El Puerto de Liverpool, S.A.B. de C.V. (LIVEPOLC1) Earnings Call Transcript & Summary

Good morning. My name is Emma, and I will be your conference operator. [Operator Instructions] Welcome to the first Liverpool Day. [Operator Instructions] Any forward-looking statements made during this presentation are based on information that is currently available. They are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions discussed today. This may be due to a variety of factors, including the risks outlined in El Puerto de Liverpool's most recent annual report. Please refer to the disclaimer on the web page for guidance on this matter. I would now like to turn your attention to a brief introductory video. [Presentation]

[Foreign Language] Thank you for coming to our first ever Liverpool Investor Day. We, as a team, are very excited to host it. Today, we're not going to talk about what we usually talk. There are the results of the first quarter that we published yesterday. But I want to just give you a brief recap, a brief summary. Our stores, as you probably know, were closed January and half of February. But March was pretty strong. Our net profit for March was more than twice the one we had on March 2019. That's 2019, because it was the last year of correct comparison. Although it was not enough to offset the results of being closed January and February, we feel very confident on the rest of the year because of the results we saw in March. So we're not talking about the results today, we're going to spend our time talking with you about 2 subjects. The first is what we are trying to build as a company, which we've called an omnichannel ecosystem. We want to build an ecosystem leveraged on our main strengths. The main focus of this ecosystem is to serve our customers in many different aspects of their lives. That presentation is going to be led by Mauricio Braverman, who is Head of our newly formed Office of Innovation and Transformation. And then the second part of this presentation, we're going to talk to you about the way we delivered our footprint. As a company, I believe our actions last year spoke louder than our words. We are very -- we're trying to make a statement at Liverpool. Not only focus is on shareholders' return, it's one of our main focuses, but also we like to focus on the impact we have as a company with several other stakeholders, customers and employees, with vendors and with society in Mexico as in general. If we want to live here -- if we want to live as a company for another 170 years, we need to address those issues more than ever today. So as -- that presentation is going to be led by Zahie Edid, our Head of HR. And after that, we're going to open the floor for Q&A. So with that, if you could show me the next slide, please. These -- we were going to -- you're going to see different people that you usually don't see -- apart from Enrique, you don't see that often on this meeting. So I'm going to start with Zahie, and will make my way around. Zahie is our Chief HR Officer. She's been with us for a long time. Sort of a big part of her career was on the purchasing office. Antonino Guichard, he's our Chief Digital Officer. He's been on that position for several years, and he was also on the purchasing office and on the stores. Edwin Serment, I think, of all of us, is the one that has served the most time here in Liverpool. He started on operations. He was manager of the purchasing office, and now he's in charge of Logistics. Gerardo Muñoz, he's our recently named Chief Information Officer, which we now changed the title to Chief Technology Officer. Enrique Guijosa, you all know, he's our CFO. Santiago de Abiega, he's been with us a long, long time as well. He's in charge of all the financial services, and he was also in charge of the purchasing office. And as I said, Mauricio Braverman, who is going to start this presentation, is our Chief Transformation and Innovation Officer. So with that, I want to leave you with Mauricio. Thank you very much for being here with us today.

Well, good morning, everybody. It's a pleasure to be here with you. Pauline, if you can skip to the next slide, please. So basically, a couple of years ago, we started exploring the concept of ecosystems. We started exploring that primarily in the Asia Pacific region. And after seeing all the innovations in retail, in financial services and in other areas that we saw in Asia Pacific, we were really inspired, and it gave us a nod in terms of how these industries were evolving over time. Our intention has been and continues to be to find better ways to serve our customers, find more synergies between our business units and also find ways to complement our offering. Last year, clearly, was a turning point, an inflection point, and it clearly accelerated our thinking and our efforts in this regard. Today, as a team, we want to share with you our vision and particularly our new ecosystem strategy for the full El Puerto de Liverpool. Pauline, if you can skip to the next one, please. Throughout our history, we have gained our customers' preference by having the right assortment, by providing it at the right value, by providing it with great service and also by having great locations. And they typically say it's locations, locations, locations. But one can argue that the definition of location has expanded in the last few years. And now we believe that location also includes being in our customers' smartphones, particularly in the first screen of our customers' smartphones. And this ecosystem strategy is a combination of efforts that we want, and we believe will help us to be in this great location as well. If we go to the next slide, please. To better serve our customers, we need not only to be a destination, but we also have to become a stronger platform, a stronger platform that provides service not only to our customers, but also to our great partners. We believe that we start from a great starting point, a great place. From the customer perspective, I think we're pretty strong in gaining our customers' trust with great brands, providing great value. We also believe that the times have changed and now we need to provide even greater assortment. And we also believe that we need to continue improving our great omnichannel experience for our customers. On the partner side, meaning our sellers, our vendors and others, we believe we have been great partners -- building great win-win relationships with our partners throughout our history. But now we also need to provide a great platform for them, and we need to make it easier for them to join and benefit from our platform. We believe that if we do that, we will continue building on this virtuous cycle or the so-called flyweel that hopefully will continue powering our ecosystem. Now if we can go to the next slide, please. With this -- clearly, our customers have changed. Clearly, the competition has changed. And we need to continue evolving as well. But in order to serve our customers better and compete better in this new world, we believe we have to do it leveraging our key strengths that we have built throughout our history. And let me perhaps summarize what we believe are the 5 most important strengths. First is our brand. We have the most recognized brands in the categories -- in most of the categories that we compete in. And that's clearly a strength that we need to leverage and continue leveraging. Second, we have a very, very strong loyal customer base. We have over 12 million traceable unique customers. And in those customers, we know their preferences. We know what products they want to buy, where they want to shop. And in half of those customers, which tend to be typically our financial services customers, the customers that have our own credit cards, we not only know that information, but we also know part of their credit history, their capacity to pay, and in many cases, typically what they even purchase outside of our ecosystem. And obviously, we have gained great NPS, or Net Promoter Scores, with those customers as well. The third one is leveraging our great financial services business. We, in the last few months and years, we have become perhaps now the largest credit card issuer in the country. Almost half of our sales are done with our own credit cards, creating a virtuous cycle. And we have been able to position what we call a great subscription services that is called the PIF, which is basically a monthly subscription where today, for basically around MXN 100 per month, we provide life insurance. We provide assistance services. And recently, we even provide extended warranty in the purchase that's done at our stores. And in this monthly subscription, it's something that has penetrated a significant part of our cardholder base, and we believe that we can continue evolving that asset in the future with other services that could be value for our customers. Fourth is our footprint. We clearly have an extensive footprint of more than 400 points of sale, plus our shopping centers. And we believe that those locations, in addition to the great people that work in them, provide us a great asset and a great strength that we need to leverage as we move forward. And finally, we have built and partnered with great brands. We have a great assortment of brands in most of our categories. We have great private labels. And we also have great exclusive brands that our customers really value and that we want to leverage moving forward. If we go to the next one, please. So this is basically kind of our 1-pager strategy, and we will try to explain it throughout the presentation. First, starting with the ambition at the top. We really want El Puerto de Liverpool to be part of your life. As our slogan says, we want to become the first option for the Mexican shopper. And we have developed 3 concrete objectives in the next few years. One, we want to continue growing in e-commerce in the next few years and close the gap with the digital competitors. Second, we want to really become the undisputed leader. As an omnichannel player, we believe that our strengths enable us to do that. And finally, we want to create more differentiated and sticky experiences. Today, we transact or interact with our customers a few times per year. Typically, our cardholders interact with us more significantly than the non-cardholders. But we believe that by doing a series of initiatives that we will explain further, we can significantly increase the number of interactions that we have with our customers and clearly become part of their lives, become part of their daily life, which is something that we want to aspire. To do that, we have developed several strategies and several key initiatives. We have articulated some key enablers that we will explain and also some key commercial initiatives that we will explain throughout the presentation. But let us start primarily and firstly with the enablers. We want to start primarily with the IT and the transformation of our technology office. As Graciano mentioned, Gerardo Muñoz, starting since this January, has become our new CIO, reporting directly to Graciano. And he will jump-start by talking about the transformation of our IT department. Gerardo, please go forward.

Thank you, Mauricio. Good morning, everyone. Nice to be here with you. As Mauricio mentioned, I took over the responsibility for the information department. So please, next slide. Technology is a key enabler, right? For a consistent strategy, we need to make sure that we deliver the value that is expected for the business. So during the next few minutes, I'll share with you what we are going to do to evolve our tech capabilities. Next slide, please. Well, to follow our evolution journey, we started with a very simple question, why do we need to change? To say that the business has changed has never been so true as it is right now. Technology transformation must overpass the pace of the business evolution to really deliver value. Also, technology is now far away to be a support function. Over the years, it actually became a key business enabler. We are in the need of a simple and nimble technology landscape that allows the business not just to go faster, but to leverage more on the current IT assets and the assets we will build in the future. And last, but not least, technology is now expected to be way more than enabler for the business, it must become a competitive advantage to differentiate from the competition. Next slide, please. Our technology evolution has 7 guiding principles. First one is customer in the center. This is the Liverpool way, and Liverpool cannot be an exception. And when we are talking about customer, it's a customer that is either in our stores, buying online, using one of our credit cards in whatever part in the world or going to a mall. That -- it doesn't matter. That's our customer, and that has to be our focus, like the Liverpool way is. For that, we need to do a really, really strong partnership with the business, working to understand its strategy and together make it happen. The third one is agility to reduce time to deliver solutions while keeping things simple. Also, we need to have a holistic thinking to build solutions that could be deployed for El Puerto de Liverpool. Business is very, very relevant and bringing an ever growing value to the business should be a key focus for us. And last, deliver technology with a purpose. This means focusing a problem to be solved, not in the technology. We are not going to deploy technology just because it's fancy or because it's the last thing that came to the market. We are going to use technology, because it solves a problem and it helps the customer and the business. Next slide, please. Where to start? Well, as the initial step in our tech evolution journey, we're working to enhance resilience for critical applications and infrastructure. Also, our technical and security standards are being modernized and strengthened. And our engineering and third-party solution deployment processes will be improved. Then we need to scale -- to speed up and scale the adoption of new ways of working. It's more relevant than ever now as well as improved collaboration and co-creation with our business partners. This is part of having a purpose for technology. We are working to increase the level of maturity of key technical capabilities as well. And also reinforce talent in the strategic areas. We are very intentional on how to balance our internal capabilities, complemented with the strategic partnerships. Architecture is also a fundamental pillar to our tech evolution strategy. So we are working to build the future architecture aligned to the updated business capabilities. Next slide, please. What -- our transformation journey is encompassed into, people, process and technology. People is a key element to any transformation. That's fair to say. Culture and mindset are first. Everything else follows. So we engage -- we need to engage and steer people that will support our evolution in the long haul. We are aiming to provide a great professional challenge, career options for our technical team and the tools to succeed in a diverse environment that fosters collaboration, innovation and a sense of purpose. In regards to processes, we're mainly working in the adoption of our new IT operating model, designing the future architecture based on 4 principles: flexibility, scalability, resilience and security. Also, we are scaling up and accelerating the adoption of methodologies like, agile, DevOps. And we are working to redefine our sourcing strategies to get the most from our strategic partners. Cybersecurity is more than ever a matter that we need to address. In this transformation, we are also updating our operational model. And finally, on the technology track, we are working hard to assess our current application portfolio, ensuring stability and resilience for our most critical services. We have started a tech modernization program that will not just make advantage of the latest technologies, but also will facilitate the further evolution of our tech landscape. Also, it is very important to keep a very simple landscape. So we have started a full review of our tech footprint to find opportunities to make it simple. All of that would be encompassed within our 7 guiding principles that I mentioned before, customer in the center, IT as a business partner, agility, simplicity, holistic thinking, ever growing value to the business and technology with a purpose. That's what I wanted to share with you. And now I turn it over to Antonino Guichard. Thank you very much.

