get something going. We've seen this during the last couple of years, and it will probably continue. With that said, I don't necessarily see these other marketplaces or players using the marketplace business model at competitors. I see them as potential collaborators with us as well because, ultimately, in the end, if we can collaborate to serve the customers better or more efficiently, that's something we're interested in. And so yes.

Our next question is from [ David Reid ] of Lizard Investors.

Can you just talk a little bit about the 3P GMV slowdown in the last quarter -- in the fourth quarter versus triple digits in the previous 3? I'm just kind of curious how much is it driven by sort of the slow Christmas or sort of the new launch in your platform and launching of -- reentering of the Amazon? Can you just talk a little bit about that? Did it surprise you of seeing 60% year-on-year or is there some external factors that kind of impacted?

We got some numbers on the market growth yesterday, and it seems like the market overall is growing something around 30% this year. So doing 60%, I think that's a fantastic result. We're beating the market by 2x or something. For me, obviously, as we mentioned before with Brad, the technical platform has surely impacted some. The lack of supply in certain areas of some goods has maybe impacted some. I can't relate much of this to anything regarding Amazon. I don't have any indications on that. So that one, I can't comment on. But overall, we're really happy about Q4. We're really happy about 60%. And keep in mind that the growth numbers, there are much larger volumes. We had tremendous growth in the year before in Q4 in the marketplace. And now we're leading larger volumes when we talk about growth here. So for me, this is a fantastic result.

Okay. Maybe just going back on, on the launch of your new platform, like did you guys see the impact? Because obviously, you've said this in the past that you're able to track every transaction down to the very, very -- every step of the way, right? Just would you say if you didn't relaunch the new platform, would have been -- would you -- like did it impact 20 points, 15 points? I'm just kind of curious like how big -- it seems rather dramatic, right, especially even versus some of the other peers you've seen in online space, in general, like just the delta on a sequential seemed significant.

It's very hard for me to comment on specifics. I mean our ambition is to outgrow the market, and we've done that throughout the entire year. We did that even in Q4 on higher volume. So I think for me, it's about continuing to developing our offer, continuing to develop the consumer experience on the platform and the merchant experience on the platform. And we took a bet and launched a new platform that is required in order for us to grow going forward. Did that impact that OpEx or why? For me, it doesn't matter. I think that it's the right choice and we need to go for this.

Understand. Maybe talk a little bit about since you've launched the platform, so maybe how does the -- so far the month of, let's say, January or February or even maybe December, how are they comparing on a year-on-year basis on a 3P side versus the previous quarters prior to relaunching the platform? Have they normalized already? Have you seen that coming back? So at least you have a sense of that, oh, okay, it did really impact you now that the growth is coming back?

Well, I can say that I don't -- we're going to continue to outgrow the market, and we're going to continue to outgrow the market in 2021 as well. Do I expect the same level of growth as we've seen in 2020 over 100%? No, I don't think so because we're growing in larger volumes.

Okay. And just on the gross margin for the 3P GMV side, terrific, I would say, improvement on the gross margin side. Can you just talk a little bit about specifics in terms of -- obviously, it's a very high [indiscernible] gross margin. What are the tricks and takes and puts, like what drove the 1 point improvement again? What about some of the initiatives you talked about previously, like advertising, et cetera? How is this -- were the specific drivers behind it?

Could you -- sorry...

On 3P.

Thanks for the question. Just -- can you rephrase the question regarding gross margin?

Yes. The gross margin on the 3P GMV improved by, I think, up over 1 point year-on-year. So can you just talk a little bit about the drivers for this quarter?

Yes. I mean, for this quarter, I mean, as I mentioned, we had a higher commission from sellers compared to previous quarters. We did also, in Q4, started with monthly fees from our merchants. So I would say that is the main driver for that.

