Westwing Group SE (WEW) Earnings Call Transcript & Summary

Hello, everyone. Thank you for joining our 2021 Capital Markets Day. I'm Stefan, I'm the founder and CEO of Westwing. I'm glad to be speaking to all of you today, and I hope you are safe and well. Unfortunately, we can't invite you to our headquarters in Munich today. Hopefully, this is going to be possible soon again. To provide for the best experience possible, we have prerecorded the presentation today. During this presentation, we will be making certain statements that will be forward-looking. Those statements are based on assumptions we believe to be reasonable, but include uncertainties and risks. They are no predictions of future results, and actual future results may differ. We will not have any obligations to update or revise the statements we make today. With me on this Capital Markets Day today are Delia, our Founder and Chief Creative Officer; and Sebastian, our CFO. Our Westwing mission has not changed since we started the company pretty much 10 years ago. The Westwing mission is to inspire and make every home a beautiful home. I will now first provide an overview of our unique business model. Delia will then explain in more detail what the Westwing love brand is all about. Then I will outline our strategy and targets for 2024-'25. Sebastian will then provide financial details to our strategy. After a quick summary, we'll go to Q&A. On the left-hand side, you will find the Q&A button, so please feel free to send us your questions as we go through the presentation. We will then answer these questions during the Q&A session at the very end of the presentation. To summarize upfront what we will share in today's Capital Markets Day. Westwing uniquely combines the superior profitability of a consumer love brand with a scale opportunity of a high-growth e-commerce business. Creativity is at the core of Westwing. We constantly inspire our customers. Our customers love this and are very loyal. This is how we build our consumer love brand and make everyone a Home Enthusiast. The growth opportunity is massive in the Home & Living market. Of around EUR 120 billion that is rapidly going online, consumers are increasingly adopting e-commerce, and billions of these EUR 120 billion of spend are going online. We, as Westwing, are building the next-level Westwing customer experience as a clear strategy to grow to EUR 1 billion in revenues by 2024-'25. We are highly profitable and a cash-generating business. We target an adjusted EBITDA margin of 15% in the long term. I will now provide an overview of our unique business model. Our customers' emotions is what drives us. We want our customers to feel comfortable at home, we want customers to create a beautiful home and we want our customers to be able to further follow in the upcoming years. And on this attractive market field that we play, we follow a very attractive and differentiating approach: being a consumer love brand. And being a consumer love brand is highly beneficial compared to standard e-commerce as consumers -- consumer large brands do not only over-leverage the growth in the market into market share gains, but are also vastly more profitable based on long-term and emotion-based customer relationships. Consumer love brands have a higher customer lifetime value based on brand trust. Consumer love brands have pricing and margin power based on differentiation and emotional purchasing decision. Customers are simply willing to pay a higher price for the products they love from the brand they love. Consumer love brands also have higher marketing efficiency based on less churn, lower acquisition costs and free word-of-mouth marketing. Customers feel attached to the brand. They want to become part of the brand family. They buy products to feel this close connection. And consumer love brand, consequently, have a much higher profitability than standard e-commerce as customers stay with the brand for a lifetime, they're willing to pay higher prices and the marketing is more efficient. There are, of course, several consumer love brands in the world. It's a great way to run a business. That's why we run our business this way. It's also not an easy way to run a business, but the benefits make it worthwhile. All consumer love brands, all of them, start with a niche of core customers with a core of enthusiasts for their product and brand. It's the only way to build a consumer love brand: the core of enthusiasts. Let's look at 3 examples of some of the very best consumer love brands. They all started with the core of enthusiasts and eventually use their transformational power, if you will, to make everyone an enthusiast. And an important disclaimer. Of course, we do not believe we are as great as those great brands or at least not yet. They do, however, provide a pathway to success. Let's look at the first example, Apple. Apple was built on a core of design enthusiasts. And then the brand evolved, that by buying an Apple product, you, the normal consumer, would become cool. And then design enthusiasts yourself, the brand had this transformational power in itself to start with the core of design enthusiasts and then make everyone a design enthusiast. Nike, another example, was built on a core of runner enthusiast -- runners and later athletes in general. And the brand evolved. And all customers wanted to feel like athletes. The brand had this transformational power to start with the core of sports enthusiasts and athletes, and they make everyone an athlete. And everyone is a sports enthusiast by wearing Nike products. They literally actually have the slogan, everyone can be an athlete. Another example is Starbucks. It actually initially started as a small company selling coffee beans at Seattle's Pike Place Market. It specifically targeted coffee enthusiasts that were interested in high-quality coffee. And over time, the brand evolved, the offering involved. The brand leveraged its transformational power to make everyone an enthusiast for high-quality and on-the-go coffee. This is one of those 80,000 first-time customers of that year, more than EUR 1,300 per customer in GMV. And customers stay with us and keep making purchase over their lifetime. It doesn't stop. As you can see from the chart, it keeps increasing, so we do not actually really know what their lifetime spend will be. Looks like it may well be several thousand of euros per customer. But that's the power of a consumer love brand: the constant spend, the very predictable spend trajectory and the high loyalty that translates into GMV over years and potentially decades. Let us now review our business model. We have built a unique Flywheel business model. It's a perfect model to build our customers' loyalty. So daily themes, the permanent assortment, the Westwing Collection and the organic marketing. And they mutually reinforce each other. Let's first talk about our daily themes, which is the start and end of our Flywheel. It's the core of the core for Westwing. We offer our customers a curated shoppable magazine. That's how we attract our customers and how we build up their loyalty and how we engage with them every day and they engage with us every day. They love our rich editorial content. And we do not actually only focus on selling the products, but we are storytellers. We engage with our customers. And we offer them products at very attractive prices so that engagement can translate into revenues. In our daily themes, we are thus combining uniquely 2 worlds. We combine inspiration and content with e-commerce. We offer our customers a curated shoppable magazine. They enjoy strolling, browsing through our site and apps every