Hi, everyone. Good morning. Hope everyone is doing great. So I'm going to talk to you about our omnichannel digital strategy. If we can go to the next slide, please. To begin with, let's talk of our transformation goal and let's talk about data. Next slide, please. So as mentioned in previous presentations, we have tons of data. And we are currently focusing on hyper-personalization. And what does that mean hyper-personalization is being for each customer there whenever they want to on their decision of purchasing options that they want to and help them to get their goals in the simplest way they can. What is our main goal in this personalization strategy is to know at least 90% of our customers. How are we going to do that? And that's 90% of omnichannel customers. We've implemented a few strategies that have helped us gain this personalization and this information about our customers. One is e-wallet that was launched a while ago. We also are launching our digital monedero electrónico, which is another way to overcome that 17% of customers that currently pay in cash. We also have the digital purchasing ticket. So now, through our digital systems, you will be able to have all the information of everything you've bought. Even if it's online or offline, you have it on your cell phone. Here also, we have a lot of customer data update. We're doing a lot of strategies to update our customers' database. Some of our customers are very loyal and have been with us for quite a while, but their data hasn't been changed, and we need to update all of those data. So our main goal, as mentioned before, is to be 90% knowing all of our customers and especially focused also on the nontraceable payments. There are ways that we can also do that and get better customer knowledge. And that will take us to the next slide, which is all this formation is also to get the customer lifetime value. We've implemented in the past few months a formula with more than 240 variables to calculate our customer lifetime value. So what is our goal here? Our goal is to keep our loyal customers, but also to increase all our customers into the -- to become high or top-tier customer. Right now, around 60% of our customers are in standard deviation, and those customers -- It's our goal to put them into high or top. Our negative customers, it's a -- we are proud to say that it's only 3% of our customer data platform, and we're pushing those into low and standard with unique incentives. What are the incentives we have? Well, we have a pretty big omnichannel footprint. So with our financial services, we're focusing on new credit cards and new opportunities for those who don't have it. We have a lot of omnichannel customers. How can we be able to digital and the physical world and bring them together? There's a lot of repurchase strategies that were implemented one by one. And also, there's a lot of products per order and things we can incentivize to get our customers' lifetime value even higher. That's where we are right now talking about data. Now I will turn it into Edwin Serment, who's going to talk to you a little bit more about logistics.

Good morning, everybody. So we're going to see how logistics and the supply chain will support this strategy. So we can change to the next slide, please. As was mentioned, this is a very ambitious strategy, and we are one of the key enablers of this. So if we can change, please. Our clients have evolved on their buying [ decisions ]. Reduced foot traffic in the stores increased the digital experience of our customers. Reliability is key in their buying decision. And their willingness to receive the product faster has increased. We also see that when the lockdowns are over, the customers are returning to stores to do the shopping. So I want to show you these figures, where, in the past 12 months, the last-mile delivery grew 4x. So shipping all the purchase orders directly from the stores to the clients' phone, that growth was 36x. It is faster and it is at a lower cost to serve the customer this way. For these reasons, our logistic network is focusing on processes, technology and other people that is involved in this multifunctional process in order to guarantee that fulfillment to all of our clients. Through improvements in the planning and distribution of our assortments, it will be possible to have inventory in the store that is closer to the client where there is that real demand. We also see that data modeling and using advanced analytics, we will have the ability to make appropriate decisions in order to meet the needs of our clients in the most -- in a very cost-efficient way. Pauline, can we move to the next slide, please? We're building the backbone that supports our omnichannel model. We have a unified commerce view. And we have streamlined our sales and logistics process. All of our sales associates realized in-store sales, with [indiscernible] projects at the stores. But also, they can realize sales from the endless aisle from our [indiscernible]. We are focusing also that also all of our associates can pick and pack the products that our customers are buying online. And now we are scaling a program where our store associates can also do the last-mile delivery from the stores. The objective of our logistic network transformation is to leverage our stores in a single logistic network. In order to be able to do this from the stores, an agile replenishment process is required. Our future logistic network will have national as well as regional centralized inventory capabilities. This will allow us to be faster in order to replenish the stores, whenever they are delivering directly to the customers. We can serve also all of our customers' shopping orders. Almost 90% of those orders will be delivered in 1 day. And about 80% of the replenishment orders to the stores will also be delivered in 1 day. Having an inventory assortment according to the demand is a key success, and I will address this further on. Obviously, the cornerstone of our supply chain will be planned, and it's linked with 7 omnichannel fulfilling centers that will have -- that will let us have a very agile and flexible logistic network. The plan we have a high inbound capacity, and it will have a high sales centralized inventory also capability. It will also have fulfillment center capabilities that will help us deliver when it's peak season anywhere, so we can deliver directly from the stores. If we want to avoid bottlenecks during the peak season, we can do it from a fulfillment center if those are [indiscernible] items. But we will have the whole breadth of the assortment also with a centralized inventory plan. And we can obviously fulfill from there to the customers, with the lead times I already mentioned. Also, having the consolidation of big ticket and soft line categories will allow the long-haul transportation to be more efficient due to the consolidation of those shipping methods. So now let's have a quick look of plan. So Pauline, can we move to the next slide, please. [Presentation ] [indiscernible]. So continuing with the presentation. Our talent and infrastructure strategy integrates with our technology strategy. We have 3 technology traits that are enablers in the supply chain transformation: planning, assortment and allocation, order management and transportation management. Pauline, the next slide, please. You will have the highlights of these 3 major digital products: first, the planning, assortment and allocation. This will help the buying office in several ways, have the best assortment based on the client preferences and also profitability. And the second one is that they will have the ability to model life cycle using products matching patterns. Also something that is very ideal is that they will [indiscernible] the stores faster according to the project attributes and changes on the customers' demand. They could be also able to identify cannibalization among different products. Then the order management will enable reliability that is very important for the customers and cost efficient that will help the profitability of the company. And finally, with transportation management, we will improve our planning processes and reduce the cost of our long-haul goods. So that's what I have to on the logistics transformation. Thank you, and I will turn it over to Antonino Guichard.

Thank you, Edwin. So now let's talk a little bit about e-commerce. Focusing on continuing with our ecosystem strategy, can we go to the next slide? We have decided to implement multiple fronts with one backup system. What does that mean? I mean we're talking about liverpool.com, our app, suburbia.com, other 5 multisite pages. Well, they all will be interconnected and will be interconnected at the customer level, at the catalog level, at the delivery process level. But on the front, they will all have their own DNA. So Suburbia's DNA will be with Suburbia's DNA. Liverpool's DNA will continue to be Liverpool's DNA as well as the multisites we have. But on the back-end, we'll have one same process. So that will simplify a lot of our strategy, and it will allow us to scale it massively. And if we can go to the next slide. Continuing with this strategy, well, we need to focus on the best category offering we could afford. We have all the information about our customers. We'll talk a little bit about that. We have a very close relationship with our vendors. So now let's talk a little bit about the best offering we can give them. We'll begin with a video of our latest accomplishments. [Presentation]

So first, let me give you what we talk about digital sales. Digital sales is a mix of liverpool.com, our marketplace business, our extended catalog that is through some stores, services, suburbia.com and the other 5 pages that we call multisites. Well, what's the result? It was mentioned in the video as well. But we've grown 7x since 2017. And now what's our goal? Our goal is to increase our sales 3x by 2025. And we're standing on a huge increase by 2020 due to the pandemic. So in order to do this, our main goal, one of our main goal and our main businesses is marketplace, which we'll talk about in the next slide. Marketplace has a key -- Pauline, can you go to the next slide, please? Marketplace is a key growth business. Well, we've targeted to increase it 16x since 2020. That's our main goal. This will increase our share to 35% of e-commerce sales by 2025. And also, we need to grow our catalog 13x. What does this mean? This will represent that 80% of all the e-commerce catalog will be a marketplace business. So as mentioned before, our marketplace is going to be one of our key growth businesses, one of our main goals. And to do that, we have some competitive advantages that are explained in the next slide, please. And our competitive advantage in the marketplace and why we are unique? Well, we have a brick-and-mortar sales. As you know, we have more than 10,000 items [indiscernible] throughout our sales stores, and our sales team can sell marketplace products. They even gain commission by that. This is a world recognition. Very few retailers have done it. And we're very proud of talking about this, because our sales team not only doesn't have on their hands whatever is available on the store, they also have whatever is able at another store or what an online marketplace product as well. And they will also gain commission. And as a model based on commission sales, this will help our people as first point and also to sell everything whenever the customer wants. One of another project is fulfilled-by-Liverpool. Edwin mentioned a lot about the logistics platform they're building. Well, it will give us a fulfilled-by-Liverpool model. Now we will be able to store marketplace products within our warehouses and increase the delivery time through a Liverpool standard drivers. Also, well, we need to increase our sellers that our sales start from. We need to increase it by 10x by 2025. This means restructuring the whole digital team. So now we are fully in a restructured time. The team is growing tremendously, and we're invested heavily on new talent and new players to overcome this increase and this increase in seller base. In order to do that, we also need to change our seller center. We need to be one of the simplest and best ways to communicate with our vendors. And this is being built right now, and it's the seller center that is going to be the simplest one there is in order to overcome this increase in growth. This seller center will also have fully automation. There will be fully automation our sellers, and our sellers will be able to perform whatever they want with their products. And one of another key credit advantages is our hybrid vendors. As you know, Liverpool is very well positioned about the relationship we have with our current vendors. Well, with marketplace initiatives, we will be able to extend that relationship to higher levels. There will be some vendors that will have the current products on their store. And whatever they cannot put on their store on our web page that could be sold on the store, but also with fulfilled by -- it will be stored in our warehouses. So the whole ecosystem starts to close via hybrid vendors. Also, the next slide, please. One of our key strength is to provide the best aspiration for our customers. We have a very strong brand, and we have very close relationship with our vendors. So can you go to the next slide, please? We are changing the way we do business. First, we've always been client focused, on client first, but now we're changing our structure to become agile and cell structure. What does that mean? I mean what is this? Well, this allows us to work as a team faster and release every 2 to 3 weeks some upgrades to whatever we're building on the web page, whatever we're building on our app and whatever we're building with the logistics team. Every 2 to 3 weeks, we are changing our -- and upgrading our system. One of our examples of things we're doing right now as a cell, we have product government. We are changing all the attributes of the way that we used to put them into the system to a simpler, better way with our vendors. We have a sales app that is continuously growing and continuously changing. We also need to upgrade our search and browse platform within the web page. Every product detail of every page has to be hyper-personalized, and we're building them. One of our key competitive advantages is our gift registry. It's continuing to improve day-by-day. Edwin mentioned the delivery experience as things that we are building right now. Liverpool Pocket, our app, which has 11 million users last year, that we're very proud of, 11 million unique visitors in 1 year. We are currently having more than 4 million users per month, unique users. And also personalization, as I mentioned before, one of our key initiatives is to be hyper-personalized. Can we go to the next slide, please? Now, what are we doing in our web page? And what are we doing right now with our -- with the information we have? Well, we have to focus on the best e-com [indiscernible] there is. So all our categories and fashion retail, which is not as simple as it sounds, we are changing the way we perform on the attributes with videos, with more content, with more optimized media content. So our -- even our buyers will be able to talk to the customers and tell them why are they buying this, why is this in attendancy? Put video, so you can see how the clothing behave. And all of that is being -- it's being done right now. Also, we're very proud to say that with the close relationship we have with our vendors, we have exclusive content. Can you go to the next slide? This is just an example of what we have. As many of you know, it's public, we have a unique relationship with the Disney store. This gives us exclusive product and content in Mexico that can only be sold through Liverpool, through liverpool.com and through our ecosystem. Just as an example, well, we'll be able to sell all the Disney and Pixar products, Marvel and Lucas, which becomes more and more important every day. Our stores have been transformed into the business story. We will have exclusive dot-com business in Mexico. Also, we will be the only ones able to sell the products that are also in the theme parks in the U.S. and Europe, which are currently in Mexico. So this is one of the examples that, as a company, we're doing to overcome and become stronger with our customers, understanding what they need and give them the best product assortment that they have. Now I will turn it to Santiago, which will talk to you about the financial services.

