Companhia Brasileira De Distribuicao (PCAR3) Earnings Call Transcript & Summary

Hello, everyone. Good morning. For those of you who do not know me, I'm Isabela Cadenassi, RI Director. First and foremost, I'd like to thank you all for joining us this morning. Our goal is to discuss the strategies that have guided the digital transformation of our company. Our agenda has 2 parts: in the first part, we will have a presentation by Jorge Faiçal, Multivarejo's CEO, followed by other executives from our digital team; in the second part, we will open for questions. In order to participate, enter your question using the Q&A icon on the left-hand side of your screen. I wish you all a very fruitful event. And now I'd like to turn it over to Faiçal.

Good morning. Good morning, everyone. I believe my mic was off. It's really a great pleasure to be here with all of you. We -- the Retail division, we are very proud to have you here this morning. I'm Jorge Faiçal, I am the Retail CEO at GPA. And we invited you all so that we can share what the company has been doing, particularly during COVID times, a year that accelerated the digital transformation of companies around the world. The same happened here. So we saw an expedited use of technology at our company. And we had to adjust, we had to take a deep dive very quickly, accelerating our plans, the plans we had for this year. And based on this background, an event such as this one that was held in person at our headquarters here in São Paulo. But this year, we are succeeding in holding this event in a digital platform, each one of us connected to our devices safely, conveniently and efficiently. We were able to enhance communication with our workplace, remote communication, increasingly more effective and efficient. And the word efficiency sets the tone of our conversation this morning. We are going to talk about all innovation characteristics, our business models, our investment and infrastructure, use of technology, data. I believe that we have a special chapter on data. And we are also going to discuss how we have been using all of our brands and the strength of our brands, particularly the strengths of Extra and Pão de Açúcar. So that it also supports and strengthens the business that was born in the food segment. So a high frequency, high recurrence. It's not a single item, purchase or business, it's a purchase of a basket of products, and we are going to share the impact on our assets, physical assets and digital assets. I'd like to remind you that we were born out of physical stores. We are a young 70-plus year old company, but with a very young mindset, so that we can take leaps in our transformation. So moving forward to Slide #3, today's agenda. So this is our agenda for this morning. We are going to start with an introduction of our data platform. We are going to talk about the market, how we see the market behavior, and then we're going to also discuss -- chapter 3 -- our digital strategy, and as well as our acceleration for the future. And finally, we will have a chapter for questions and answers, particularly in the last 30 minutes of this event. So next slide, I'd like to introduce our team, the team that is directly responsible for this transformation. So I am GPA's Retail CEO. Laurent Cadillat, he has been with us for almost 6 years. He's our CDO, he is responsible for the entire transformation of digital teams. Othon Vela is our Marketing Director. He's also in charge of the entire data framework of our customers. Rodrigo Pimentel is our e-commerce Director, Marketplace; and Lucas is the CEO and Founder of James Delivery, a company that was acquired by GPA some 2 years. So it's -- we are very proud to have James here with us. Moving towards the content of what we have for today, if you could move on to the next slide, please. I'd like to talk a bit about our origins, about our purpose as a company, our purpose as professionals. We have a very close relationship with our consumers. And we know that all of us are also consumers of the company, right? So we are all made up of different narratives. We all have different experiences within our individual narratives. Whenever we go to a sales outlet, whenever we start, as we call it, a consumer journey, and the consumer journey is the most important thing, and it starts from at a point where you feel a need to buy something. It might be a yogurt for your kid, another food item for the family or pet food. From all -- from that starting point, all the way to the time when you leave the store, be it a physical store or a digital store. So all that journey, where you have contact, the brand makes up what we call the journey. So first off, we'd like to state that, given our story, given our origin in the food industry, we have this recurrence, this high frequency. And today, we can safely say, we also have a very rich multichannel approach, not only in terms of format that includes Extra, which caters to lower income population, and Pão de Açúcar, which tenders to a higher income part of the population. With both brands, we are able to service the population across Brazil. And we are -- we have a footprint across Brazil from the North to the South, East, West; we have a slightly higher concentration in São Paulo, that's true, but our brands service all and we have, as I said, a footprint across the country. And we can say that with a lot of conviction, a lot of confidence. And if we may say that we are the only retail player in the food sector that is positioned to create that ecosystem, which is wholly integrated, wholly interconnected with a data platform model, which we'll be detailing as we move forward with the presentation. That places us in a very privileged position, as I said. Well, first, I'd like to say that today, we have about 240 million visits to our digital platforms. That's a yearly number, be it through our website or through our apps. I'm not considering our physical store transactions. Out of those 240 million yearly visits, they are made by over 20 (sic - see slide 6, "20 million") loyal customers. Customers that we have identified, it's actually close to 22 million, more than 20 million. Out of those 22 million clients, which are loyal to our brand, 9.5 million are active clients; in other words, clients who have made at least 1 purchase in the past 12 months. Those numbers are really impressive, larger than the population of several countries in South America, Latin America. And so the whole population of Buenos Aires, for example, just to give you an idea that the population in Buenos Aires is equivalent to what we have in terms of identified clients. And 50% of those clients are already using this multichannel possibility. They buy both digitally and physical platforms. That is, of course, very, very important for us. It represents a significant movement in our database. We now have 3 main apps: the Pão de Açúcar Mais and the Clube Extra, and James. Those 3 apps have more than 14 -- I rephrase myself, 16.5 million downloads for the 3 apps, 16.5 million downloads and remain active download, net of installation. And 17.5 million apps are spread across the country. Just to give you an idea, in terms of penetration, our apps are already present in more than 1/3 of the iPhone smartphones in Brazil, more than 1/3 of all iPhones in Brazil already have 1 of our apps implemented. That's really, really impressive. Within our -- still talking about our numbers, I'm insisting on numbers. I know that. But just to give you some color and some materiality to what we have in terms of possibilities. We have over 900 physical stores. And those outlets are not mainly places where we make purchases, but they are already delivery hubs in terms of logistics that service our customers on the digital platform. So in the physical stores, we already have over 400 million visits a year. That's important for us to set us apart from other competitors. As for the physical stores, we have an average of 12 items per transaction. So 400 million visits with something between 10 and 12 items purchased per transaction. And on the online front, we have over 40 items per transaction. And why do I mention all those numbers? To show you on the next slide, out of all the narrative that we have, all that large-scale we have put together in time, it would be a huge waste if we didn't get to know our customer's data very deeply. The core of our discussion today hovers around that platform, what we call the platform of customer knowledge. With over 17.5 million downloads, I think close to 22 million customers whom we know, people who are buying a high amount of items, they have a large basket of purchases. We can safely say that we have the richest database in the Brazilian market. Perhaps we are not benefiting as much as we could from that database, but that is here to show you the potential that knowing the consumer brings to us. Oftentimes, they have 2 or 3 purchases, but that's already enough for us to get to know them a little better. I apologize for the technical glitch. I was off a couple of seconds, but going back to my previous point. We have, unlike other companies which started doing business in consumer electronics, where people buy once every 4 months, or purchase every year, we have weekly or monthly purchases -- oftentimes, 2, 3 purchases a week. So we need to understand those customers, those clients. We need to know their history. So within this concept of having a platform in place, once we get to know that data about the customers, we have a very interesting ability to link our customers to all our business partners, all our suppliers, our sellers, our future sellers as well. We can connect all those stakeholders under the same platform and everybody can benefit from that. Everybody wins: our business partner, GPA wins, and GPA's consumers gets the bulk of the benefit as they are included in this 360 platform. I'll give the floor now over to Laurent. He will be talking a little bit more about our platform, providing a context of the market. Thank you. I'll be back further on with the presentation.