day in the same way that they enjoy reading a magazine. But on top, they can buy. We inspire our customers, thus, every day and we gradually pull them into our world and build loyalty and customers' awareness and reach of the Westwing Collection. We will expand the categories that our Western Collection offers until ultimately it will cover all categories for Home & Living. And we will further push international growth of our Westwing Collection. The last element in our unique Flywheel business model is Organic Marketing. Our organic marketing is the ultimate love brand builder and something that we've built over the recent year and which differentiates us from pretty much every other company. We run daily newsletters, and we have a massive number of followers and viewers in our social media channel. We share some numbers on this slide. We inspire our customers every day with our fresh and unique content that we produce in-house with hundreds of producers. In addition, we focus on search engine optimization and public relations. We use referral marketing, where our customers can send invites to their friends. And in all of those channels, we focus on creating great content. It's the secret sauce of our marketing model. Our biggest organic marketing channel, as an example, is Instagram. With massive increase in followers, by now we are at more than 7 million followers across Europe and the numbers are growing. And this is a statistic that we're all very proud of, our customer engagement on social media is extraordinary. In Germany, we had the second-highest social media engagement across all brands, not just Home & Living, all brands, only trailing Mercedes-Benz. We actually have a higher customer engagement than well-established brands like Netflix, Audi and Disney, quite some company for us. And our marketing and creative teams have done amazing work here. And continuing to do that, that's a focus for our Flywheel, the organic marketing to push that to the next level. And the results of that are unique. We generate 94% of our traffic through our own organic marketing channels every day and only 6% with paid marketing. The main drivers for our strong organic traffic are a daily newsletter and our social media channels. When we step back a bit and say, okay, let's compare the organic marketing model with a typical paid marketing model that is prevalent in many e-commerce companies, we are highly differentiated. Our organic marketing model is asset building in a way that's very hard to copy. It provides operating leverage as was very visible during COVID times. It uses inspiration and engagement as brand building tools. It sets up sizable entry barriers for competitors, which is both fantastic and very differentiating. We can also see the success of our organic marketing model and our return on marketing investments. We have very rapid payback times of our marketing investment of circa 12 months. And due to the high customer lifetime value, our long-term return on investment are even higher. Remember how the chart looked of customers after 7 years. So these cohort charts that you see of ROI, they will keep going up over time. And you can see how consistent the ROI progressions over time are with 2020, of course, indicating very special times. As our organic marketing model is so critical to our business and so successful, we allocate the majority of our marketing investment into organic marketing. In 2020, in fact, 66% of our total marketing investment was made in organic marketing and even a significant part of the paid performance investments are leveraging our organic assets. Paid complements our organic marketing by moving new people into this funnel. Altogether, our Flywheel is a perfect business model to serve our customers. We provide them with daily inspiration. We have great content and good prices. Our customers love the best sellers from the Westwing Collection, and we have a very effective and efficient way to communicate with our customers through organic market. All of this Flywheel is supported by a state-of-the-art platform. We have our creative team, we have our in-house technology, we have a scalable and customized operation and logistics and our passionate and excellent team. The foundation of our low brand is our creative team of around 200 people by now. It is at the core of our company, it is the foundation of everything we do. And this is something unique to us, the way we built it is that our creatives are spread across the entire organization, across all business areas, not just in one department. They have the final say in product decisions. They know what our customers love. They have the final say in almost everything that touches the customer front end. Delia will actually share many more details here later on. So I will now focus on other topics. Our brand actually couldn't succeed without our technology platform. Only through that technology we are able to inspire our customers every day. We are a technology company through and through. We have a team of world-class technology engineers. We have a leading-edge in-house built technology platform. And there we use our site and apps to inspire our customers every day. We fulfill millions of orders through our scalable platform. We provide data and analytics for all parts of the business, and we run all this with the highest security standards and increasingly cloud-based. Our customers love our apps and tools and the looks and everything that they see on the site and the app, and this really strengthens the love brand. And with a focus on a beautiful experience, it's an everyday love brand foundation. We're also truly mobile first. This is shown in the feedback we get from our customers. Our app has a rating of 5 or 5 stars in the Apple App store based on 70,000 ratings. The share of mobile visits at Westwing is at an astonishing 79%. We are mobile first. To deliver our orders, we have also built a logistics and warehouse network in Europe that is able to master the complex logistics that we face in the Home & Living market. Of course, as you know, our products are bulky, have different shapes and sizes, different breaking points. It's not easy to do logistics for Home & Living. It's a great competitive entry barrier. In total, by now, we have a network of 6 warehouses spread across Europe. Our biggest and central warehouse, in Poznan, Poland, there, we have a Westwing Collection and our permanent assortment warehouse, a daily themes warehouse and a replenishment warehouse. In Warsaw, Milan and Barcelona, we have warehouses for our daily themes. In total, today, our warehouse has a capacity of 110,000 square meters. And we have more than 1,200 staff members working in our warehouses. The capacity in terms of revenue that these warehouses have is EUR 650 million of revenue. In addition, we have more than 30 international and local freight partners that we manage across Europe. Our operations are highly scalable, and we have the option to expand our capacity as we have done in the past at CapEx-light investment, and we will later share how we will do that in the future. All our warehouses are supported by our own in-house developed technology platform to really best deliver the products to our customers. Here, there are some pictures from our biggest warehouse in Poznan in Poland for you. It's called ELC 5, European Logistics Center 5. It's a wonder to behold, we're very proud of it. And should you ever be in the area, please reach out to us and we'll be happy to arrange a tour for you post COVID, of course. And as you can see, the warehouses are all turquoise, so that's our brand color. As I said, the creative and