Thank you, Tony. Hello, everyone. I hope you and your families are all doing well. Today, I would like to review with what we are doing and where we want to be in the years to come regarding financial services. You have heard from my colleagues about one-stop shop. You have heard from Antonino what we are doing on the marketplace and everything that we are doing in order to serve our customers. Well, in financial services, we want to do exactly the same thing. We want to offer our customers a one-stop shop and a marketplace to fulfill our customer needs -- our customer financial needs. If we can go to the next part, please. Okay. In this chart, we are illustrating our general view of how we picture all the different services we want to include in this financial services one-stop shop. Okay. First, if we go to the center oval, we have the monedero electrónico, which Antonino talked about, or monedero digital, in which I will be talking a little bit more in another slide. Then, on the second of oval, we have credit on us. Credit on us is credit to be used in our stores. Here, we have been issuing -- for probably the last 90 or 100 years, we have been issuing our private-label Liverpool card. And recently, 3 years ago, we started issuing the Suburbia private-label card with -- and these products have various credit plans like revolving credit, installment plans, deferred payments, et cetera. Here we also have what we call credit to our consumer. This is a new nonrevolving credit product that we are developing right now, and I will further explain in another slide. Then, on the next oval, we have credit off us, which is created to be used outside Liverpool and Suburbia stores. Here, we have the co-branded Visa Liverpool card and the co-branded Suburbia Visa credit card. We are developing here personal loans. These are cash loans for qualified customers. And our expectation is to start piloting on the second semester of this year with personal loans. We are also developing a secured card program. This is going to allow us to target customers that we are rejecting credits today. And this program will allow our customers with bad credit bureau information to have access to credit and to start a good credit history. Then on the next oval, we have the insurance distribution business. We already have a variety of products today. Like we have an extended warranty. We have home insurance, life/accident insurance, auto, health. And here, we also include all of our assistance services. And by assistance services, I refer to auto assistance, home assistance, medical consultation, ambulance, legal, dental, et cetera. Up to here, these are services we are already offering or we are in the process of developing. It is important to mention that all of our customers today, they have digital access to all of these services. But we are conscious that we need to keep working in order to have the best assortment and to have the best omnichannel experience for our customers. What we've seen is that probably most of the developed retailers are already offering these kind of services. And then we have this final oval with other financial products, which we believe only maybe up to 40% of these developed retailers are offering and where we have products like savings, checking accounts, time deposits, auto financing, mortgage, international remittances, foreign exchange, et cetera, even up to very structured investment products. And we believe that here we can find very interesting opportunities to serve our customers. Today, I am not going to go into detail into any of these opportunities since we are in the stage of analysis and evaluation of all of these products and services. This analysis includes the definition of what can we develop by ourselves and what needs to be done via an alliance or a partnership. If we can go to the next slide, please, Pauline. Now well, we talked about monedero digital, and also Antonino mentioned it. This is going to be a very convenient omnichannel experience. We've had monedero for a very long time, but it was a physical monedero and it was nominative monedero. Today, what's going to happen is that it is going to be a personalized product, and this is going to help us to establish a direct relationship with a full customer base. And obviously, this will help us to have all the customer information and other habits and preferences of our customers. So we believe this is going to be a very good product for us. If we go to the next slide, I mentioned credito al consumo in -- where we're running a pilot test. This is, as I mentioned, a nonrevolving consumer credit where we ask for an initial down-payment And then we have weekly installment plans. Here on the right side, you can see the image. These are actual images of how we are communicating to our customers where they can buy a fridge with only MXN 99 a week. And this product is addressed for lower, medium and upper-low segments for the acquisition. Here, we have durable goods. But actually, what we are seeing on this pilot test is probably 40% of the total sales that we are doing today with these products are being done for clothing also. So today, we are doing these pilots. We are learning. We're doing a benchmark with all of our main competition. And we are developing all of the technical, operational capabilities, as we are aware that this product is going to have a different behavior of the actual products we have today. And by 2022, we hopefully will be implementing all these capabilities we're developing today. So we can do rollout for all the country and expecting to have a growth in the share of our products in our sales and obviously to have an increase in sales. Then, if we can go to the next slide, Pauline, please. Then we have -- these are just some examples I wanted to show you. We just launched the bill payments. These are other services that we're offering our customers, where our customers can pay all their bills and services by a simple way. Just by one click, they can schedule their payments. And obviously, they can check all the payment and billing history. That is already going on today. If we can go to the next slide. We also have -- we already launched the digital issuance. And this is a digital applications, and we are about to launch in this second stage the digital card issuance, instant digital card issuance. So this is -- our customers can come, they can digitally apply for a credit card. And if they are approved, they immediately will have the availability to go online shopping or to go into one of our stores and make purchases with their e-wallet. And obviously, they will have access as they have today with all of their cards to all of their financial information. They can check their balances. They can check their statements. They can check -- they're open to buy, et cetera, et cetera. So as I mentioned, these are just some examples of things that we are developing right now. And we are very conscious that we need to keep working in order to have the best assortment of services and products and the best omnichannel experience for our customers. Thank you very much. Now I will turn you to Mauricio.

Thank you, Santiago. Now we will jump to the next one, which is value-added services. As you know, value-added services and service in general have been part of our DNA throughout our history. But now we need to expand the definition further. Pau, if you can go to the next one, please. We want to continue providing great service, not only during the transaction, but also before and after the transaction. And we have to do it in an omnichannel manner. Let me illustrate perhaps 3 areas where we see particular opportunity. One is technology given the footprint that we have in selling technology, white goods, computers and electronics. We believe this is an area where we can simply make it easier for our customers not only to buy technology but also to use technology. And that's an area that we see a particular market need, and we see also opportunities in the market given the recent evolutions in the market. Secondly, we see opportunities at what we call the home level, which is we're a very strong player in terms of selling furniture and selling different items for your home. We basically want to help our customers build their house of their dreams, and we want to do it by providing better advice, by partnering better with designers and architects, et cetera. Finally, we also believe that we can help our customers as an individual. We believe that we can help them feel better by looking better. And we can do that also by providing them advice on fashion and also by leveraging our strength in makeup and other categories, as you probably now by leveraging also our BX service, which is the Beauty Experience that we have launched in many of our stores. So we see great opportunities in those 3 areas and in others that we will explore going forward. But we believe technology is one where we can assign particular focus in the months to come. If we can move to the next one, please, Pau. So that's value-added services. And now let me jump into loyalty, loyalty and rewards. If we can go to the next one, please. We have presented a pretty ambitious ecosystem strategy, and we see a loyalty program for the full Puerto de Liverpool brands and assets as kind of an orchestrator to some degree, kind of a glue to orchestrate and bring all of these assets together. We believe that the right loyalty program can help us first to know all of our customers. As Antonino mentioned, today, we can assign basically around half of our sales to unique customers. We basically -- we did -- we want also to target the other half. We now -- we want to know the full basically customer base and be able to uniquely assign almost every purchase to a single customer because we believe that, that will help us serve them better. Secondly, we believe that through a loyalty program, we can motivate some behaviors. For example, if a customer has tried some of our categories with a loyalty program, we want to also motivate our customers. to try and sample offering in other categories. And finally, by doing that, we also want to motivate better engagement with our customers. Obviously, we will love all of our customers to try our financial services products and engage with us deeper And we also would like all of our customers to download the Liverpool Pocket app and have a more intimate relationship with us so that we can serve them better. And to also enable our customers to really, really take full value of the ecosystem strategy. And we believe the loyalty program is a key corner store in that regard. We're currently in the process of designing this loyalty program, and we believe that design phase should be ready this year. If we move to the next slide, please. Now let me turn it over to Graciano, who will speak about basically the last initiative, which is how to maximize our ecosystem reach.

Hello, again, everybody. Could you go to the next slide, please? Okay. So a few years ago, most of our CapEx was spent opening stores and shopping malls. It's going to change in the future. As you saw, we have a lot of initiatives in logistics, in IT, in digital that are going to take up more than 2/3 of our CapEx. So we are going to still open a few stores. For example, this year, we're opening 2 stores. And actually, one is more of moving one store from one place to the other one. So we're opening Tijuana and Kodak in Guadalajara. And so yes, we still feel there is quite a few opportunities to open stores that would get us closer to our customer targets. So we are opening stores, but it's going to be fewer and just stores that have a really, really good place and that have a really good reason to be. If you go to the next slide, please, we are not going to open shopping malls, but in the next 3 or 4 years, but we are going to do extensions upgrades. We need to keep our shopping malls relevant to our customers. So for example, this year, we're going to finish the expansion of the upgrade of Galerías Monterrey and Galerías Insurgentes. But we need to do that also on our Liverpool stores. That's a [indiscernible] store as well. We need to have stores that have more entertainment for customers that have a better experience. And furthermore, the stores and the shopping malls are going to have different functions. They are going to work as a store, but they are also to going to work as a delivery center and as a distribution center. If you can go to the next slide, please. With that, my final comment on this side is we're going to see about MXN 8,000 million of CapEx this year, mostly on IT and logistics. And we expect that number to be closer to MXN 10,000 million for the following years. And again, as I said, mostly focused on an area that we didn't spend that much CapEx in the past. So with that, I'm going to turn it over to Mauricio to finish this ecosystem presentation.

Thank you, Graciano. I believe we've seen many, many initiatives. And so let me try to summarize them briefly. First, we said that we wanted to establish a goal of being the first shopping option in the country. We mentioned that we had 3 specific objectives to do that. One is closing the gap with the digital players, becoming the omnichannel leader and increasing the stickiness and the interaction with our customers. And to do that, we mentioned that we wanted to do it, leveraging our strengths and focusing our efforts in 7 key commercial initiatives. First, having the best category offering and growing them by leveraging the marketplace. Second is by having a one-stop shop, not necessarily with the largest assortment, but clearly with the best assortment. Third, we mentioned that we wanted to create a one-stop shop for financial services, and Santiago elaborated on many of those ideas. Fourth, we mentioned that we wanted to create inspiring content and a great omnichannel experience. Then fifth, we said that we wanted to increase our value-added services; sixth, develop a loyalty program; seventh, maximizing the ecosystem reach. And we want to do all of this supported by primarily 3 enablers: IT, data and the supply chain transformation. We clearly know that this is a pretty ambitious goal and a pretty ambitious agenda. And we're working as a team to be able to, not only execute well the strategy, but also to continue operating the business as we have done over the past 170 years. We know that we need to execute all of this well if we really want to gain our customers' trust and be able to gain a location in our customers' first screen. So thank you very much. And with that, I will turn it over to Zahie, who will elaborate on our sustainability strategy.