Thank you, Faiçal, for your introductory words. Well, this platform is very rich with the wealth of data, which can quickly connect our customers' purchasing behavior to the market, to the retail. As Faiçal said, this should be seen as a very important strategy or strategic asset and our value proposition, which is around omnichannel approaches, which is the most fitting for this transformational moment. So we can safely say that we have a clear vision of where the market is going, and that allows us to speed up our digital strategy, as we will see in this presentation. Now on the next slide, just to give you a little bit more color on the market this year, under the effect of the health -- public health crisis we're going through, multichannel purchase journeys are not only multichannel, there are multi region. And then we try to pinpoint the main characteristics of that journey for Brazilian customers. The first pillar there is around the experience. And it's linked with convenience. Number two, coming from our price global survey, it says that 80% of consumers point to speed of purchase and convenience as drivers or main drivers in their customer journey or experience, 80%. So they want to have a very intuitive and simple and fast journey. And the supermarket or grocery store at hand, our apps, the online tracking of all purchasing as in orders, and orders made via WhatsApp using Chatbot and digital menus and so on and so forth, all of that combined, are examples of our ability to anticipate and also to adapt market changes so that we can continuously improve customers' experience. The second major trend is this ultra customization process. We are no longer talking about customization. We are talking about ultra customization. According to an Applause survey, 91%, 91% of consumers would rather buy from companies which are able to offer recommendations and customized offerings. So players, which have just as we do a value proposition, which is ultra customized, guided by customer data, which is compiled through the purchase process, that gives us a very robust competitive advantage. The third trend is this increase in the dynamics of customers' behavior. We clearly had several changes in customers' behavior because of the COVID situation, concerns with safety, with hygiene, with health and so on, were, of course, brought on to the table. We know that the food safety rules and health rules have affected and have punished sectors who are not abiding to those rules. GPA and its strong brands, Pão de Açúcar and Extra, was 1 of the first players to really and forcefully face the COVID crisis and provided health measures which were acknowledged by our customers, especially those in a more vulnerable situation. And also number four, digital and also -- and finally, as the fourth and final important trend, digitalization. Last but not least, according to a survey by Bain & Co., 1/3 of users or respondents went online to buy groceries because of the COVID-19 situation. And out of the 1/3, 63% showed interest in continuing with that purchase habit after the pandemic. GPA as a market leader in e-commerce, with historic initiatives in e-commerce with extra.com, paodeacucar.com. We have been able to reap the most possible benefit from that trend. Well, moving on to the next slide. We see that as we go digital, we also transform the retail sector. And those trends that I have just listed can be translated into new types of behaviors. In light of that, we have created new purchase journeys, new experiences, which are more digital than before. And the idea is, of course, to improve the interface that we have with customers, customers who are increasingly more mobile, who increasingly want more convenience, more customization. Because of all that, we strongly believe that the food retail digital transformation is here to stay and those new digital journeys are taking center stage in a scenario where we need to create value from other streams. It's a very important competitive edge that we have. We have data coming from different sources. And we can use that to improve, number one, our core business, but also to improve our engagement with customers. That will give, of course, more commercial efficiency, and that will improve our return on marketing investments and to improve, of course, retail as a whole, as we'll see going forward. So as we are able to capture large volumes of data, and of course, you'll have better use cases. With that, GPA will be able to create forecast models, which are very sophisticated, something which would not be possible if we had only a single activity, a single core business. As we compile data from different sources, different firms that can put it under a platform, we can create a single model and have a diversified and at the same time, resilient model across the country. So this is the main piece. The platform is the main piece that allow us to connect, integrate and value all the assets, at the same time, providing a 360 view of the business from end-to-end, going over all contact points from both internal and external customers to the platform and allows us to have a unique competitive advantage, as Faiçal just mentioned. And finally, we are talking about a platform that helps us know the client, which is taking center stage in our assets, as you can see on the slide, and that will support our new business cycle going forward. Well, on the next slide, just before I give it back to Pimentel, our next speaker, he's in charge of our e-commerce front, but in finalizing here. I just want to show how we were able to increase the dynamics like never before because we are able to interpret the market better. And with that, we were able to speed up our e-commerce front. It's a digital acceleration which has never seen before unprecedented numbers in the history of online commerce. So Pimentel, over to you now so that you can go on with the presentation. [Technical Difficulty]