the brand is in every part of the company. Another aspect that our customers highly value about our brand is our customer service. We are customer-centric from the core. Of our total 160 team members and customer-serving, around 75% are in-house agents, and they do deliver an on-brand love brand service. And it's fast. The average waiting time in our hotline is only 15 seconds and 98% of our customer tickets are answered within 24 hours, truly amazing. We could not make any of this happen without our team. Our team is the key to our success. We are a diverse company with over 60 nationalities and a high share of women. We're especially proud of the high share of women across all levels. Even on the most senior level of the company, the executive team and their direct reports, we have more women than men. Westwing is not only led by Delia, Sebastian and me, but by our very experienced executive team who is covering all areas of the company. Many executives have been with Westwing since the founding of the company in 2011 or for many years. We are all passionate and dedicated to the company. I'm also personally proud that we've made great progress in the share of women in our executive team. Overall, our leadership team and our overall team is what creates the love brand, what creates the business. And I'm grateful to be working with these fantastic colleagues, and we should all be thankful for their day-to-day work. Summing up. What I've discussed, our business model is, we believe, vastly superior to standard e-commerce retail business models as we focus on our consumer love brand strategy and inspiration. We benefit from a high customer loyalty. We have high pricing power. We have a high share of our own Westwing Collection, which is very profitable. Our marketing model is mainly organic and our marketing ratio is moderate. This leads us all together to a highly profitable business model overall. Summarizing this total section. We are a Home & Living consumer love brand. We uniquely combine a consumer love brand with an e-commerce business. Being a consumer love brand results in superior profitability. And the e-commerce business offers high growth potential as the EUR 120 billion Home & Living market is moving online. We have the perfect business model to serve our customers. Our Flywheel builds extreme loyalty with our customers, the home enthusiasts. Our organic marketing model is highly differentiated compared to typical e-commerce models. And through our approach, we perfectly leverage our creative core. We keep inspiring our customers every day. And our love brand and our approach of being inspirational e-commerce business leads to great results. We have a higher profitability compared to standard e-commerce models. And now I will hand over to my Co-Founder and our Chief Creative Officer, Delia. She will give you more details on our love brand and how it is being built from a creative core.

Thank you, Stefan. So Westwing is truly a love brand. We build Westwing as a love brand from the start, and I want to tell you more now in detail why and how we do this. So as a consumer brand, it is great to be a love brand. Consumers identify with their love brands, they want to stay connected with their brand. And they're much more loyal customers. Also, they are okay to pay a higher price simply because it's a Nike sneaker or an Apple device. When you have a love brand, also you're much more likely to promote this brand within your friends and family because you're proud and want to be identified with this brand. Love, as we all know, is not rational. It's, like in a marriage, about emotional connection. It's about creating a bond and nurturing this bond every day. Now let me tell you a bit more how we nurture the relationship daily with our customers. So first, it's about customer communication. So every day, we send out our beautiful newsletter to millions of customers. And our customers really start their day with the Westwing newsletter because they get so much inspiration and advice and it's just fun to open and have this as a part of their routine in the morning. Then we connect with our customers every day multiple times on social media. We have by now 7 million of fans on our Westwing channels, and it's a very personal way to talk and communicate with our customers. Then in a marriage, I think there is the everyday things like, let's say, you make your spouse every morning a coffee. And then it's also about creating really memorable experiences. And this is also what we do at Westwing. So next to our daily things like the newsletter, the social media, we try to make sure that we share memorable brand experiences with our customers. This is, for instance, the Westwing Academy, where our customers get exclusive access to master classes with our creates about everything interior. Or our delivery service, something that we just launched, where somebody from the Westwing team would come to your house, deliver your couch, leave you a nice note, a little gift and just makes the whole receiving your new piece of furniture an actual nice memorable experience. Or our interior design service, where we have interior designers that would personally design your new living room and make you just a gorgeous space that is truly unique for you. And that is, of course, done with a lot of love. Third, brand advocacy. So the cool thing about being a love brand is that you have so many genuine fans. So at Westwing, it's our team members and our customers that just really like to be associated with the brand like -- with the brand Westwing, and they like to talk about it. So this can be in our many Westwing home stories, where we visit Westwing team members or Westwing customers at home. And they show their beautiful interiors or it can also be on social media. So we have by now so many user-generated content. We have 188,000 pictures on social media that are tagged with our #MyWestwingStyle just because people are really proud to show their Westwing furniture. And I think it's just like a really new kind of way of showing your interior. Like if you think about back in the days, you only could show your interior to your friends and family that maybe come on Sunday for coffee. But now you can show it to the whole community on social media and be really proud about it. And if you think about it, I mean there is definitely no other marketing channel that is more honest and authentic than user-generated content. Then the next thing that's super important to us is being really engaged in current trends. Our business model is really perfect for this. Our daily themes allow us to be always on zeitgeist and really try to connect daily with our customers' feelings and needs. So especially now in the pandemic, we were able to really kind of live this with our customers. So we were trying to give them ideas and inspiration what to do at home like, for instance, we were baking banana bread together or how to create special occasions during the pandemic. Let's say, we were giving ideas how to create and how to do a small intimate bedding during the pandemic. Then I think it's also in a relationship, really important to sometimes share a laugh. So on social media, we try also to be a bit funny not just because it connects. And for example, when we had Bernie Sanders, the grumpy Bernie Sanders, we put him on our Westwing furniture, it was just funny and people loved it. And I think it's just nice, and you connect it with the brand at those things. Then also, I think in a relationship, you have to give each other sometimes a little bit of comfort. So during the pandemic, our influencers and team members really openly