Thank you, Mauricio. It's a pleasure to be here and share with you the sustainability strategy. Good morning to all, and please, next. Our sustainable strategy is a frame and topics, which guide our sustainable actions across all business units. What we name it is la huella de El Puerto de Liverpool, or the footprint. Okay. So next, please, Paulina. In this model, as you can see, we consider the alignment between the business strategy, the customers' experience and the evolution of the services we bring. As we have heard through all the presentation, we want to be in the top of the mind of our customers. So it's important to both the way of working inside the company and have new concepts and mindset to achieve this goal. Since 2018, we have defined sustainable initiatives on environmental performance, education and responsible sourcing to work with and improve the environmental, social and governance standards in the company. At the end of 2020, with all the changes and disruption happening, our materiality study was updated and now is represented in this model. In the right side, it's important to mention that all the stakeholders' perspective are included as well. Next, please. The ESG governance team is going to help us to monitor and align the initiatives and efforts across the business units. Currently, multidisciplinary teams across company are designing the KPIs, which will be measured for the next 5 years. And today, I will show you our approach to sustainability and the programs topic by topic, okay? So let's begin. Next, please. In terms of corporate governance, we foster a culture of integrity and best practices around compliance and ethics. We work to be congruent and transparent in our processes and behaviors. Last year, we obtained the 26th place in the corporate integrity report published by Expansion and what it's named the companies against corruption. And we climbed 14 places in corporate reputation business monitor in LatAm, standing at the 12th position. Next, please. Regarding human capital management, the main efforts are centered in diversity and inclusion and improve the quality of life for our collaborators. We want to be a place where people like to stay at. In 2015, women in management in top management represented 20% of gender participation. And now we proudly represent 27%. We want to empower women at work and bring some same opportunities to talent. Our philosophy is to grow the best talent because of its talent, not because of a gender quota. Last year as well, we launched a wellness program for employees called creating my best version. With its main focus on mental, physical and financial health, we brought experts to help us manage emotions and other issues during the pandemic. And last week, for example, we have the first financial event for all the team members in order to help and orient it in the way they can improve the use of money and their salaries. This year, the intention is as well to help bring diversity to build and add value to the strategies that we have seen and to increase the interaction to know each other better with lots to talk and learn about sports, cooking, art, gaming, whatever. It's a free topic community. Next, please. The third one about vendors and suppliers. Since 2019, we launched responsible sourcing program with the intention to certify most of our strategic suppliers under international work standards and environmental regulations, guaranteeing human and labor rights as well. And it was a success. What is our intention is to increase the level of ESG concept in the mindset and the decisions of our vendors, too. Next, please. In this model, we confirm our commitment to improve our customers' lives everywhere, anytime. In the digital world, we have reinforced the protection to customer information and cybersecurity and credit transactions. We have a solid digital strategy through the cybersecurity operations center for active monitoring and response to possible threats. For the second consecutive year, we obtained the certification of compliance with the international security standard, PCI, in the use of credit and debit cards for payment. During the next 3 years, we will seek to improve accessibility to our customers with motor disabilities and improve responsible consumption with greater financial education with the support of credit areas. Next, please. Environmental performance. The environmental performance is one of our favorites. It's oriented to use clean energy and reduce the impact of gas emission and carbon footprint in our operations. We have contracts with 88% clean energy suppliers, additional to the owned by the government CFP for the following years. 34% already -- are already operating, and 54% are going to be connected or installed in the next 3 years. We have changed store lighting for LED in 98% of Liverpool stores with a reduction of 12% in electricity consumption. In 2020, we have redesigned our packaging to be friendly with environment in all the business units. And with the transportation order management initiatives that will develop in the logistics, we plan to reduce the emission of polluting gas by 10%. And as we saw before, for example, plant and new workplaces are considering with a sustainable design. Next, please. And last, but not least, is the social commitment perspective. We strongly believe in education. The skill of learning is the most valuable skill for the workforce today. Liverpool Virtual University has committed to help 17,000 collaborators to complete their studies in basic and medium-level education. Next, please, Paulina. And to promote as well a business administration degree. This is our projection of graduates that we want to have the next years to this arm we have with the university. With a flagship program in education, we will help people to improve their capabilities, their vision and the way they execute the things in a different way. We are thinking that with this effort, we are not only offering a good option. We are also offering growth and progress to our people. Our vision is as well to open these services to the community. Finally, last year, we donated in kind MXN 170 million to foundations we work with and are oriented to health and education. With all of these initiatives in mind -- the next one, please. With all of these initiatives in mind, El Puerto de Liverpool is moving in the right direction, not only to be responsible with our community or to support the long-term vision of the company, but because we want to reinforce our commitment to serve our customers every day, everywhere, anytime. Thank you so much for your attention, and I turn to Enrique Guijosa.

Yes. Thank you, Zahie. Thank you very much for your -- your explanation of what we're doing in terms of our footprint. And the next part of the presentation is to go directly to your Q&A without any further ado. I do think that you already saw the figures for Q1. So I will not elaborate on them unless you have specific questions. I think that's a better use of our time. [Operator Instructions] Thank you.

Thank you, Enrique. Our first question comes from the line of Antonio Hernández.

This is Antonio Hernández from Barclays. Actually, a couple of questions. Could you please repeat your CapEx guidance for the year? And my second question will be related. You mentioned private labels' importance. And of course, that's very, very relevant for Suburbia. But could you give also a little bit of some information of how relevant this could be maybe in the future for Liverpool format as well?

Yes. Thank you, Antonio. Well, in terms of our CapEx, that -- what Graciano mentioned is that the guidance that we have for 2021 is basically around MXN 8 billion. I think that our CapEx is going to be in the MXN 7 billion to MXN 8 billion range for this year. And for the next several years, we're thinking specifically probably for the 2022, 2023 time periods, CapEx is probably going to be more on the MXN 10 billion to MXN 12 billion range because we have a big investment related to Arco Norte, the Arco Norte project. So that will basically increase between MXN 1.5 billion and MXN 2 billion our CapEx for the next couple of years. And after that, we are thinking of a CapEx on a running rate of MXN 10 million. And as Graciano explained also, the idea is that the -- a big chunk of that, 40% to 50% of that is going to be devoted to our digital and our logistics technology initiatives And the majority of the other 50% to 60% is -- will have to do, as you saw, basically with maintaining our locations fresh and current So it's going to be more focused on renovations and remodelings more than new stores. So in terms of new stores, the focus is clearly still on the Suburbia where we're thinking of our 10 stores this year and a running rate of around 15 stores per year starting 2022. So that's the color on our CapEx. And I don't know, Graci, if you want to give a little bit of color around the importance of private labels and what are we thinking around them.

Sure. Thank you for the question, Antonio. Private brands are really, really important for us for 2 things. First, they have higher margins, and they also give us differentiation, especially now on an omnichannel world. We just recently launched -- we ended the project maybe at the beginning of this year, which is called PLM, which will enable us, both in Suburbia and Liverpool, to better work our private label since the idea of the label all the way to the delivery of the product. And in Liverpool, private label penetration, as you said, is lower than in Suburbia but that, I think, is a little bit misleading. Because in Liverpool, we sell a lot of electronics and white goods, where we are not considering having private labels. Our -- in clothing, though, Liverpool is pretty strong on private labels. We have brands like [indiscernible] map that are selling really well. We are not planning on building a ton of -- mon cara mia, for example, is a good example in kids. We're not going to build a lot of new brands. What we're going to do is we're going to better leverage the brands that we already have, and we do believe that they are going to have a higher growth than the other brands in the future. It's really important for us. We now have also the knowledge that Suburbia and Walmart have when we bought Suburbia because they were -- they sell around 70% on private labels. So we are using -- we use that to the PLM project, and we're going to use that in the future. I believe private labels are going to be really, really important for clothing and fashion for us.

Our next question comes from Luis Willard.

And congratulations for this first event. I hope it's the first for many more to come. I have 2 questions, Enrique, if I may. The first is, you mentioned that a large portion of the CapEx is oriented to remodeling and upgrading the stores at least in the next 5 years. So this -- I mean, it's a relevant portion of CapEx that seems to be a little bit more defensive than offensive play. So are you setting any metrics to ensure this investment does not erode the company's returns? That will be my first.

Yes, Luis. Well, yes, we basically run a financial model for all the investments that we do. We have a threshold of a 10% minimum rate of return on an after-tax basis on a real basis, a real-term basis, so it's after inflation. That's our threshold. So as we take a look at every single one of these projects, we do our best in order to make sure that we are not eroding our financial returns, as you were saying. So we will continue that discipline. That's the same thing that we have done in the past. As you're saying, is defensive or it's also -- I mean, in terms of protecting our franchise and making sure that we have both our stores and our shopping centers still relevant and fresh for our customers. So we think that, that is the right thing to do in order to protect our franchise. But again, the financial discipline will be there in order to make sure that these renovations bring additional productivity to the stores. Perhaps also like redoing our selling space in order to have more square meters for the right categories based on the customer needs. So that's -- those are the things that we have -- we need to -- we try to balance in any of those projects.

And if I may, a second is, do you have the intention to increase the level of information disclosure ahead, maybe on a quarterly or at least semiannual basis, to keep track of the evolution of the new strategy?

Yes. I think that the idea is that we will be -- in our press releases every quarter, we will give some color on the relevant advances or results that we have in the initiatives that we just explained. So yes, we will do our best in order to give you, the investors and the analysts, the right color in terms of what -- how are we doing vis-à-vis the objectives that we're setting for each of the initiatives that you saw. As you might imagine, I mean, the idea we have on the initiatives that you just saw, is to be very choiceful in terms of the -- just specifically the next level of action plans that we have for each one, which are the right ones to do in terms of the value-added that they bring to the company. So that's also something that we're doing as we speak in order to make sure that we have the right sequence of action plans for each of the initiatives.

Our next question comes from Irma Sgarz.

My name is Irma Sgarz from Goldman Sachs. I wanted to ask about -- and thank you also for this presentation. Very helpful to have a complete update on your vision. I wanted to ask a little bit about the network design on the logistics side. How do you sort of -- and I'm sorry if I missed it along the presentation. How do you sort of think it might split up further down the road between sort of fulfillment through your stores versus click and collect versus sort of the fulfillment directly from the distribution center to the customer? Just trying to think sort of how you're thinking about that network design by maybe 2025 or whichever timeframe you think is appropriate. And then the other question is regarding the technology, you've clearly laid out what the enablers are. I was just wondering sort of how do you think about the technology that you're specifically developing for the marketplace? You spoke about fulfillment, offerings, the seller center. But how should we think about this ramp-up sort of until -- when is the technology ready? And how should we think about that ramp-up of that marketplace by 2025? Is it more back-loaded given that maybe some technology components need to still be developed, and only then you can sort of accelerate the ramp-up? Or is it relatively linear across that timeframe?