Yes, Lucas. Now this sounds better. Let's have you and then go back to Pimentel.

Good morning, everyone. I'm Lucas Ceschin. I am the CEO and one of the founders of James Delivery. We are in different cities. Here in Curitiba, we have heavy rains, but I don't think we're going to have any issues. 2020 was a year in which our industry experienced growth and maturity. It certainly moved the needle of the entire industry, and it was not different for James. We experienced exponential growth. Our business model changed from a convenience model to an essential model to our society. Nobody would expect such relevant role played by our industry. It certainly moved the needle. In April, we launched the benefits of our loyalty program, Prime, to those at risk and also to physicians at the forefront. And then in May, we -- so in May, we launched the Prime consistently and we see growth week after week. So Prime is one of the initiatives, a very successful initiative, and we see this consistent growth. We also opened more dark kitchens together with Cheftime, another GPA company in São Paulo and Rio de Janeiro. It's important to remind you that James was set up on infrastructure on a base, installed base of apps. We have more cell phones than the population and stable Internet. And James experienced this exponential growth with the support of GPA's assets. Next slide, we can see the growth from the beginning of last year. James was acquired. So from the time James was acquired till September of 2020, you can see growth of more than 27x. If you consider this year's snapshot, we see a more than 3x growth. We also see an increase in the number of stores from 52 to more than 300 stores operated at GPA. We also started with 18 cities. Today, we have almost 29 in 4 states. So that just demonstrates the excellent work by our team that really succeeded in scaling this up. Today, we have more than 3 million downloads, almost 4 million downloads. So twice the population of the city of Curitiba. And this year also marked a change in consumer behavior. So we see the more recurrence purchase, 17% increase in September compared to January; and also Prime customers, we can see that recurrence is 46% higher than regular customers. And for the 60-year-old and older bracket age -- age bracket, what we see is that they more than doubled their participation in sales this year. So we see this marked change in our business model. So not only the model, but the industry really became more robust. And at James, we focused -- we were very disciplined to listen to our customers and that really led to this exponential growth. Now I'd like to turn it over to Othon, and he's going to talk to us about GPA's ecosystems customer experience.

Thank you, Lucas, for your kind words. Good morning, everyone. It's really a great pleasure to be here and talk to you. So I'm going to talk to you about experience and how close we are to our customers, as Laurent and Faiçal already stressed. So next slide. Here, we can see our ecosystem, so our apps and how we really changed our customer experience at stores. It's different if you have an app for e-commerce and one app that you see people using inside brick-and-mortar stores. So we can see our customers using the app while they are inside the stores. So we have what we call a digital experience, so the mix of physical stores with digital environment. Next slide, please. So here, we can see that this obsession in providing a good customer experience, a friendly usability led to see how our customers are embracing these initiatives. So we have Pão de Açúcar Mais, Clube Extra apps, more than 40 million downloads. And they have generated more than 170 million visits over the last 12 months. Besides that, we also use our apps in order to support after sales. So we have a Chatbot tool that is supported by artificial intelligence. So our customers may resolve issues that are already automated. For example, order status. And we exchanged more than 1.5 million messages per month, so that increases our reach. Not to mention that this is a technology that allows us to educate it in enhancing its cognitive aspects to answer questions from our customers. But we don't stop at our environment. We are where our customers are, and our customers use WhatsApp, especially here in Brazil. So during the pandemic, we enabled a new service, particularly for older customers. So that allowed them to use WhatsApp and have a personal shopper. So to choose their products to be delivered at home. And besides that, we have also invested in this tool. For example, with the support of a wine curator. So you can talk to our wine specialist. We have many specialists at our stores that actually support our customers when buying wines, and WhatsApp also supports after sales. So we proactively send a message to our customer to let them know where their order is. And that is for Pão de Açúcar and Clube Extra. Next slide. So here, we like to talk about digital initiatives. So we have been working hard in order to add more technology at GPA and retail and this certainly has an impact on our customers' purchasing experience and also optimize our operations, not to mention that it also develops our talent. So PIX has already been implemented in more than 500 stores since it was launched, and that started just this Monday. We have more than 150 self-checkout totems. We have more than 25 cross-functional squads working on our digital platform, so they -- we work continuously so that we can provide the best to our customers. We have also implemented agile technologies beyond IT. So we have squads also working on customer experience. And more than 80 startups and scale-ups that are plugged and our GPA development system. So we have food tax, retail tax. James, for example, is 1 of the start-ups that actually merged from this ecosystem. Now I'd like to turn it over to Rodrigo Pimentel. He's going to talk to us a little bit about the marketplace and our assets.