talk from their homes over social media how they're currently doing, what they're struggling with being stuck at home. And I think this really creates a strong bond. Then sustainability. It's something that was always important to Westwing. So for example, our boxes are from 100% recycled materials. Even the turquoise coating, by the way, is biodegradable. But we also do a lot of other things like, for instance, when we get a referral friend from Westwing, we plant a tree or we recently launched our We care label where we promote sustainable brands. And we do much more and plan to do even much more in the future. Collaborations is also something that is really important when you want to be a love brand because you want the people that are the opinion leaders in your industry, I would call it now, you want them to have your product. So when you are in sports, of course, you want the professional athletes to wear your clothing. For us, it's the taste makers, the style influencers, the celebrities that we want to have the Westwing furniture in their homes. And luckily, a lot of them are really fans of our brands, so we have a lot of collaborations. And we are in a lot of celebrities' homes and influencers' offices and magazines like Architectural Digest. Then another thing very important for us is emotions. So Home & Living is something so emotional because, if you think about it, in your home, you create so many special memories. You celebrate your birthdays, the holidays, you watch your kids take the first step in your home, so it's something very emotional. And in Westwing, we have never been shy to share emotions and to show emotions. So in our visuals, in our language, in our newsletters, videos, we are always very emotional because home really is where the heart is. So now I want to talk a little bit more about our Westwing customers, about the home enthusiasts, who are these people actually. So it's quite simple, it's basically everyday people that just love to have a beautiful home. They love to decorate. They love to decorate -- it's just really fun for them to have a nice home. It's also super important that it doesn't have to do anything with gender, religion, sexual orientation. It can be really everybody. And something I want to highlight here especially it's also for all incomes. Like it doesn't mean that you have to be rich to be a home enthusiast. No, this is something, especially at Westwing that is always very important to me that we have affordable products so that really everybody can have a beautiful home. With our business model, we really connect so many times per day with our community of home enthusiasts, be it online but also offline with just simply having the product that they have from Westwing in their home. And our business model of Westwing Collection, permanent assortment, our daily themes and organic marketing, it's just so perfect because it's really woven into the everyday fabric of home and living from the morning newsletter at Westwing till at night when you cuddle up in your Westwing bedsheets. So everything I told you so far, a lot of retailers have kind of claim. We are doing this, too. We are on social media and so on and so forth. But there's one thing I believe that is truly unique at Westwing. We are really storytellers. We are not sellers, we are storytellers. We love to tell stories. So I, myself, I was an editor before I start at Westwing. And a lot of my colleagues come from magazines or from TV stations or from blogs and it's just really in our DNA to tell a story like we love it. We love to entertain our customers. We love to get good advice. We love to give inspiration. So for example, I brought you here one theme that we did around one of our brand partners, Zuiver. It's a big brand from the Netherlands. And of course, we could just show the product. But this wouldn't be really Westwing. Like we actually -- we went to the home of the creative director of the brand. She lives in a gorgeous home in Amsterdam. So we brought our customers into her home. We showed how she was having her products in her home, how is her creative process, how does she design the product, how does she style it. And this is something I believe that is really just inspirational. Like basically our customers, their eye travels with us in this beautiful home and it's just so much more fun than just seeing it play on a sofa. So another example I brought you is from this year's International Women's Day. So we had actually 3 female founders in our Westwing studio and they were telling about their founding story, why they started their brands, what is special about their products. And I just think it's so much added value for our customers to go on Westwing and not only see a candle, but really see the person that is behind the candle and understand why has this specific candle been created and also get just so much added value about, for instance, a young woman that founded her own brand and just get the story. So our creative team, I want to have a word about this. My creative team, it's around 200 people and growing. And we are, I think, uniquely in a way that the creatives really make the important decisions at Westwing when it comes to the offering. The creatives are spread everywhere at Westwing. And also in the not primarily creative departments, we do have a lot of creatives. Let's say, in buying or in PR, we have a lot of creative people, home enthusiasts, that really understand our customers and this is why we can ensure such a customer-centric retail approach. The heart of our creative team, I would say, is our Westwing studios. So every day, we create so much content there from videos to reels, to live talks, to live shopping and so much more that really can entertain our customers on our daily basis -- on a daily basis. So now I would like to have a word about our Westwing Collection. That is something, to me, super important. So just when we started Westwing, it was always kind of my dream to have our own collection. Now we have it. I can probably say we sold about 2 million products in the last 12 months. So the Westwing Collection now accounts for more than 30% of our group GMV. And I think it's so essential at Westwing. Why? So the products, of course, are really stylish, but they're also very relatable. They are practical. You can use them every day. They are also affordable. And of course, they have a good quality. One example from the Westwing Collection is our best-selling sofa, Lennon. So Lennon is really a favorite from a fashion influencer to like your next-door family alike because Lennon comes in so much varieties like we have different colors, we have different sizes. You can really pick what fits best for your home. It looks super stylish, and it's really the most comfy couch ever. Our customers really love the Westwing Collection. We have an average rating of 4.5 stars. And by now, it represents 80% of our best sellers in our permanent assortment. So to summarize. At Westwing, we really work with the creative-first approach in everything we do, just like the big love brands. The design is done by the creative team, not in Excel sheets. This is really the only way how to click with the opinion leaders, with the home enthusiasts because they feel that we have a brand that really cares about Home & Living, that understands what it's about, that loves Home & Living. And only with this approach we, over time, turn everybody into a home enthusiast just because it's fun, we love Home & Living and more and more people get just so much excitement and fun about creating a beautiful home by themselves. So now back to Stefan with our ambition for 2025.