Yes. Thank you, Irma, for the questions. I think that in terms of our network design, really what's really new were -- 2 elements are really new on this: First, the size of our Arco Norte new location that you saw. It's huge. We're going to start with the big ticket facility, which is really not that new in terms of -- it's not going to be that new in terms of technology. I think the technology for the big ticket items has not evolved a lot in the past several years. I think that -- so basically, what we're thinking about the first phase of the Arco Norte priority is basically just to move the current facility that we have in Huehuetoca for big-ticket items, to move that to Arco Norte. The next one is really the big change in terms of soft lines because that will be a combination of doing cross stock, which is basically how we do today at our Turkey plant and distribution center. But also, we will be more aggressive in terms of holding inventory to follow the month in terms of trying to anticipate demand. We do some of that today in one facility called [ Olega Central ], but this is very small. So the scale in terms of what we're trying to do in Arco Norte, it's completely different. So that's the first element of the new network design. And the second element is the fulfillment centers today. We don't have fulfillment centers. We are trying to build in the next several years the 7 that Edwin mentioned. And the idea there is to put those distribution centers, as you might imagine, in the big cities in Mexico. That's going to be, of course, Mexico City, which we sort of already have that; Galerías Monterrey and so on and so forth. And the role of that fulfillment center is going to be twofold. It's going to, first, to serve as a fulfilling or trying to renew the merchandise in the store. That's the replenishment role for our stores. And the other role that they're going to have is also to sell -- to send merchandise directly to customers' homes and complement that last mile with our stores. So that's a general color, I'll ask Edwin, if you please want to give you -- wants to give additional color on what we're trying to do in terms of the network design and how we're seeing the Click & Collect play out.

Yes. Thank you, Enrique. And Irma, we're working on the network design. We're building something very flexible in order to serve the customer in the most convenient way for them. So the challenge here, as Enrique mentioned, is to ramp up the fulfillment centers and orchestrate in a better way how during peak seasons, we avoid bottlenecks and do it in a most cost-efficient way. And about Click & Collect, all the network, all the stores are going to be able to do Click & Collect. So the customer will choose if they want to use this method. And another challenge will be the distribution model. What I mentioned about the planning and so on challenge. Because we are planning to do a soft allocation in order to sense the demand and then replenish to ensure profitability. So I hope I answered your question.

Our next question comes from Bob Ford.

Sorry. Irma -- just a minute. There's also the second question of Irma in terms of the marketplace and the technology. And first, the second part of your question in terms of how the growth rates look for our marketplace initiative. You're absolutely right. They are more backloaded towards 2023, '24, '25. So in terms of the digital horizon that we're doing from now until 2025, the ballpark part of the growth comes in the latter part of that timeframe. But in terms of the technology, I don't know, Gerardo, you want to give a little bit color together with Antonino in terms of what we're doing technology-wise for our marketplace, our 3P initiative.

Sure thing, Enrique. Thank you. Thank you very much. Yes, technology wise, what we are doing is building platforms and tools that will support the growth for a marketplace business. Still, there are some companies that we need to build. But everything is planned to be ready for -- as the business is ramping up, the marketplace business. And so far, there are some components that should be integrated to our technology landscape and some others needs to be built. But everything is part of the plan, and I will turn it over to Antonino, who has actually the business side of that.

Thanks for your question. On the part where you ask if the technology's ready, yes. A simple answer is, yes, the technology is there. It's ready. As you know, we have partnered with the best companies, technology-wise. We've partnered with Google, with Oracle, with Miracle, which is a specialized part of our marketplace model. Of course, it needs improvement, but we're ready. And the ramp-up comes also from process standpoint. So the business is growing tremendously. If we want to continue this growth, we are -- as I mentioned before, we're changing our structure. But I don't think the technology right now is a stopper. Of course, we will be implementing it and upgrading it and changing it in order -- how the business grows. But right now, we're changing the seller processes and our inside structure with the buying department with our own digital department in order to ramp up this and be -- and grow way faster than we've had in the last couple of years.

Now we'll move on to the question from Bob Ford.

Good morning, everybody. Thanks for the presentation. My name is Bob Ford and I'm with Bank of America Merrill. Graciano, what do you expect e-commerce penetration to be as a percentage of overall mix in retail sales in 2025? And as you think about that going forward, how much of that is going to come cross border from China to the United States? And within that context, how should we think about real estate and Liverpool margins more broadly as the consumer goes increasingly digital? And as part of that, how are you thinking about using technology to maybe reduce cost and operating expenses?

Thank you for the question. That's a tough one because you're asking me something in 2025. I'm not really sure the answer on 2022. But I think it's certainly going to grow. It's going to be very important. It's going to be I don't know, around 30s, maybe 40-ish percent for us. I think overall, for e-commerce, it's going to be a little bit lower. We do expect to have a higher market share in e-comm than what we have with physical, and that's why we are building all this. It's going to -- where it's going to come from, cross-border from, I think the U.S. You can see Amazon is doing really well. [indiscernible] as well. I don't know. AliExpress is probably going to be a relevant player also. So I believe that there's going to be 5, maybe 6 players, counting Walmart and Coppel, who are going to win on this front. Actual number, it's a guess. I don't know. But the main point is that the last year with the pandemic, the market grew and found that it's easy to get your stuff and your purchases delivered to your home. So overall, I think the pandemic was the lever or the accelerator of all these initiatives. In 2025, I'm not really sure what the number is going to be. In terms of what you said of physical footprint. I think that's one of our main advantages. If we --- we mentioned it really fast, but planning, assortment and allocation is a project that it's -- a brain behind the logistics, right? So the issue is with that project, combined with the physical side, which is plan, which are the distribution centers, I'm going to be able to have the merchandise closer to the customer. And that's going to be -- that's going to allow me to deliver cheaper. Let me give you an example. For something that I deliver directly from my store, it's maybe 30% of the cost of something that I delivered from a warehouse. I think that was also part of the last question. What percentage of the deliveries I plan to make directly from the stores? We are ramping up that capacity to deliver most of what we can directly from our stores because it's faster. So I see all [indiscernible] deliver has as an advantage as a cost reduction. And you said technology reducing cost, we are having some projects on that, like robotization and automatization on processes that are very manual today, that are very repetitive. But I see technology, not only that, but technology is going to help us improve the top line. We are focusing most of our technology on improving the top line and customer satisfaction. And we have a few processes on reducing costs. For example, transportation management that Edwin also talked about. It's mainly how do we optimize our primary transportation costs in order to transport lesser and do it more efficiently with less gas consumptions. There are a lot of projects mostly going to help us on the top line, but there are some pretty relevant on the bottom -- on the cost side as well. I don't know if I answered your question.

That was very comprehensive. With respect to just a general sense of margins, do you envision a business -- because you're leveraging technology more effectively or you're creating -- adding more services to the ecosystem, do you think you can maintain or improve on your current levels of profitability, the ones that we've historically seen? Or is it -- is there going to be some secular pressure that you're going to have to -- maybe top line grows, but the margins are going to be a little narrower.

No, I -- no. Well, historical margins, apart from last year, I hope you were asking about.

Yes. No, prior to 2020.

Because last year margins, I'm sure you want to improve them. No, but I believe that margins are going to go back to the level we used to have, but it's going to be a combination. Because we're going to have more cost on the logistics side, where we are having more deliveries to the home of our customers. And we're going to have some benefits on other parts of the businesses where we're going to have, as I said, improvements on the first role of the transportation efforts. We're going to reduce also -- when you have a better planning, assortment and allocation, you reduce markdowns and you improve gross margin. So where -- we see a combination of aspects that are going to -- essentially, we hope to return to the margins we saw pre-COVID next couple of years. Not on this year though.

Our next question comes from Joaquín Ley.

Joaquín Ley from Itaú. It's -- I'm curious to know what's your opinion on the evolution of the credit business in relation with the evolution of the e-commerce business. I mean my sense is that probably you're selling 40%, 45% of what you sell in the brick-and-mortar business through your credit card. But that proportion is materially higher in the e-commerce business. So Graciano, you mentioned that might be in the 30s or the 40s in -- of your total retail sales in 2025. So how should we think on the contribution of the credit business to your consolidated numbers by then and, therefore, to your profitability?

Yes. Thank you, Joaquín. I think that I will ask -- since we have Santiago here, and he's the expert on the credit card. Yes, we have -- just to say very brief, and then I'll pass the mic to Santiago. Yes, we are thinking in our financial models at the credit card portfolio. And because of that, the revenues from the financial side of the business will or should grow ahead of our retail sales, reflecting exactly what you're saying in terms of the penetration that we have, our credit card on our digital sales, which is materially higher, as you said, than what we have at the bricks and mortar. And on the other hand, what we're doing in terms of the revenue that we generate for the -- for sales on the -- of most part of our portfolio, that's the invoicing that -- with our credit card for everything outside Liverpool stores and digital websites. And finally, with all the initiatives that Santiago described, where we're taking a look as we speak in order to enhance our financial service offering. But having said that, Santiago, please go ahead and give some additional color, please.

Thank you for your question. And I think you pretty much already answered the question, Enrique. And yes, as you mentioned today, in the brick-and-mortar sales, it's close to 47% what we have in penetration with our own products. It would be -- this is in Liverpool. It would be like, I would say, 40% with our private label and another 7% with our Visa portfolio. In our e-commerce sales, it is much higher. Sometimes it is even closer to 60% probably. First of all, one of the reasons is because we don't receive -- we don't have cash sales or we didn't have cash sales in our e-commerce. So, obviously, the way that it was divided, automatically, the percentage of the penetration is much higher. So what do we expect? Well, we really hope that even for 2025, we keep -- and if possible, not just keep the same percentages that we have in penetration, but obviously trying even to increase. And that's why we are trying to go to different segments of the market, like, for example, the credit or consumer that we have with these new products or with the guaranteed credit card that we are also trying to launch in order to gain a larger percent of the cake and a bigger percentage of the penetration with our product. So yes, hopefully, we will try to be closer to 50% or even above 50% in the penetration. I don't know if that answers your question.

Can I chip in a little bit as well? If you guys think that the retail business is going to be disrupted by new technologies, the credit and the payment business is going to be a lot more disrupted. It's going to be -- so I think that business is going to change a lot in the next few years. And that's why Santiago is building this financial marketplace. Because the changes we're going to see in the way we pay are going to be huge in the next 3 to 5 years.

Our next question comes from Joseph Giordano.

This is Joseph Giordano at JPMorgan. Congratulations on the first event. Very insightful. I have 2 questions here. So like I'll start at technology and then end on the financial service. So the first one on the technology side and all the architecture you guys are developing. You mentioned you partner up with major technology companies. But here, like I would really like to understand what's actually proprietary. And why is that? So we want to understand what's really changing inside the corporate culture, particularly in terms of agile teams. And in this context, how are you guys trying to bring this different type of employee, right? So the guy with mindset. And also within this tech context, we see throughout the region like several bolt-on M&As attract new technology development. So I would like to pick your brains here on how you guys think about like how those small acquisitions could actually further accelerate your digital transformation process. Then thinking like on the long-term vision of being on the front screen of the smartphones, right, and being like the preferred destination for shopping. My question here is like on how you guys think about higher frequency categories, so household products eventually groceries. And how like you can embrace other bricks and mortar retailers into your platforms. And here, like we have a clear gap in Mexico. So Walmart is doing that very well, but we do not see like other major players doing that other than Cornershop. And lastly go into the financial services. And I fully agree that's something that really has to be transformed. I'd like to see like how you guys think about the integration of the monedero, the e-wallet and creating like a closed-loop environment system here, right? So that's why I asked about the higher frequency categories and integrate that with the credit card and the loyalty program.