Good morning, once again. I'd like to kindly ask as a technical support to go back to Slide 13. Good. Great. So I'm going to talk to you a little bit about our assets. I think it's very important that we address e-commerce. So as I mentioned earlier, we have a highly senior team in charge of e-commerce. A team that's responsible for developing our platform, CDs, stores, media team, performance team, very efficient. So we have all the competencies here as our company in order to develop e-commerce. And at this point in time, in which our services are essential, we were able to respond very quickly. And by doing that, we met the basic need of our customers to shop grocery store without having to leave their homes, and we activated our operating model, which is a hybrid model. So we use our brick-and-mortar stores. Our stores that are located in the best neighborhoods and large capital and that allows us to shorten delivery time and also reduce costs. And why is that? Because we are closer to our customers. And other interesting points that strengthens our model is our capacity to react to demand. So it's on demand model. Internally, we call it Plug-and-Play. So as we see increase in demand in 1 region, we add pickers. So we had the marginal cost that is very low, and we increased sales, which is very interesting for our company. What about stores? Well, in February, we had 126 stores at the beginning of this year. Today, we have 295 stores. So an exponential growth with regard to the number of stores. And besides everything I mentioned, we also have a very good profitability. Another asset is represented by our distribution centers. We started in São Paulo with one, so large warehouses. So in supply chain, it's a distribution center. We started this year with 1 distribution center. We will open 1 more in São Paulo. And in Rio, at the beginning of this year, we had 1 mini distribution center. We opened 1 more, so we doubled the capacity in these 2 capital cities very quickly. Once again, a reaction, very quick reaction because we have all the competencies inside our company. We also opened 1 mini CD in Brazil, another region with an expressive growth and 1 operation in Pernambuco. Just to give an idea, in the Northeast, we saw sales increased by 564%. That certainly is a turning point for that region, and we reacted very quickly. Some other numbers of our business -- so we have been handling more than 6 million orders. And when you think about food e-commerce, that's highly relevant, always keeping the same quality. And we have 2 important metrics of the perfect order. So what you ordered, the brand you ordered and within the delivery time frame you have ordered. So when we put them together, we call them OTIF, On Time Info. And our indicator is 95%. So growing is important. Serving is important. Profitability is important, but we cannot do that hurting our customers' experience. One more point is our Click and Pickup. So 36% of our sales is sold through this model. And that is interesting because it generates traffic to our stores. And then we can convert and increase sales. So when the customer comes to pick up, his/her order. What we see is that 30% of these customers buy another item or items at our physical stores. So that puts an end to that myth that the Internet cannibalizes brick-and-mortar stores. That does not happen. We do have information that our omnichannel customer actually concentrates and buys more from our company. Next slide. So here, we are going to address how all these assets together deliver revenues and GMV to our company. So we are very proud to see our market share when it comes to food retail, almost 77% of the market. This is a very robust number. We are very proud of it. We are 4x bigger than our C competitor. If you consider the A, B, C chain, we are 4x bigger than this competitor. And that also allows us to continue in this journey and offer some other activities. Our GMV is above BRL 1 billion this year. This is another milestone. 2018, 2019, we already had a mean growth of 40% a year. And that's why we had already planned and earmarked CapEx for investing in our infrastructure, technology, number of stores, distribution centers. So with the confirmation of that trend of that growth, we were already prepared for any changes. So sales increased by 240%. And perishable items, that's another miss. People don't buy online. On the contrary, and our experience as our platform Clube Extra, Pão de Açúcar and Pão de Açúcar Adega, people buy about everything. So we need to provide perishable and nonperishable items. You cannot buy and receive cleaning products one day, non-perishable the other day and then having to go to a different store to buy perishable items. But not here. So our platform, our strength is to provide a full basket. We have approximately 42 items per basket. And when we go over the growth in perishable items, we just confirmed that our online supermarket is the best solution for our customers. Some other interesting data. We more than doubled the number of new customers, so you can see 202%. And more than 50% of our customer base are omni-channel. And that's very, very important because as I mentioned earlier, these customers present a higher ticket compared to non-omnichannel customers. Next, now we need to go to the marketplace slide. So let's see this one, Slide 20. So in continuing, it's a journey. If we recap, we have strong brands, paodeacucar.com, Clube Extra, Pão de Açúcar Adega. We have millions of downloads, stores, brick-and-mortar stores, distribution centers and capacity, internal competence. We have a team that knows our customers' journey. So the next natural step in order to continue moving forward is to launch our marketplace. Our marketplace emerged very strong and unique. It's a platform that will frequently and recurrently welcome customers so that they can get to know the products available. So sellers that join us will have the opportunity to see this highly qualified customer that comes back to our platform many times. Next slide. So here, we are addressing our brand positioning. Our brands are very well known. So on the 1 hand, Pão de Açúcar, very clear positioning. It's a more gastronomic brand concerned with wellness, a brand that offers or talks about lifestyle, healthier life. It talks about happiness. So it's a brand and sellers with a similar value proposition can join us and add-on this value proposition. So it's a brand that will provide a more comprehensive solution to our customers. So from the coffee powder to the coffee cup, so a more comprehensive experience. And I am sure that sellers will certainly adopt this. On the other hand, Extra. Extra is a brand that is highly democratic. It's a brand that allows us to sell about anything to anyone. So from tires to nails, mattress, so this brand allows us to be a more general platform, and Pão de Açúcar are more specialized. So GPA providing solutions in the physical stores but now bringing brands with a very clear proposition in the digital world, also supporting sellers and customers. Next slide, we like to ask why? Why would seller join our platform? Brand reputation, client knowledge, 14 million downloads. We are leaders in e-commerce. We have revenues of over BRL 1 billion. 6 million orders, recurring clients. In other words, we help in continue that journey with the launch of Marketplace now in November. We are now promoting the onboarding of sellers. We already have several sellers on board, Ri Happy, Lego, Cobasi, Spicy. In other words, we'll have several sellers, sellers who are important in their own industry but also smaller ones. In other words, we'll have a hybridization of types and size of sellers as we speed up our platform. So again, we'll have large sellers and niche sellers, small wine producers, for example, small wine importers, another example, so we'll become the largest food commerce platform in Latin America. We already are actually -- we're simply going to reinforce our positioning. On the next slide, provide some context as to how this will play out this year. Just to give you some more color, we started with 15,000 items in 1P. Today, when you visit our sites, we have 15,000 products. And in 3 months, we'll include 30,000 items, 15,000 from 1P, 30,000 items for 3P. In other words, 45,000 items, we're going to be multiplying that by 3. In 12 months, we'll have over 400,000 items in our platform. This is not a promise of a political campaign. We already have over 100 sellers on board with us. And over 170, which are negotiating with us. In other words, the acceptance on the part of the sellers validates our thesis, which is the following: a platform which holds strong brands with strong reputation with relevance and recurrence is the way to go, is the best place for sellers to display their products. I now [Technical Difficulty] over to Othon, correct, or Lucas, you may carry on, please.