Thank you very much, Delia. I'm now very excited to share with you our strategy and targets for 2024, '25. After a decade in the market, we're now ready to embark on the next chapter for Westwing. We have been working on the formulation of this strategy since the middle of last year. And since we have started sharing it with our leaders and the team members in the last month, we can see how excited everyone is around this chapter. Certainly, I am. As it has been since founding, our creative and inspirational core has been and will continue to be the basis of everything we do. We will actually double down further on this creative and inspiration core. Westwing is and forever will be a consumer love brand with a creative core. Our concrete targets for 2024-'25 are threefold. We will grow to EUR 1 billion in revenues. We will increase our market share in European Home & Living to around 0.8%. We will do that highly profitably at more than EUR 100 million adjusted EBITDA with best-in-class cash conversion. And we will be the most desirable consumer brand in the Home & Living market for home enthusiasts. The underlying driver to get to EUR 1 billion in revenue is extremely attractive market growth. We're only at the beginning of the e-commerce potential in the Home & Living market. 2020 gave us a glimpse into the unique opportunity in front of us as the market for Home & Living is going online. COVID has accelerated this trend, and we really believe that it will not reverse as the pandemic hopefully winds down over the course of 2021. Just to put the market potential in perspective. Each percentage point of higher e-commerce adoption equals an additional EUR 1.2 billion of e-commerce spend. The potential in the coming years is massive. The adoption of e-commerce actually is accelerated by 2 factors: millennials that are already very accustomed to the Internet and e-commerce are getting older and they're entering the age to shop Home & Living products; and on the other side, older generations are getting more used to doing online shopping and shift their shopping behavior towards e-commerce, especially also pushed by the recent year where they had to do that and we believe will continue to do that. Another driver is that technology trends significantly enhance the use cases for Home & Living e-commerce. Especially augmented reality offers customers the possibility to try the products in their own homes. They can use our products at 3D models in a real-world environment and actually experience the products in their own homes. This improves conversion rates and return rates. And it's such a fun way to explore our products and the inspiration that they provide. And we're very confident that we, as Westwing, can take a lot of the market movement to e-commerce. Market spend is, of course, not equally spread across households in the market. The top 5% of consumers who spend more than EUR 3,000 per year on Home & Living, they actually make up 25% of the total market spend. For the top 25% of consumers who spend more than EUR 1,000 per year on Home & Living products, they make up for an astonishing 66% of total market spend. These 25% are the typical Westwing customers. They are passionate about Home & Living. They love our inspirations. They love our love brand. They are either home enthusiasts or we will make them home enthusiasts. We will be at the forefront of this market and gain significant market share. All elements of the Flywheel business model of Westwing perfectly serve these customers' needs. Starting with the daily inspiration from our daily themes going to a permanent assortment for planned purchases, our best sellers from the Westwing Collection and our organic marketing model, we are optimally inspiring and connecting with these customers. To strengthen all these elements of our business, we have defined what we call the Westwing Customer Experience 2.0 for our 2024-2025 strategy and targets. This will guide our path to 2024-'25. The Westwing Customer Experience 2.0 consists of 4 main building blocks. First, we will double down on our creative and inspirational core. We will do this with expanding the Westwing Collection by growing our creative team significantly, by pushing the next level of organic marketing, by being first movers in video and live shopping and by creating industry-best AR, 3D and CGI experiences. Two, we will set the next level of our customers' order and post-order experience. We will build and roll out our own Westwing delivery service for large products. We will establish the Westwing interior design service for those of our customers who want support in their home furnishing. And we will increasingly personalize the Westwing experience with regards to products and in-app experiences. Third, we will scale up our business model and platform significantly. We will invest into deeper and greater supplier relationships. We will dramatically scale up our technology team. We will improve our International segment's profitability. And we will strongly increase our warehouse capacity. Fourth and by far not least, we will deeply embed sustainability into our operating model. All together, this is an extremely ambitious and exciting road map. Let me now share some details on some of those initiatives. Our most powerful strategic initiative, and we've shared that before but it's worth repeating, is our Westwing Collection. And we will significantly further invest here into products, team, design, distribution, marketing, et cetera. Since the introduction of the Westwing Collection, its share of our total GMV has strongly increased and we already achieved 33% in DACH and 14% internationally in 2020 of our GMV sold in those markets. Group-wide, we have reached 31% in Q1 2021, and we are aiming at 50% long term. Our outlook for the next year is here to increase the customer reach and the awareness with our Westwing Collection, to expand our category coverage until we really cover the entire range of home and living categories. So far, we don't even have storage, we don't really have decoration, so we can expand a lot. And we will push international growth, as we always start with DACH, where it's already very far and we need to push it in the international markets. Another important initiative is our doubling down on our creative and inspirational core. And by doing that, we will be a first mover in video and live shopping. As you know, from China, live shopping is there, a EUR 50-plus billion industry, and this format is now gradually coming to Europe. We are the first movers here in the Home & Living space as live shopping perfectly fits with our daily themes business model. Our customers can watch our live shopping events and directly interact with us. They can like and comment and ask questions about what we show them during the videos. And they can then directly purchase the products in the live shopping event. It's like bringing the experience of social media