Yes. Thank you, Joseph. I think that -- so I'll go one by one in terms of the tech and what you ask in terms of proprietary technology. What we're doing in terms of agile teams. What we're planning to do in terms of talent acquisition and retention, and finally, on the M&A. I'll just on the M&A, I think that we're thinking that perhaps M&A -- very punctual and very specific acquisitions may complement and accelerate some of the initiatives that we have just described in the presentation. So we don't have anything like specific in the short term. But we clearly know that, that could be a way for us to accelerate and build the capabilities that we need much faster. So again, we don't have anything like in the short term to announce, but clearly, that's in the long-term picture that we discussed for the presentation. Now for the other 3 things, I'll ask Gerardo and perhaps Antonino to give some color in terms of -- on the proprietary part of our technology, agile teams and talent. Please go ahead, Gerardo.

Yes. Yes. Thank you, Joseph, for your question. Yes, in terms of the proprietary technology, what we're aiming to do is build an open tech ecosystem or landscape. We are willing to take advantage of technology that is already available. So that's the reason we have partnerships like the one we announced last year with Google, right? So we are trying to take advantage of what is already there for us to take. That will help us to accelerate the -- enable critical capabilities for the business. So we will try to, as much as possible, keep an open technology ecosystem and taking advantage of our partnerships. In regards to agility, we have, as Antonino mentioned, we already have some digital products. We already have some product cells or squads that are working that way, using agile methodologies. And what we are doing is just scaling up to the rest of the organization. And of course, it's a challenge to work on culture and mindset. That's the real challenge on that. We have a plan to scale it up and make sure that we provide the team with the proper tools to make that happen. That will help us also to attract and retain talent for technology. Antonino, I don't know if you want to complement.

Yes. Thanks, Gerardo. Thanks, Joseph. I'm going to talk a little bit more on the job part of what Gerardo mentioned. And we've come from, a couple of years ago, to launching one, I'm going to say, 8 to 7 projects the whole year. Last year, when we implemented this new technology, as Gerardo mentioned, it started in the digital part of the business. We were able to implement more than 150 new features. This year, we're growing it to 400 new features, I know Gerardo's expanding it to the whole organization. And regarding talent, well, we have 2 main strategies. One is, obviously, retain the talent that we have. I believe we have one of the best talents in the company -- in Mexico, sorry, and we need to retain it. So there's a lot of cannibalization. There's a lot of offering between even the Mexican retailers, the pure players. So yes, that's part of our everyday business now right now, and we are currently focused on how to retain it, stop the cannibalization and retain our best. The best of the best, we have them here, and we need to retain them. So we're currently reviewing how they are, rereviewing their -- not just only their monetary compensation, but how are their lives. How can we improve their lives, and Zahie is helping us a lot on that every day. And also, the other part is we need to bring the best of the best. So yes, we are also -- when we have an opening on a specific talent, we do first analyze obviously, internally, but we do also focus on what's the best out there, wherever they are, in whichever country they are, and we try to bring them here. So yes, we are really, really focused on our talent. And that's part of our main success is being able to sustain and maintain the talent that we already have.

Thank you, Antonino. Going to the second question in terms of the local vision and what might be the role of the higher-frequency categories in that vision that we have. I think that we also understand very clearly that in order to have a sticky experience, as Mauricio said in the ecosystem one pager, we need to add to our portfolio precisely categories that have basically a weekly spending pattern instead of a monthly or bimonthly or even semester by semester spending pattern, which is the case for most of the categories that we're currently offering. So we also -- that's something that we are starting as we speak. What will be the best way to bring those high-frequency categories into our portfolio? Most likely, that will involve some kind of partnership instead of going greenfield. But at this point in time, that is still in the very early stages in terms of the internal discussions. But again, it's clearly on our radar. I don't know, Graciano, if you want to give additional color on that.

Yes, I think part of -- you touched the subject pretty well. I think you understood it pretty well. We need to upgrade our marketplace capabilities in order to increase frequency of our customer, and that includes having additional categories, which we are currently working today. So I think, yes, we need to look outside of our current offerings, and that's why we are developing our marketplace at a faster scale.

Thank you and last but not least, on the financial services and the integration on -- where we're talking about a closed loop with Monedero or even thinking about an open look to use the Monedero outside our current offering and -- either from partnerships or ways to do that. I'll ask Santiago to also provide some color. Please, Santiago.

Thank you, Enrique. Thank you, Joseph, for your question. As Enrique mentioned, yes, on the closed-loop products that we have today, like the Monedero, as I mentioned, we believe that we are already doing a good job in integrating it with everything, not -- because with the Monedero that is being launched on these days, you can go directly and make purchases on e-commerce. You can go to the store and make purchases, and you can check your balance, and you can do transfers to somebody else and you want to transfer. This Monedero, for example, we also have the Monedero of the Visa card, which is a loyalty program that we will eventually need to integrate with the -- all of the loyalty program that we are developing for all of our customers. So in this case, you can move the money from your loyalty program of the Visa card, from that Monedero you can move it automatically to the new digital Monedero that we have. So we believe that on the closed loop, this integration is pretty much being done today. With the e-wallet, for example, you can automatically go and do purchases in e-commerce. You can go to the store and pay with your telephone in all of the stores. You can consult your balances, you're hoping to buy, your statements, all of the purchases, all of the payments, everything is pretty much. And I think right now, the challenge is to go to an open loop. As I mentioned on the last -- over that we had on that illustration that I showed you, when we want to go and want to integrate an open loop account, that would be like a checking account or a savings account, that would be probably the next step. And definitely here that we are right now in the process of analysis and exploration. Yes, definitely, we believe that it is most likely that this will be done through a partnership, a partnership or an alliance with a technological partner or with a financial institution alliance that we can do. And we have an example of the way that we are doing this with the insurance, okay? On the insurance distribution business that we have today, the way that we are doing is we're not even -- we're not an insurance company, and we are not even a broker. So the way that we're doing this is through alliances and through partnerships that we have with different brokers and with different insurance companies. And the way that we do it, we just integrate that into our Liverpool pocket in order for the customers to be very convenient in order to -- if they want to buy an insurance, by just one click, it's integrated and it can be charged to your private label with the credit card. So something like that scheme that we have today within our insurance distribution business is the way that we see that it could probably be done on the open loop accounts. I don't know if I answered your question?

Yes, you answered.

Our next question comes from Vanessa Quiroga.

Vanessa Quiroga from Crédit Suisse. My questions, I have a couple. I wanted to get a better idea in terms of your unitary delivery cost. Going back a little bit in terms of the results. I mean, since the pandemic started, can you tell us by how much your unitary delivery cost was reduced? And what strategies did you implement to achieve that? Also, if you could give us some base numbers for some of the targets that you are presenting? In terms of marketplace sellers, for example, how many do you have today? And in terms of the next day deliveries that you are -- that you want to achieve, what percentage of your current sales are right now being made next day?

Yes. Thank you, Vanessa, for your questions. I think, fortunately, I have Edwin today with me that he is really the one that knows everything about our supply chain and logistics. So I'll ask Edwin. He's the one that knows. Obviously, he -- to give us some color on how the last-mile delivery cost has evolved since the start of the pandemic in March last year to what we have today and what's behind the reduction that we have seen in the past, basically, 12 months. Please go ahead, Edwin.

Yes. Thank you, Enrique. Vanessa, the reduction that we see since the pandemic started in terms of shipping your item to the customer is, if we send the product from the store, we have reached a 70% reduction in the cost of serving since the pandemic started. And doing this from our warehouse, it's a 40% reduction. How did we achieve this? Obviously, the volume that we received at the beginning of the pandemic was not in any quarter. So there was -- we need to go to 3PLs without having reference tolls on the services. So since we improved our forecast accuracy and we increased the delivery capacity from the warehouses and enabled the work from the stores in a more efficient way, using also crowdsource delivery methods, because those were exploding in terms of they were available at lower cost and at higher frequency. So that was one of the strategy that we did. We took, and those are the results that we get right now. And your second question, the same-day delivery, we are planning to do 10% of our total delivery the same day. Right now, we're above the plan. And the way we are managing this initiative and the change management, as I mentioned, the people involved in this process and the knowledge about the importance of the delivery time that we offer to the customer, is really in the mindset as far as our collaborators. So we are above our plans. And in medium and long-term plans, we intend to, in a couple of years, reach above 30% and then above -- I mean, between 70% and 80% of our deliveries. Obviously, we need to improve, as we've been mentioning, the distribution because we need to have the product closer because capabilities to deliver from stores or from warehouses or from the fulfillments that we're going to build are going to be there. The big challenge is to allocate the product closer in the network to win in this niche. So I hope I answered both of your questions.

Vanessa, regarding your question number two, which is about the marketplace sellers. Yes, we're currently in numbers around 1,200. That's our numbers because they go up and down. And as mentioned before, we are planning to grow that [ fertan ] fast. So that's why we need to have the best of the best and change the structure we have right now to optimize that growth.

Excellent. And I guess the last one, your target of 3x increase in e-commerce sales. Is that -- does that include 3P?

Yes.

Yes. Yes. Yes. It's the whole enchilada. It's all the digital channels that Antonino explained. So when we're talking digital, it involves .com, it involves all 3P, all the marketplace and maybe also the extended catalogs. So I think that we have exciting opportunities. And also the multi-sites, which basically are the gap.com and the potterybarn.com websites. So when we're talking digital, that's the whole thing, Vanessa.

Okay. Okay. Great. How would you -- how do you envision your same-store sales growth going forward? Obviously, 2021 will be a recovery year. But after that, what do you think the normalized same-store sales look like, including the growth in e-commerce?

Yes. Well, obviously, as you're saying, I mean, this year, it's going to be a little bit strange because, especially as of Q2, the comparison against the previous year is going to be completely crazy. But if you -- just first, talking about 2021, what we're thinking is that basically, I mean, to have a comparison against 2019, which is the last, let's say, normal year, again, it makes sense also. We're thinking at least in our current plans we have for Liverpool, same-store sales for 2021, minus 6% for April - December compared to 2019. And in the case of Suburbia, it's a combination of minus 13% in Q2 and then basically a 6% growth in the second semester, again comparing against 2019. So that's to give you a flavor of how we're thinking about 2021. Hopefully, those are conservative numbers. We were really surprised, as Graciano said, by March. March, I mean, Liverpool sales were 51% above 2020, which, as you know, the second half of March was already an effect of the pandemic. But even comparing against 2019, retail sales in March for Liverpool and Suburbia combined were 11% above March 2019. So that was a confidence booster in terms of our expectations for the rest of the year. So hopefully, the numbers that I gave to you turn out to be on the conservative side for the balance of the year. Now going forward, in terms of financial models, we usually, for our same-store sales, use 3% GDP growth in real terms, which with inflation should give us same-store sales growth of 5% to 6%. That's basically our thinking in terms of our merchandise sales. And then on top of that, you should put the 3P growth rates that we just mentioned, which are not included in those 5% to 6% same-store sales.

Excellent. Excellent, Enrique. How much of that 3P sales represent today of your total revenues?

Well, today, you know the share of marketplace in 2020 was around 6% of the digital sales. And as Antonino explained, our 2025 target it's 35%. So that gives you a good flavor of how that will play out.