Okay. Now about our loyalty programs now. Everything we do starts with client identification. Next slide, if you will, please. So for us to be able to have intelligence of market for it to be able to know what the clients are -- we need them to identify at the cashier, unlike e-commerce, where the whole transaction is identified through and through. At the physical store, you may go in and leave the store without being identified. So we need to provide some incentive for clients to identify. We want to understand their behavior. And on their front, they need to see some benefit as they provide identification to us. And the strength of our programs allows us to reach the amazing level of 70% of identification. In other words, 70% of our sales and 62% at Extra, we have people identify themselves, that provides us with a wealth of information about our clients. For example, I know who are the people who buy without looking at the price tag, that has immense value to us. And how do we convince clients to really engage in the programs, and thus provide us with information in exchange for benefits. So what are the benefits we provide in exchange for information? We provide exclusive discounts for those who are at Clube Extra and Pão de Açúcar Mais. We have customized discounts as well. And in terms of slides, we see that 9.5 million people that have purchased in the past 12 months. So for each 1 of those people, when they open the app, they could see discounts, which were totally different from other discounts. So we have an intelligence to allocate offerings. So it is, as [ it's missed ] here, ultra-customized. We also often rewards in terms of Stix points, loyalty points, and we also anticipate promotions for those who are more loyal. What does that mean? For example, it means that you'll have Black Friday one day before. You can buy at the store or at the site before everybody else can. So those are the types of benefits we offer. And that's why we have a high level of acceptance to our programs. The Pão de Açúcar Mais has been around for 20 years. That's 20 years' worth of data we've been collecting. And that customization has proven very valuable. When we look at that chart on the bottom part of the slide, we see that a client that's very much engaged. Is the 1 that uses the app, uses discounts and uses the rewards, and they spent 6.3x as much as somebody who's not using the app, that's huge. When we look at our client base, those who are identified during the year, 10% of them are heavy users. That provides us an idea of the operational leverage that you can have as we have a higher level of engagement, as clients get to know, digital offering is better. And as they expand the ways they can reap those benefits, and they concentrate their wallets, as it were, with us. On the next slide, we see how we are able to generate a positive network effect with important players such as Raia drugstore, Drogasil drug store chain and also Itaú bank. Early on in October, we launched a combined program. What does that mean, combined programs? It means that clients might spend buying services or products from those partners using Itaú bank card. They have their own loyalty programs, that's important to say. But all those partners have a common currency; in the case of Itaú, they offer the option to clients to migrate their loyalty points. For Raia Super Mais and Drogasil, the only common currency they have is Stix points. So clients are able to collect Stix points as they spend in those programs. And with this common currency, clients can have a very broad catalog of rewards to redeem those points. And what's underlying that? We have created a high-frequency program. Both in terms of adding points and in terms of redemption. And the range of amount for redemption is much more accessible than a plane ticket. So it is a more democratic program. It is more affordable to more people. And we have products ranging from espresso at the store, a sushi plate at a store, to aspirational products at the end of the line, such as expensive cutlery or expensive silverware, that kind of thing. And 1 more bit of information, which is quite important to us is that we saw in the first 45 days of operation, this is very recent. For the first 45 minutes (sic – days) , the overlapping of clients between Raia and GPA set at around 1.3%. In other words, that's an important lever to acquire new clients, given that the base overlapping is quite big. And the combined base adds to 60 million individuals. So it's very, very beneficial for us to create this positive synergy in our ecosystem. Now back to you, Faiçal. Faiçal will explore other potential uses of the platform.