coupled with life entertainment right into the core of our daily themes experience. It's like a format that's perfectly created for daily themes. And our customers love those live shopping events. They can get inspiration from us and directly interact with us. This builds a lot of our customers for our brand, and it makes a lot of business sense for us. So far, we have done already 41 live shopping events and we will significantly increase this in the future. The vision really is to have video and live shopping in every event at some point in time. On the post-order experience, one of the most exciting initiatives is our own Westwing delivery service as a true game changer for customer experience. Customers have forever told us that the experience of getting delivered a sofa, a chair, a rack is not perfect, and we want to make it perfect. We want to ensure that customers have an outstanding customer experience with us end-to-end. This experience then doesn't end with a purchase, where today we hand it over to a third-party provider, but it continues until the final product is being delivered to our customer's home. We will handle the last-mile delivery of large items to our customers ourselves. The rationale here is to provide outstanding customer experience. The whole process will be very personalized and reliable. The product is delivered to the customer's home with our own Westwing vehicle fleet. Our Westwing team assembles the products. Our Westwing team disposes the packaging. And the customers can instantly return the items or even while in their living room contact customer service for questions. There's real life interaction in the customers' homes with our Westwing team. We've actually set this up as a pilot in Munich since winter last year, and the initial feedback is very positive. We already have 10 trucks going through Munich covering now a significant share of the Munich deliveries of large items. It's a substantial reason, according to the customers, to purchase again at Westwing. So it's a great loyalty builder and differentiator, so it reinforces our core and creates the love brand experience also on the last-mile side. We are currently working on expanding this pilot from Munich into other cities in Europe and expect a fast rollout in the coming years. Another initiative that we have set up in the last 3 years in which we are now pushing very hard to expansions of Westwing interior design service. Our interior designers personally interact with the customer on the phone, over e-mail, over FaceTime and create an individualized 3D concept for the customers for a price of only EUR 119 per room. The interior design service builds strong customer relationships and brand loyalty. And it has a huge impact on GMV. On average, a customer that buys an interior design service consultation with us spends EUR 2,200 in GMV at Westwing in the 12 months after the concept was purchased. Compare that to the average spend per active customer of a bit more than EUR 300, you see the massive potential that the interior design service has. Currently, already when you put it all together, the interior design service is generating around EUR 9 million of GMV already, and it's rapidly growing. And we're rolling it out to all markets to all customers, have started pushing it proactively with marketing on-site and off-site, and we believe the potential is massive. Organic marketing is our next initiative and it's, of course, something that we've been doing as a core of our business. And we will expand on this with even bigger investment into our existing core channels like Instagram, where we can still grow much, much further, as well as into new channels for social media like Pinterest, YouTube, TikTok and others. We are confident -- well, actually, we already see the initial signs of that we have -- what we've created on Instagram we can actually further intensify and make bigger, but also translate it into other new channels. We really want to weave ourselves deeply into the everyday fabric of our customers' lives and make millions of more people familiar with the Westwing brand experience. And this is the core initiative to achieve that. Creative's at our core, we have said this several times before, and we will keep this focus. This is what makes us unique. This is what customers love about us. This is what builds our consumer love brand. And in the next years, we will literally double down here and increase our creative team to more than 400 team members. This will be across all areas: the creative headquarter team, designers for our Westwing Collection, creators and editors for our social media content, for our e-commerce content, in our daily themes, et cetera, et cetera, across the whole company. Furthermore, we will need to scale all aspects of our platform. As an example, let me talk about warehouses. To shift the massive growth in GMV in the upcoming years, we will scale up our warehouse capacity significantly. Currently, as I said before, we have around 110,000 square meters of warehouse space in 6 warehouses, which is already scaled up quite significantly in the recent years. And in 2022, '23, we will add, at minimum, 120,000 further square meters of warehouse space. We will open a dedicated warehouse for large products near our existing warehouses in Poznan. And we will open a new warehouse for our Westwing Collection, permanent assortment parcel products very likely in Germany or very close to the South of Germany. In the further years, we will make sure that we have warehouses for our permanent assortment that we need to grow beyond EUR 1 billion that are ever closer to our customers. Warehouses not only for permanent assortment, for our Westwing Collection, for our daily themes. And in parallel, we will selectively increase automation in our warehouses, something that is notoriously hard actually in Home & Living given the various size, shapes and breaking points of our product and yet something we will embark on also to enable growing beyond the EUR 1 billion in revenues beyond 2024-'25. This is a key initiative, and we've already taken significant steps in the recent months to progress here. Furthermore, sustainability is a very important topic to us and our customers. We have already done a lot of initiatives here in the past, and we will keep focusing on this topic. We will actually also talk more about this topic. We will embed sustainability deeply into our business model. We have done initiatives focused on the planet -- that were focused on our emissions. For instance, our headquarter is carbon neutral since 2020. Our packaging paper and material usage for packaging through our warehouses already operate at 100% recycled paper from sustainably managed forests in packaging and our operations such as the waste recycling in the warehouses product returns, et cetera. We will also roll out the Westwing delivery with a mostly or all-electric vehicle fleet. As an example -- or as a further example, order consolidation, meaning shipping products together in one package versus multiple packages, even if it takes a bit longer, has been a hit with our customers when we introduced this option to them. Already more than 90,000 orders have been consolidated in such a sustainable way. We also do a lot of sustainability initiatives for our products. We have special We care sustainability events in our daily themes, where we have run already more than 70 of such events highlighting sustainable brands in a special place. We have introduced GOTS- and FSC-certified labels to our permanent assortment and Westwing Collection. All of our suppliers have signed our stringent code of conduct. And for new products in the Westwing Collection, we focus on a high share of sustainable products. Another experience we do to bring -- another initiative we do to bring the customer experience to the next level is augmented reality and 3D features. Customers can use augmented reality to trial already more than 1,000 products in their own homes and use products with a 3D view. We will keep focusing on those technology trends. They really bring the customer experience to the next level. It enables our customers to try the products in their own home and see how it matches with the room, with other furniture and really get an experience. We will scale augmented reality to more than 5,000 products, including the majority of Westwing Collection. And we will show those products also as 3D models under product detail page. Those were only some examples of the initiatives we're doing to bring the customer experience to the next level. So exciting. We're looking forward to working on this, building this and sharing progress with you. And exactly this will enable us to grow to a EUR 1 billion company by 2024-'25, and of course, far beyond that. Plus, it's not only about the EUR 1 billion, it's also about how our love brands enables us to be very profitable and reach our targets of more than EUR 100 million of adjusted EBITDA and a 10% to 12% adjusted EBITDA margin by 2024-'25. So EUR 1 billion in revenue, EUR 100 million in adjusted EBITDA and 10% to 12% adjusted EBITDA margin reached by 2024-'25. And all of that, these 2024-'25 targets, that's just the start. The long-term opportunity in our market remains massive. At the revenue of EUR 1 billion, we're still going to be a tiny blip in the market, which is EUR 120 billion. We will still have a market share of less than 1%. The picture shows us quite dramatically there's so much more space to grow, and we intend to not give in until we take much more. So we look forward to not only talking about 2024-'25 with you, but way beyond over the coming years. Let me now summarize, however, our strategy and targets for 2024-'25. The strong and dynamic adoption of e-commerce in the Home & Living market drives a high market growth for the years to come. We target around 70% of total market spend. And we have defined the Westwing Customer Experience 2.0 with exciting initiatives, which will enable us to grow the company to EUR 1 billion in revenue. We will benefit at the same time from the high profitability of being a consumer love brand. And we will achieve a high profitability of more than EUR 100 million in adjusted EBITDA. And still, we'll be small -- tiny in this huge market and have a market share of less than 1%. So the long-term opportunity is massive, and we are just getting started. I will now hand over to our CFO, Sebastian, who will provide you with an overview on our financials.

Thank you, Stefan, and good afternoon, everyone. I'm very excited to present to you how our strategy translates into our financial performance, to share and discuss our financial targets for 2024-'25, and last but not least, to give you a long-term financial outlook for Westwing. Quick reminder before I will start. [Operator Instructions] We will come back to you later in our Q&A session. Before we look ahead and discuss how our strategy unfolds in financial value creation, let me start by summarizing where Westwing stands today and recap 2020 from a financial perspective. Westwing has a very strong record of growth. Since 2013, we achieved a GMV CAGR of 29% and reached EUR 0.5 billion of GMV in 2020. Our growth record is even stronger and more consistent in our DACH segment, where we completed the full rollout of our unique Flywheel first, and hence, benefits from it the longest. As a result, the growth rates in our DACH segment have been even higher, realizing a GMV CAGR of 34% since 2013. In 2020, we were also able to prove how the power of our consumer love brand at scale results in very strong profitability. We delivered a very strong adjusted EBITDA margin of 11.5%, which is EUR 50 million. We also convert this strong profitability into strong cash flows, had a very high cash conversion rate and had a 9% free cash flow margin, which is EUR 40 million of free cash flow for 2020. With that, we are now at a point where we produce significant free cash flows and can finance our growth investments internally. We see it as a strategic priority to ensure not only an attractive profitable growth, but also delivering a strong cash conversion based on low CapEx and negative net working capital. Let me give you some details what has been driving these improvements in 2020. Firstly, we realized a very strong contribution margin of 29.5% in 2020, an improvement of more than 8 percentage points compared to 2019. I will give you some more details on that steep improvement later, but I want to highlight that this attractive contribution margin is very much driven by our very attractive unit economics and these improvements are mostly of structural nature. Secondly, given the strong growth and the high share of our organic marketing that nicely scaled in 2020, we had a marketing ratio of only 7.1%. Thirdly, in 2020, we were able to prove how well our platform is working at scale and the level of operating leverage we can generate on our G&A cost. Most of our G&A costs are personnel costs for technology, our Westwing Collection, third-party buying and supply chain as well as our admin functions. Overall, the operating leverage resulted in a G&A ratio of 13.3%, an improvement of 6.7 percentage points compared to 2019. As a result of these 3 major P&L drivers in 2020, we delivered a very strong adjusted EBITDA margin of 11.5%, which is, again, EUR 50 million. As said, in 2020, we improved our contribution margin significantly. Let me now give you some more color around these improvements. These improvements we have seen in our contribution margin were mostly structural. To be precise, we considered 6 percentage points of structural improvements. This brings us to a normalized contribution margin of 27.6%. This marks a significant improvement compared to 2019 and serves as a very strong basis for the future. Structural improvements were driven, on the one hand, by margin