Okay. Have you -- maybe talk a little bit about the unbundling it there? Maybe I don't want to quote the word unbundling with the take rate, but if you look at obviously how Amazon have done it or how some of the other players have done it. They just started out with [indiscernible] generic and then they unbundled over the years. Just the opportunity to unbundle here. I mean, you can probably take pricing up, right, on a base level as you introduce more other services, like just the opportunity on the overall blended take rate on the 3P side, what's the opportunity here? And can you give us some sort of sense on will it be for a seller if they're taking advertising versus not taking advertising? Just give a sense like what's the opportunity as you're kind of introducing more products for the sellers, offering more -- better services, like how that will increase the take rate coming to you?

Well, first of all, I think that we're on the start of the journey here. As mentioned before, the take rate is mainly marketplace commission right now, and that is kind of a success fee if you like. Having said that, we need to add more services. We need to add more things that we can offer the merchants that they're willing to pay for. But being specific on that development is too soon because we're still investigating some of it and some of it were further. And we see great opportunity in this because there are services like advertising that is required. There are services like further integrational support that we can offer. I think that the merchants are willing to understand more about what's going on in the platform and in the market in general. So I think we have an opportunity to go and work with that. Then exactly how that's going to pan out, that's very -- it's very early days. It's very hard to say. And we're focusing on this, we're investigating this and we're looking at ways of improving this.

Okay. And maybe...

And you're right in the way we -- you're right in mentioning the way we disclosed it today it summed up. You probably saw in the report what is included. But I mean if we see that there is value requiring to split it up, to be more specific, we will more surely do so, but that is a decision we will take as we go.

Sure. Just touching on just the cash flow for the year and maybe even for the quarter. Obviously, working capital continues to be terrific. But just maybe comment a little bit about, obviously, the working capital improvement wasn't as significant as previously. Can you just talk about what happened on the payable side? Was -- obviously, it was a significant outflow for the full year. How much was it even impacted by maybe the spin-off or something like that? Can you just talk a little bit about that?

Absolutely. I mean, the spin-off itself did not really affect there. On the payable side, we have -- I mean the retail business, those payables are decreasing. But as we are increasing the marketplace GMV, the debt to our merchants is increasing. So that is the driver there on the debt side.

Because I'm just looking at -- I'm looking at the cash flow statement. The operating liabilities was down significantly, right? Was this driven by, maybe you guys pushed that pretty hard the year before creating difficult comps? So the specific -- the delta seems quite significant. I'm just kind of curious what that is.

Yes. I mean the reason -- I mean, last year, we had a much larger retail business. So going out of the year from peak season, the payables related to the retail business was, of course, a lot higher, and that is the main reason.

Okay. Okay. And -- that's terrific. And maybe just talk about going forward in terms of the CapEx, obviously, further building on the platform. Are you guys doing anything on the fulfillment side or is this going to be sort of continuously sort of asset light? What are you guys doing in terms of supply chain warehouse logistics and et cetera, to sort of stimulate more sellers coming to the platform or making it easier for them? I'm just kind of curious, like CapEx, obviously, down again this year. Just kind of thoughts on that in terms of what are you guys spending? And what more could you spend to really drive or even accelerate drive growth for 3P business?

Well, first of all, as I said, for us, it's important to build solutions and capacities that are needed by our customers. And if we take the merchant time, we have engaged in new collaborations during this year and the year before. One of those collaborations was a collaboration with the French marketplace called Cdiscount where we operate together. They have a very strong assortment, very strong pricing, super relevant for the Nordic consumers. The problem is that they're in France. That's pretty far away, which means that they don't have the ability with next-day delivery, which would be kind of the standard in the Nordics, right? So that kind of forms the need for some kind of fulfillment offering towards them. And we have other merchants that are requesting similar solutions but with different needs. So this is something we are investigating right now to see how can we put together some kind of fulfillment offer to improve the customer experience on the delivery side with these partners that doesn't have the capability themselves. So this is definitely an area that we're looking into. Are we going to go and build our own supply chain? No, I don't think so. I don't think you're going to see CDON [indiscernible] going on the street anytime soon. So we're looking at partnerships where we can kind of partner up with some of the leading actors in the market and create the value proposition together that we can offer to the consumers and to the merchant.