Okay. I hope you all have been able to get a good picture of what our ambition is around that platform. I'd like also to apologize for the technical glitches we have experienced throughout the presentation, but it seems to have gotten to a better track, and it's more understandable now. Okay. Let's talk a bit about logistics. We are filling the gaps in this chart, as you can see. We have, at the center, knowledge about the customer. That sits at our heart, at the core of the business. Assuming that Lucas mentioned, they talked about commerce, about apps, about websites, about the marketplace initiatives, James and so on and so forth. Othon talked about Stix, our loyalty program, and I'll talk a bit about logistics. Logistics is a key component of our profitability equation. So first and foremost, I'd like to underline the following. Our end-to-end logistics is actually a logistics platform. We are putting it together, and we have a very deep penetration, 900 stores. Then we have the 300 stores to explore our last mile delivery to customers' home. And that represents the highest cost along the whole e-commerce chain. But we do have the penetration to reach customers' house. Not only the necessary footprint to have a locker for a single item distribution, we have a footprint in terms of stores to deliver a head of lettuce or an ice cream container that's difficult to fulfill those items. We have 900 stores which have a head of lettuce and who can deal with a cold refrigerated chain, which is 1 of the most expensive logistics component in the whole chain. We'll be able to deliver a packet of rice or beans might be easier, but to deliver meat, to deliver lettuce, tomato, the whole dish, if I may, it's not -- it's no easy task. Not everyone has the expertise to have that end-to-end logistics chain and we are there, we are positioned to do that. And when we talk about fulfillment, we are including GPA Log. GPA Log is our -- is a new corporation under the GPA Group. It is a logistics-geared company. It's a storage company as well, which will also provide services to our sellers so that we can deliver 3P of that inventory, which is not ours, right? So early next year, in the first quarter, we'll start to have this network or the first steps towards having that logistics network, storage houses, which will be ready to deliver products to our -- for our sellers. So on top of being a sales platform, we'll also have a delivery platform, as it has become the practice in this market. And of course, it brings on added revenue to our business. And here we have logo, the logo for James. James is a end-to-end platform. It is an app, right? And all the way from the app to the motor bike courier or to the truck making the delivery, why not have James conducting that delivery? Why not consider James to be also a logistics company. They have a fleet of motorcycles ready to be used. Now we are starting to use cars and small vans as well. Why not have James visit the seller, pick up the products and then deliver that to customers' homes? So that's also included in our logistics platform, which starts to take shape. We are in advanced discussions, so that we will have logistic products ready to be offered early next quarter. Moving on to the next slide, please. Just to give you some more color. I've talked about our footprint. Today, I have already mentioned, 250 million visits to our operating platforms. And we're talking about 3 different wheels, if I may, that work in an integrated fashion: client flow, operating knowhow; knowhow around refrigerated and dry chains; few retailers have that in Brazil, and we do; and technology making up the third wheel. So we have developed WMS systems, that is our warehouse management systems; and TMS, our fleet management system; and OMS, our order management system. So those 3 systems as they are integrated, they allow us to have the necessary technology to be able to take our inventory to customers' homes at the lowest possible cost with the highest productivity possible, and that's a reality for us already. So this would be one of the final chapters around logistics. Now moving on to the next slide, please, providing some more color about other possibilities, which are already in our pipeline. They are actually providing some perspective for future gains and also offering a complete journey, which only a platform can offer. Of course, that platform, in a way, consolidates customers' journeys and goes way beyond pure retail, the purchase and sale of products and services. We're going beyond that. We are going the monetization pathway now because we have one of the richest basis in Brazilian retail, not only in terms of quantity, but also in terms of quality information, so why not make money with that? Why not monetize that? Why not sell that, of course, always respecting data protection law and so on, the general data protection law, of course. GPA is a group that has invested significantly in data protection and confidentiality of individual data. But the insights that we can extract from that database, both for us, but also for other industries who are not necessarily our partners, that data is extremely valuable. For example, an auto maker. What can an auto marker do with supermarket data, for example? An insurance company, what could the insurance company do, exploring data coming from grocery store customers? We're not talking about selling individual pieces of data. We're talking about selling insights. We're talking about selling the wealth of information that we can extract from that database. And it cannot monetize not only insights, but we can also monetize different types of media, a platform that has 250 million visits a year, why not sell media, too. A CPG, for example, the large multinational consumer companies, they -- what wouldn't they do to be able to launch a product using our platforms. What wouldn't they do to promote a product using our platform? So there is a big opportunity there for us to monetize data and media, too. Also important to mention our digital wallet of portfolio assets. We are one of the main retailers to launch the PIX as a pay -- means of payment. This new means of payment, the PIX, has been accepted at all our cashiers, at all our physical stores, and we're now going to expand PIX across all our operations in the coming weeks, with all the investment that the Central Bank has been making in technology, not only around PIX, but also around open banking. The GPA is a large food retailer, with the large-scale that we have, we are also aware that we can benefit from the new payment platforms. So that can also add to customers' journey in other points of contact. I'm not going to extend myself too much around the digital wallet point. That's a project we are working on. It's a work in progress, and we'll bring news as they unfold going forward. Moving on to Slide number 30 now, and giving an overview of what our rationale is. We've been talking for 1 hour in 20 minutes now. What lies at the core? Well, the core of our view for a platform is knowledge of the customer, consumer data, but not raw data. We're talking about refined data. We have advanced significantly in technological terms to be able to extract that knowledge from the [ bed ]. We call it internally the identity platform as in the identity of customers. With that identity platform, we see it as if this were a wheel to which we apply the network effect, which is detailed on Chart 31, please. One more, please. Yes, 32 is fine. Okay. Once we get to know consumers slightly better, a woman in this case of this picture, and the consumer is lying at the center of our journey. We have 5 integrated platforms, our flying wheels, as we call them internally, 5 flying wheels, which are integrated and create the network effect. So first, you have the marketplace platform, which involves both 1P and 3P and several other types of platforms, different apps, including James, which need a critical mass to be able to work well. It generates value, so that a logistics platform can also work integrated with a relationship platform, a loyalty platform with our customers. And moving on to digital wallet and monetization of data. So that creates a network effect, which I was talking about, including sellers, sellers who are our partners. They can be service providers, suppliers, product suppliers. We put them in contact with customers. And GPA creates the link between those 2 ends. The producers on the one hand and customers on the other hand, working around a platform that works based on the network effect. The network effect provides gains of scale, provides speed to the whole process. On the next slide, just as a wrap-up to our presentation, we are starting that journey now. We can be seen as a business, which not only has scale with a number of stores and number of clients, we have wealth of data. We are getting close to BRL 1.1 billion -- BRL 1.2 billion in terms of marketplace sales this year. And we are just starting this journey. We are spinning up more significantly going forward. So I'd like to turn the microphone over back to Isa for us to start our questions-and-answer session. Thank you, everyone.