Our next question comes from Andrew Ruben.

Andrew Ruben from Morgan Stanley here. Just continuing the questions on marketplace. You mentioned the hybrid vendors. And I'm curious how you think about managing the suppliers on both the 1P versus 3P side, how to manage any conflicts and understanding what goods would go 1P versus 3P. Just getting more color on your plans there would be very helpful.

Yes. Thank you, Andrew. I'll take advantage of the expert here, Antonino. I think that, as you might imagine, this is a very delicate balance in terms of -- with our merchants and all our buyers. I mean [ you know it as well ] the 1P and 3P has been a really challenging and insightful discussion, right? Antonino, please go ahead.

Thank you, Enrique. Thank you, Andrew. Thank you for your question. Yes, as Enrique mentioned, that's a hot topic right now. But I'll try to explain it the best that I can. Currently, we have our buyers' expertise as one of our greatest assets here in the company, but we have limitations. We have purchasing limitations. We have store space limitations. So let's say what we're doing is we're focusing with some partners where they have more inventory than we can handle. So what we're doing is we put it and it's all going to be automated. That's the catch. It has to be all automated, with automation and working with the data that I mentioned before. So our buyers' expertise will decide this is the right share that is going to go into the store because it's the fashion trend. However, if the merchandise were out of stock and the vendor still has them, automatically put it into 2PL and sell it and also with Fulfilled By, which Edwin is building, we will be able also to handle some inventory from our vendors over there. So it's a mix between the expertise and the data we have with what our vendors and the close relationship we have with them and how can we mix them all automatically to have one omnichannel experience and a seamless experience for the customer. I don't know if I answered your question, Andrew.

Got it. Okay. No, that's helpful. And it makes sense on current limitations on shelf space, and how that's not the case with 3P. And then I guess just as a follow-up, when you're thinking about the plan to grow the sellers by 13x, you'd be getting away from some of the traditional vendors that you work with. So where is that growth going to come from? Is it going to bring you into new categories, new products? Or what type of sellers are you targeting?

Thanks, Andrew. Yes, I mean, it's been mentioned before. Of course, we need to experience and we're analyzing new categories. That's a lot of vendors will come in too. Our main focus in our marketplace is to complement our offer. So yes, we are planning to complement our offer. We have, as you mentioned, limited shelf space. And we are currently working on vendors that will complement what we have. Some will overcome, but right now, our goal is to complement and give more of what we have, but not exactly the same. So yes, we're focusing on new products, new categories, especially new vendors. And also, as I mentioned before, exploiting the vendors that we already have to get more out of them with this partnership we already are into.

Our next question comes from Rodrigo Alcantara.

Rodrigo Alcantara from UBS. Three quick ones, if I may, Enrique. The first one, just as a way to wrap up everything here. Well, you mentioned your target for 2025, are expectations for digital fintech, right? So -- but if you were to give an order in terms of priorities for 2021, what would you say would be your top 3, top 5 priorities on this front? That would be my first question.

Yes. Thank you, Rodrigo. You mean top 5 priorities in terms of the ecosystem strategy?

That's correct, yes.

Okay. I think I'll ask Mauricio so he can have some time to give some perspective on how things are -- 5 key things that we need to deliver in the short terms in terms of everything that we shared. Mauricio, please go ahead.

Sure. Thank you, Rodrigo, for your question. And I would perhaps answer it in 2 ways. One is in terms of enablers and the other one is in terms of commercial initiatives. In terms of enablers, I believe the IT transformation and the supply chain transformations are the 2 main ones that we need to get significant progress on, since those enablers will help us accelerate many of the commercial ideas that we have already shared. And in terms of the commercial ideas, if I had to name one, probably I would name the marketplace. I believe Antonino has shared a lot of info in that regard. But I believe that's a key one, very linked to our core, that will help us with our 3 main objectives, again, reducing the gap versus digital natives, getting -- or strengthening our assets versus the omnichannel players. And also, and very important, increasing our stickiness by getting into new categories. So I had to name 3 because those will be perhaps the 2 enablers and the marketplace.

That's helpful. The second one would be on the infrastructure network, which I found quite interesting. This new addition of the 7 omnichannel fulfillment centers, which is different when compared to your previous plans, were not -- where these 7 DCs were not considered. So I was wondering what drove this change relative to the previous plans, which appear an infrastructure more similar to the ones of Walmart, MercadoLibre or Amazon that they have in Mexico. And on this front, I don't know, for 2021, should we expect 3, 2 DCs to be built? Or what's the target on this front?

Thank you, Rodrigo. We're [ now ] going to answer that. Edwin, please?

Yes. First, that [ anything in the ] infrastructure plan because we are seeing the customer behavior. We need to be more agile, we need to be more flexible and much more scalable and closer to the [ ment ]. So we are not only building the infrastructure, but we're also changing our commercial model in terms of change more for a full commercial model rather than only a push model. So that was the main issue that drives this change. And how many are we going to open? We're going to start transforming a couple of warehouses that we have. A couple of hubs that we have the size, we have the location, and we are going to incorporate new capabilities and prepare the systems. Obviously, as I mentioned, a big part of this to start the operations of the fulfillment centers is the change in that push-pull model, and that is dependent on the implementation of planning assortments. So we believe that we will start operations in 2022 with a couple of them, but not in this year. This year, the total focus is basic infrastructure for Arco Norte and delivering to the customer from the stores. I hope I answered your question.

Yes, that's clear. And the last one, just for the sake of clarity here on the marketplace discussion. When we're talking about 6%, 2020, 35%. I mean, we're talking about in terms of GMV. I mean, marketplace GMV equivalent to 6% of total sales growth? Or are we talking about marketplace, Internet sales as a percentage of total sales? Just to get some clarity here. That would be my question. And also here, on the incentives that you're giving to sellers, if you can give us any sense of how take rates or other incentives are you giving to sellers to differentiate versus competitors. That would be my last question.

Yes. Antonino, do you want to clarify? The 6% is -- what's the base in order -- just to be transparent and talk about the take rates and incentives for sellers to get on board with us.

Thank you, Rodrigo. Thank you for your question. Yes, just to clarify, it's 6% of e-commerce sales. It's the total GMV of e-commerce, that 6%, and we're planning to grow to 35% of that same sales. The marketplace is part. And the overall GMV of digital sales grow by 3x in the next 4 years. And regarding the incentives and the sellers, we're organizing differently and the incentives we have, it's clearly what we already are known for. We are a company based on performing and having a close relationship with our sellers. So we are not as aggressive as many competitors on our sellers. We try to make a partnership instead of just a transaction part. Of course, with this growth, we cannot maintain the same one-to-one relationship, but that's why we are structuring differently to overcome this and have a lot more one-to-one transaction with our top sellers. The other ones try to give them an automation process. And of course, being less aggressive than our competitors. Obviously, focusing on our customers, but also understanding where they are, what are their options leveraged with what Liverpool is offering and also having a close relationship with them in order to what we're doing, what we want to do, what's our promotion, what comes up next, if they wanted to participate. So we are mainly just focusing on those issues. Having the best experience for a seller that they can have and also having incentives that are a little less aggressive and we will help them have a win-win relationship with us. I don't know if I answered your question, Rodrigo.

Yes, that's very clear. And once again, thanks for the Investor Day. I hope it is the first of many.

Our next question comes from Álvaro García.

It's Álvaro García from BTG Pactual. I have 3 questions. My first question is for Edwin. Similar to what Vanessa asked, you mentioned sort of your goals for same-day delivery over the next couple of years through plan. But I was wondering if you could talk a little bit about how you think of vertical integration and delivery and maybe not same-day delivery, but maybe next day or second day delivery goals that you might have embedded in your plan? That's my first question.

Yes, Álvaro. In terms of vertical integration, I believe that we're working in a very collaborative way, diversifying the processes of the buying office, operations, logistics and technology in order to do a very lean and user-friendly way to manage the footprint. So obviously, the challenge is not only same-day delivery. That depends on the time when the customer is really doing the purchase order. It depends on if there's a delivery window to still accomplish the same day. So we are measuring also in hours. If we deliver in the first 24 hours or less, if you buy by 10:00 p.m., you will receive new products by 8 a.m. So in the customer mindset, that could be same-day delivery. And how we are managing the rest of the volume, as I mentioned, the moment where the customer is buying and also the moment when we can fulfill directly from stores. We are believing that in a peak season and a higher market share volume, we need to operate 24 hours also in the stores, in order to be able to [ beat back in sheet ] and start delivering first time in the morning as soon as it's a proper time frame for the customer to receive the product. So that will shrink also the time for 24 hours or 48 hours, even though we need to do picking from another store that doesn't have the assortment, but it's in the same city, we could still achieve those timeframes. So hoping I answered your question.

That's helpful. And then going back to Joaquín's question. It's always been difficult for us to measure sort of what the stand-alone profitability in your credit division is. And I guess it's a clarification, but as you explore all of these new ovals on the fintech side of things and the credit side of things, particularly the stand-alone credit offering you have, that you're developing, is it fair to assume, sort of as a follow-up to Joaquín's, is it fair to assume that you expect the profitability of your credit division to increase through 2025?

Yes, absolutely. I think that's one of our goals. I think that, as you know, because of the pandemic, our credit portfolio has been shrinking due to the conservative actions that we took in order to keep our risk levels within the parameters that we feel comfortable. So in the very short term, the profitability -- and that basically comes from the size of the portfolio -- is being under pressure, but the idea behind all the growth initiatives that you saw that involve taking a bigger share in terms of Liverpool sales and all the additional things we're doing or trying to do outside, that should, of course, give us higher growth rates for the financial services business vis-à-vis what we have seen in the past several years. Santiago, do you want to go ahead and complement -- give additional flavor, please?

Yes. Thank you, Enrique. And thank you for your question. As you explained, Enrique, yes, definitely, is the -- we're hoping to have an increase in the profitability of the financial services business. But it is important to mention that today, what we believe on the 1st August that we have on the left side on that chart is the -- those are the most profitable business where we see that the -- most of the profitability for the financial services business comes from. And that is something that we already have developed. We need to keep working on it. We are still doing a lot of -- and we have a very, very big list of the nice things to have in order to have a better experience for our customers in these products, but that is something that already exists. As Enrique mentioned, unfortunately, due to the pandemia, yes, the portfolio has declined. And obviously, the profitability went down. Also, the NPLs also peaked due to the pandemia. But hopefully, both for this year and the next years, we're seeing a good recovery. We will see a good recovery. And as we keep developing the other areas that I showed you and new products, [ well ] definitely, they will have to add something to the profitability of this business, even though we believe that the main profitability comes from what we are already doing today.

That's helpful. And yes, certainly seeing solid trends on the NPL front. And then just one last one on something we haven't spoken about today, which is your boutiques portfolio. So these strategic partnerships with Gap, with Pottery Barn, with a lot of different brands. So my understanding is that this business line maybe hasn't done as well as of late. And I was wondering how you're thinking about this business over the next 3 to 5 years. Is it something that you'll continue to seek or maybe exit going forward?