Okay. Just maybe -- just one last question from my end on the Amazon situation, the launch because I was seeing some more like Amazon launch. Actually, it could have an impact. Maybe just talk about why aren't you seeing any impact from Amazon or maybe even from your sellers because it's not -- you don't have a millions of sellers, right? Because it's not -- you don't have -- no evidence of shell is just a small market. It's only thousands of number of sellers. Just kind of curious like why aren't you seeing any impact at all? Or is there any product category where you might have seen an impact? Is there any -- or anything that you can talk about regarding the impact of Amazon other than you don't feel like there is any.

I mean Amazon are -- they're a fantastic company. When they go for something, they really go for something, and I admire them tremendously. They had a scale-out model. So they're pretty much scaling what they have. That's the way they operate or we have been operating up until now. That means that they have -- they've launched in Sweden, but mainly with kind of German assortment and German product, I can't say whether that's going to be compelling or not to the consumers in the Nordic. And I'm sure they will build a value proposition over time. But I mean, if you take it, we have a strong local assortment at hand. That helps us a lot. We also have a very kind of trusted brand. We're in times of turmoil right now. And when it's turmoiling, you go to the people that you trust. And yes, CDON isn't the perfect brand. We don't have the customers that doesn't understand exactly what we're doing right now, and we have so many flaws in the way we operate. But still, they know CDON since 20 years back, and that's worth something. We are focusing on our platform development now to improve the customer experience. And we do that, and we listen to our customers. We have these 20 years of experience on what the Nordic customers want. So I think those are kind of the strongholds that we use in order to mitigate any competition from Amazon. If you then go to the kind of merchant side of things, it was very hard to anticipate how they would attack this. What I'm hearing is that their penetration isn't that high yet. And for us, we don't really care about that because we want to make sure that we're easier than Amazon to work with. We know for a fact that we're cheaper. And one of the things that the merchants really value with CDON in the Nordics is that we don't compete with them in their categories. We don't sell our own 1P stuff anymore. That's why you see it so rapidly declining the retail side of CDON because we want to truly be there for the merchants, right? And we've got an assortment. It's going to be something that the Nordic customers are going to value.

What are the things that you guys are -- if we speak to, let's say, like a couple of hundred of your merchants, what are the things that you guys have done to make it so that distinctively or cheaper or easier, I mean it's cheaper take rate, but how much is it easier for you guys to work with the sellers? Like how visibly easy or convenient for you guys from the seller's perspective?

I'm not sure if I understand the question.

I'm just saying what are the options that you're offering to the sellers where it makes them much easier to work with CDON than, say, Amazon?

Okay. Well, if you take the [indiscernible] if you look at the way we integrate -- the way you integrate, if you try to kind of put your products on Amazon or you try to put your product on CDON, you will find that the integration is easier. For instance, we launched a technology which we call [ Insta ]. It's a scraper. But basically, the only thing we need from the merchant is that they send us their URL and say they www.myhomepage.se. Then we will put into the call their page, we will call in their content, we will call in all their products and their stock information and all their pricing and everything, we will put that into our interface. But the only thing they need to do is to go in, validate whether it looks okay and then push publish. That means that a merchant can join CDON on Thursday and start selling on Friday. So we try to be nice. That's really what we're trying to do. And looking at our API, they're super simple. We've talked to some of the other marketplaces in Europe, and they said, wow, you guys have the easiest integration we've seen. That's amazing. So we've put a lot of price on making it easy. And when it comes to pricing, we didn't start off with kind of a global model or building in Germany or something. We looked at what are the market dynamics in the Nordics and what is the appropriate take rate per category in order for us to be relevant in order for the merchant to survive profitability-wise, and then we've built our entire model around that.

Next question is from Nick Fhärm of SEB Equities.