Okay. Everyone, we'll start Q&A session. [Operator Instructions] First question from Guilherme [ Dardis ]. Does marketplace have a date, a launch date?

Well, I'll address that one, but you feel free to jump in and complement my answers. Okay, Guilherme, thank you for your question. Marketplace has been launched -- was launched early on in the first week of November, but we did what we called a soft launch. The idea is to start operating the marketplace platform, start trying to get quality involved with both sellers and customers. We launched 3 or 4 sellers only. But we are now moving to a more accelerated phase. For Black Friday, we want to reach 20,000 SKUs between 15,000 and 20,000 SKUs -- before Black Friday, actually. As Pimentel mentioned in his presentation, we want to reach the level of over 400,000 SKUs in 2021. When you compare those numbers, in other words, 400,000, with our direct marketplace competitors, they're talking about millions, we have a slightly different view of that. We are going to work along several different vertical lines. For example, wines, toys, automotive parts, home products and then patch up, which are vertical lines of consumption. We are not going out to see as it were to an open sea to have a scale around millions of SKUs. We're talking about hundreds of thousands of SKUs, but not millions SKUs, but with very vertical sales, very focused sales with large sellers. We are starting our journey with large sellers, not with small or smallish sellers, no. If anybody wants to complement on my answer, please feel free to do so. Go ahead, Isa.

Our next question from Joseph Giordano from JPMorgan. Today, we have several platforms growing without GPA. Why not using them, as they complement to your own platform?

Yes. Thank you, Joseph. We are analyzing that. If I understood your question correctly, we are creating a marketplace in and also marketplace out. In other words, we're studying that. We are already in conversations with some of the existing platforms in the market. It is a possibility. We do not have a final decision around that. But there is no prejudice. It is a moment to have open collaboration. We defend open collaboration, but we do not have any position around that.

Next question is still from Joseph. Under Stix, how can we think about creating a broader coalition for aiming at a super app or a combined work with other marketplace?

It is part, Joseph, of Stix approach, a broader coalition. It is part of the plans. We are talking to our current partners, Raia Drogasil, the drugstore chain and others drogasil. We are talking with other Brazilian retailers. Our idea is to create a broad program, a broad use of the Stix currency in the Brazilian market. As Othon mentioned, I'm emphasizing one of Othon's replies, we're talking about a much more democratic program. Loyalty programs in Brazil, they ended up concentrating their efforts on the higher income brackets of the population, usually linked to air companies, travel companies. So people who are able to redeem an international plane trip are those who have high credit card bills, right? But most of the Brazilian population would not be able to redeem items at that level. So we're thinking about lower income bracket citizens that we curated the Stix program. Of course, we'll try to reach higher income consumers, but lower income brackets of the population will finally have a program directed to them, a program that might include grocery store purchase or retail purchases or niche purchases, for example, drugstores. Looking ahead, we could have a fashion partner, a pet shop partner or a sports -- sporting goods partners, well, why not? So we do advocate for a broader market coalition around that initiative going forward.

Next question, Guilherme Assis from Safra. Other players have established partnerships with aggregators, such as Happi and Cornershop. How does GPA assess this strategy of being in the platform of third parties? Can you plug-in other aggregators? And the other question, can you establish a partnership with a large marketplace platform such as Mercado Livre or Magazine Luiza in order to increase the base of online customers?

Well, 2 questions, Guilherme. And thank you very much for your questions. It allows us also to clarify some points. The questions are similar to the question by Joseph about collaboration, about marketplace out. So your second question with regard to large marketplace platform. As I mentioned earlier, we are examining that. I'm not going to provide further details, but we support collaboration. As for the last milers such as Happi or Cornershop or iFood, we have chosen a strategy 2 years ago with James. James is doing very well with accelerated growth, and we are very happy with the numbers that we see from James. So James already has a relevant participation in the cities where it's available. And somehow, to us, it's a different option from our major competitors because this actually allows us to keep the consumers journey inside the GPA. And obviously, we are paying close attention to the behavior of this market. And this market, 2 years later or 3 years after, it actually arrived in Brazil after the last milers arrived in Brazil, and this year, the reality actually accelerated competition for investment for market share amongst the last milers, be last milers themselves or retailers working more in a collaborative model, but it's changing, and we are paying attention. So far, we are still working with our own and exclusive last miler, but we are certainly paying attention to what's going on in the market in the future. Lucas, would you like to add anything?