Yes. Thank you, Álvaro. I think, as I'm sure you know, at some point in time, probably 4 or 5 years ago, we thought about the boutiques, the stand-alone boutiques as a growth strategy. And frankly, we were disappointed by the profitability that we saw on those lines of business. And we have been either trimming our portfolio. We have a ban on the exclusivity that we have with several brands. And also, we have been rationalizing our -- the number of locations that we have under these banners in order to make sure that we only stay with the ones that are on the positive EBITDA of our cash flow generation. So that's not going to change. I think we're going to continue to have more or less the same number of storefronts that we have today. We don't see that business as a growth strategy. [ for that critical ] we see is that having that limited number of storefronts allows us to have those brands exclusively in our stores, and that's where it makes sense. I mean, to do the combination of -- by having the storefronts, having exclusive rights to sell the Gap merchandise or the Banana Republic merchandise in our stores. So that really is how we see the role of the boutiques as we stand today. We don't have any brands that are not present in Mexico and may potentially add to the portfolio. But if they come, it will be under this combination of committing to open a very limited number of storefronts, if and only if we have the exclusive rights to sell that merchandise in our, basically, Liverpool brand.

Yes. Great. Thanks for the Investor Day. Appreciate it.

Our next question comes from Sergio Matsumoto.

Yes. Sergio Matsumoto from Citigroup. Two questions, the first is more on the 2025 strategy. When you look at the competitive landscape when it comes to omnichannel, what type of leadership do you seek to achieve? Or perhaps in certain areas, maybe differentiate from those 3 to 5 players that you mentioned before? And how would Mexico's e-commerce market differ from those in other countries, either in Latin America or in developed markets? That's the first question.

Yes. Thank you, Sergio. I don't know, Graciano, do you want to provide your perspective on what we mean by leadership on the omnichannel side?

Yes, I think we -- different companies work in different ways. So we arrived at a moment where we each have competitive advantages that are hard to replicate. For example, we have a footprint in Mexico which is hard to replicate. We have 70,000 employees in Mexico that can allow us to give services to our customers that are hard to replicate. We have the credit side of the business, which we have more than 5 million credit cards issued, which are hard to replicate. So that's how we differentiate from the pure players or other people. They have other advantages, we have ours. And I believe that if we do this ecosystem strategy correctly, we will be more relevant than ever to our customers. I think the fast steps we have done on our pocket and our app on the logistics side, which last year was chaotic, but we turned it around pretty fast. And on changes we need to improve on our digital side, will enable us to be a true competitor with different advantages than what other businesses have.

That's very clear. And my second question is on Suburbia. How does Suburbia fit into this 2025 ecosystem strategy? And is it still a growth driver for the group for -- to penetrate to different demographics? Or has the experience during 2020 give you a different -- give it a different positioning for the format?

I think so, what we have fits really well on this strategy, because we have that focus on another customer base that we didn't have as Liverpool. 2020, as you said, was difficult for clothing overall. People didn't go out of their houses that much. And especially formal clothing didn't sell at all last year. So it was tough for Suburbia but that doesn't mean that's going to be the new normal, right? So I believe people are -- they want to go out to see their friends. Offices are returning now in Mexico City. So I -- we still do believe that Suburbia is [ planned off ] a growth path we're going to take. We're going to grow more stores in Suburbia than we had in Liverpool. But we are also going to -- Suburbia's online capabilities were [ not ] good last year, and we believe there's also a growth path on the digital side of Suburbia to come through the omnichannel as well.

Our next question comes from Rodrigo Echagaray.

This is Rodrigo from Scotiabank. A couple of questions from my end. The first one is related to customer acquisition costs and the lifetime customer value. On the former, arguably because of lockdowns, the acquisition cost was likely slow in general for the industry. And so I was wondering, what strategies do you have in place, if anything specific at all, to acquire more customers, whether through high-risk spending on advertising or shipping subsidies or anything of that sort? And the second, on the presentation you mentioned that you've been tracking more than 200 variables to understand and calculate lifetime customer value. So I was wondering, what have you learned from that process? And can you share some insights on trends around these lifetime customer values?

You want to go ahead, Antonino or -- and answer those questions?

Yes. Thank you, Enrique. Rodrigo, thank you for your question. Regarding our lifetime value, you mentioned what are the acquisition costs and the strategy in place to increase that. Well, good news for us is that over the last year, our new customer database or our new customers, and I'm meaning as an omnichannel company, not just digital, grew by more than 150%. That's new customers that we didn't have. So yes, we're currently being able to get to new customers within Mexico. And what are new strategies that we're doing? And I believe that's a very, very good question and a very fair question. Well, we mentioned the whole strategy that has been in this presentation, like an omnichannel strategy with new categories, with new offerings. Also, well, we changed a lot our marketing acquisition and our marketing strategies, and they're proven to work. Our digital marketing strategies have been completely different from, let's say, 3 years ago. Also, the partnership with some strategic companies like Google Cloud platform, Google intelligence platform has helped us understand better where are the customers and how can we approach them in a new and better way. And as I mentioned, the results are incredible. We've grown quite a bit in new customers. And mentioning the 200 variables and what have we learned about them, sorry about that, it's -- well, as mentioned before, 60 -- we've learned that we have very, very, very profitable customers, as I mentioned before, and quite a few there are negatives, but that's really small compared to [ in other retailers ]. So we are okay with that, and we need to change that, but that's not our main goal. What we learned is that 60% of our customers are in the middle, and we've learned that with very little effort, we can increase the lifetime value, and we're giving a lot of examples, but let's say, in the first time you buy digital, we give you a special promo code or we give you an omnichannel experience the first time you go in the store or the first time you use one of the financial services in the store or online or -- and those incentives have helped us move little by little that 59% all the way to the right side of the bar, which is where they -- we want our customers to become higher and top customers. And yes, with all the teams and with all the effort we presented you before, we have learned a lot of our customers, and we're using those trends. And we're doing bit by bit some incentives and testing them on [ NBDs ] and see if that works. And then we scale them completely to the whole customer database in order to increase our [ mathimally ]. I don't know if I answered you, Rodrigo, for that question.

Yes. No, that's helpful. And maybe just a follow-up on a couple of things. As we talked about the key players that have a shot at being competitive online, obviously, there is no mention on -- regarding some more direct competitors like Grupo Sanborns or Palacio de Hierro and not -- is there -- and so in my mind, there is a big opportunity there for you guys, obviously. Is there anything specific that you are doing to address that opportunity? Is there anything specific that you can do to address those customers?

Do you want me to answer -- Enrique?

I don't know if Graciano wants to provide some color on that in terms of -- [ but I think that ] one of the things that we have been trying to do in the -- recently is precisely to expand the definition of competition, which before, we were basically, prior to all these growth that we have seen in digital in the past 2 years, basically in 3 years, basically, the comparison that we saw was basically [ against ] exactly what you're saying, how Palacio de Hierro and Grupo Sanborns were doing. And based on the performance that we have seen, we have gained a lot of share in the past 3 years. We were patting our backs and saying, well, we're doing a great job on that. But frankly, I mean, the digital natives have been growing like crazy. So I think that we are doing -- or we have been doing a great job in terms of taking share away from our traditional competitors, but we need to move faster and catch up in several things that, you know, the Amazons and the MercadoLibres, and obviously, a Walmart also and even Coppel have been doing on the digital front. So I think that -- again, what we are doing against the traditional players is working very well, and we continue to leverage on that. But the challenge now is to be competitive with this new landscape. I don't know, Graciano, do you want to provide any additional perspective?

Thank you. You called it out right there. Our competition has changed because the customer is changing as well. So we need to focus on that new capability. We need to build that change. And we are -- we didn't see our other -- a couple of years ago, we had a very clear sense of our competitors and now it has grown.

And our final question comes from Jorge Benítez.

This is Jorge Benítez from Mexico Value Partners. I actually just have one question related to the financial services unit. I don't know if you can give us a little more color on -- in terms of credit quality and how it should evolve in the future, not only because of the economic environment, but also because the change of mix that you could face given the new products that you are about to launch. This change of mix is going to change the delinquency ratios, regardless if they improve or deteriorate, just for the mix?

Yes, Santiago, please go ahead.

Okay. Thank you, Jorge, for your question. That's a very good question. Yes, well, as you know, definitely, we have seen a deterioration on the quality of the portfolio with the pandemia. But I think the good news is when we redid the -- all of our budgets, we had really expected it to be much, much worse than what we are seeing today. So obviously, we implemented all kind of support to our customers, what kind of plans that they can -- to help them to stay current to all of our customers. So what we are seeing today is, for example, the entry rates and the early delinquency rates that we have today, they are even better than prior to the pandemia. So it has been a very -- even though, obviously, we have today the NPLs, KPIs are higher than what we had because of the situation. But today, the early stages that we are seeing, they look very well. So today, if you look at all of our portfolios all together are under 6% in NPLs. So what we believe is from here on is that hopefully -- well, we're starting to grow the portfolio. Again, we're starting to get more new accounts that, obviously, that is going to change also the equation. But we believe that we can get back to the levels where we feel comfortable. Definitely, these new products that I mentioned that we are developing right now, like credit or consumer, which is a completely new -- is the product for us, we need to learn, and that's exactly what we are doing today. Today, where it is a small pilot test that we are doing, and we are learning. And part of this learning process is getting to know the customer and getting to know the behavior of the customers. We are putting on our books customers that, otherwise, we would never do with our credit card. And what we need to do is for this specific portfolio is we need to find the right financials because, as you know, for example, in our portfolios, well, we have a very big chunk of our sales that are done on noninterest installment plans. The famous "meses sin intereses," you know? So -- and on these products, well, there's a different pricing. So in this project, there is not going to be any -- is the noninterest installment plan. So that will allow us to have higher delinquency rates in these kind of products. So we need to find the right and the precise -- the pricing from these products. And as I mentioned, today we are in the process of learning and putting all of our capabilities and creating our capabilities in order. For example, collections, we -- collections are going to be quite different from what we do today. So yes, with our actual portfolios, we feel comfortable today with the levels of risk that we are seeing and what we need to address on these new products, address what we want to have in terms of the risk. I don't know if I answered, Jorge, your question?

Yes, yes, perfect. Just a bit follow-up on reserves, because if we compare your portfolio to the banking systems, I mean, just in the credit card business, you have a very good and competitive NPL ratios, but I think reserves are slightly higher than the market. So are you comfortable with this level, like you're planning to release some reserves or maybe you can use it to cover the credit risk of the new products? What's your strategy there and if you're comfortable with that?

Well, it's the -- definitely -- I will start by the last question. Definitely not to cover the new products. I think each product has to be -- and create their own reserves. They have to be [ auto este ], not be -- because we have -- the level of reserves is different than the ones that we have, for example, for the Liverpool private labels and the one that we have for Liverpool Visa and the ones we have for Suburbia. For example, in the Suburbia portfolio, which are riskier portfolios, we have much higher levels of coverage with our reserves. Yes, definitely, we understand that we are -- we have higher than probably the market in reserves. But yes, we feel comfortable. We much rather like to be conservative in these cases. And today, because -- well, this year, even though today, we're seeing that the behavior is pretty good, but I think that there are still some things in this year that make us -- I'm not sure what is going to really happen. So we'd rather be with this kind of reserves than being with just very tight levels of coverage with the reserves.

That concludes our question-and-answer session. I will now pass over to Enrique Guijosa for some closing remarks.

Well, very quickly, thanks a lot. I mean, thanks a lot. We have been taking almost 2 hours and 45 minutes to make a presentation, which we hope was useful for you to get clarity in terms of where we're going, and appreciate your time and look forward to the next year to continue this new normal of [ LIM ] investor days every year. Thank you very much. Bye-bye.

That concludes today's virtual event. You may now disconnect.