No, that's quite clear, Faiçal. We are growing James significantly and the main differentiating point is that we are a retailer to retailer. So investment rules are different from those -- the market. We have a totally different strategy when compared to other players. We value the whole experience, and we are confident that experiences can only be unique when you have access to digital platforms, which is the case of James and also when you have access to physical traditional assets, so that unique combination is difficult to replicate. We have a few cases in China, where they have digital companies that also have off-line services. But James has been growing differently from what the market does. So again, that combination of physical and digital assets is making a difference for the company. And that, of course, is revealed in great form to the final customer.

Next question comes from Juliana Buchaim from Sumauma Capital. Great presentation. What's the time of execution to reach the desired service level? And what are the main challenge for the next 12 months?

Juliana, thank you for your question. Execution timing for the desired service level, I'd say we have already reached that. When you talk about e-commerce, we are over 95%, and that was one of the main work platforms for us. One of the main work levers, rather, that we've had in this past year, moving from 100-some stores to over 300 stores and 6 distribution centers and placing the focus on a physical store using our own apps, apps for fulfillment, apps for picking products, apps for issuing invoices. We have orders of 10 items, orders of 300 items at the same store.

Our next question comes from Frederico [ Vontomel ] from [ Woking ] Investments. Is there any lessons learned from Amazon plus Whole Foods that you could use as a benchmark? The same goes for Alibaba's operations. Any lessons learned from those players?

Thank you for your question. What we see in common in those 2 examples you mentioned is this search for AI, artificial intelligence. So the more data you have, the more you can use AI to identify standards, tastes and provide better recommendations, a more customized offering. Alibaba invests heavily in this, so does Amazon. So Amazon is linked to Whole Foods and therefore, linked to this food journey, which helps feed back into their algorithms. So they end up having a lot of knowledge about customers. So those 2 examples are similar to what we are trying to do here with our database platform. We already captured important data, which has to do with people's eating habits. I did mention in my presentation the fact that we know how sensitive people are to pricing. We're able to identify people who do not even look at the price tag and also identify those who like to put up a hard bargain. So you can do that, and you can improve your algorithm as you do that. And we do have that benefit of having high frequency. Our customers have a very high frequency, as I said, several times a month, and that provides lots of data. Unlike a retail business where you have low frequency, where you have purchases happening every few years. So of course, we are starting from that base onwards, and we are including more data, more AI in our data platform. The idea is to increasingly get to know our clients' customers better and then generate all those positive benefits that we have listed during the presentation.

Thank you, Othon. I'll go back to Faiçal. We had a technical glitch in his audio. So Faiçal, please, you can now address the previous question.

From Juliana, right? I hope you were able to listen to part of my answer. I was concluding my answer when I got cut-off. Just as a disclosure, in our previous earnings calls, we did mention this. But as a reminder, unlike almost all e-commerce companies in Brazil, we are a profitable e-commerce business. We increment the company's profitability level with our e-commerce efforts. In our last earnings call, we have an EBITDA, which sits above the average of Multivarejo, multiretail, in the third quarter, and that number is set at around 8 percentage points, and our EBITDA sits above 8%, which, of course, adds value to the company. And of course, encourages us to grow even faster than we are already growing. So our challenge, Juliana, for the next 12 months is not only to try and mature new products, new launches, but also to continue in this uptrend trajectory for the next year, the next 12 months, providing the necessary consistency to our growth curve on the digital front.

Next question from Bob Ford from Merrill Lynch. Could you talk a bit about how you're attracting and retaining your developers, especially taking into account how difficult the market is for programmers?

Good question, Bob. Thank you for your question. It is truly a difficult task. I did mention we are a young 75-year-old lady, right, as a company. A company, which has been around for over 70 years and which is now trailing the digital path for the past 4 or 5 years. In 1995, we had our first digital experience, the first food e-commerce, we emerged in the country, but the real acceleration only took place for the past 4 or 5 years. We have, of course, cultural challenges. We have changed management, cultural changes, behavioral changes, and the total transformation is relatively simpler when compared to a culture change because it depends on cash, it depends on your ability to raise capital, it depends on top-down willingness, but cultural changes are slightly more complex. Because they depend on beliefs, they depend on stories and narratives that need to be legitimate, need to be real, to be told and conveyed. We are a top-down company. That's the model we believe. That's a belief that emerges at the Board level, emerges at the controller level, at the executive management level, and that trickles down along the company. Today, we already have over 150 developers with us working internally and also outsourced programs have few possibilities there. When we see that the engagement is there, we internalize that professional and they start working inside, and they have this multifunction positions, what we call squad. For our market price launch, we had 15 multifunction squads. So the workaround squad works very seamlessly, and it's increasingly improving based on our experience. And with that, we provide the necessary legitimacy to the project, the credibility to our project. So those guys who have lots of employment opportunities, as we know they end up staying not only because of compensation, but because they are building a concrete future, not only for the company but for their careers as well. So that's what we believe in, Bob.