improvements. This includes our Westwing Collection share gain, efficiency gains in fulfillment and overall better gross margins, thanks to our pricing power and improved supplier terms. These effects totaled to approximately 4 percentage points and are, to a large degree, driven by the improvement initiatives that we have started back in 2019 after H1 2019 shows nonsatisfactory contribution margins. On the other hand, the structural improvements were driven by scale effects and fulfillment, giving us another 2 percentage points, the majority coming from our warehouses. Currently, our warehouses run at very favorable utilization rates as we manage a significant increase in shipment volume at higher customer satisfaction with our existing infrastructure. On top of the structural improvements, we benefited from 2 effects that we expect to reverse over time. Firstly, we have seen lower inventory-related obsolescence costs. Our inventory levels were relatively low compared to our huge revenues with very attractive inventory turns, and we had hardly any aging write-offs. Second, the return rate in 2020 has been considerably lower compared to historic levels. While we have initiated structural improvements in 2019 to reduce our return rates, we believe the larger share of the reduction was driven by high share of first-time customers that are returning less and the inconvenience of returning during COVID-19 situation in 2020. The lower return rate has quite a positive effect on our fulfillment ratio, so we do not have to send the items back to our warehouse and process them again. In total, both effects had a margin impact of roughly 2 percentage points on our contribution margin in 2020. So to summarize, we believe our current structural contribution margin levels to be at 27% to 28%. Before we jump to our 2024-'25 targets, let me summarize the big picture of where Westwing stands. In 2020, we were able to prove and demonstrate that we have built a unique and very robust business model that works perfectly at scale and we have reached a very strong profitability and are firmly cash flow positive. We are now in a stronger than ever before financial position. We will continue to manage the business with a long-term strategic approach towards our vision. Now let me start looking ahead and move on to our financial targets for 2024-'25. We target to deliver profitable growth and to grow our revenues to EUR 1 billion by '24-'25. We are convinced that Westwing is positioned very well to capture the market opportunities that we see ahead of us, and we have a clear strategy how to achieve our top line targets. Our target is not only to grow strongly but also highly profitably, and we aim for an adjusted EBITDA margin of 10% to 12% by 2024-'25. Our consumer love brand strategy results in very attractive profitability, and we are committed to realize the potential of that by 2024-'25 despite the significant investments into growth we will take on the way. Cash generation is and will stay a key focus area of ours. Therefore, we are planning a negative net working capital and a CapEx ratio of 2% to 3% to maintain our best-in-class cash conversion alongside our strong profitability. Let me now give you some details how the target profitability for 2024-'25 breaks down into our P&L lines. Starting with contribution margin, we are targeting 30% for 2024-'25, which is at the upper part of the range of our expectation for 2021. Improvements will predominantly originate from our Westwing Collection share gain. As Stefan described, the growth of our Westwing Collection is a key initiative here and provides us with a significant margin upside that we realize as we increase the share of the Westwing Collection. At the same time, we will need to invest into our customer and delivery experience, for instance, into our own delivery that we announced today and into our warehouse capacity, reducing the utilization in the years the new capacity goes online. We might also be faced with increasing last-mile costs in most of our markets. Moving further down the P&L, we plan to continue to increase our investments into marketing at attractive paybacks. Effective marketing, next to our superior loyalty metrics, is the basis to achieve our growth targets going forward. As a result, we plan for 9% to 11% marketing ratio. While this is slightly above our current target corridor, we believe now is the time to invest as the market is moving online at a higher pace. On G&A, we will continue to realize operating leverage based on our scalable platform, and at the same time, invest decisively into growth in our long-term vision. The growth investments in G&A will mainly center around technology and our Westwing Collection. Summing that up, this brings us to the target profitability of 10% to 12% adjusted EBITDA for 2024-'25. Yet you should be aware that in the years between now and 2024-'25, we might see profitability being below the levels advised for '21 before then approaching the target profitability we have set for 2024-'25 as we will continue to manage Westwing with long-term mindset and continue to invest in long-term growth rather than optimize short-term profitability. We will update you on this strategy annually when we set the concrete guidance for each year. Coming now to cash. Our target is to maintain our best-in-class cash conversion. Our strong cash conversion will continue to be driven by negative net working capital and a low CapEx ratio of 2% to 3%. Let me provide you now with some more details on net working capital and CapEx development, next to our adjusted EBITDA levels, the key drivers of free cash flow. Let me start with net working capital. Westwing operates with a negative net working capital as trade payables and customer prepayments overcompensate our investments into inventory and our trade receivables. Trade payables as well as customer prepayments will grow roughly in line with our business over the coming years. Additionally, we still have upside potential by increasing our focus on payment terms with our suppliers as we increase our order volumes. These 2 effects will compensate our planned investments into Westwing Collection inventory. These additional investments into inventory are necessary to improve availability as well as to enable further category expansion. However, as our Westwing Collection business grows, we also target to improve the inventory turns of our Westwing Collection with the 2019 baseline. This is especially possible as we are growing GMV per SKU strongly, leading to higher turns. 2020, however, with regards to inventory returns was a very special year that cannot serve as the baseline going forward. As a result, inventory will increase, but after some catch-up effects in 2021 and '22 to increase our availability buffers, and is expected to grow less than our revenues. Trade and other receivables are expected to grow in line with sales but will not have a significant impact. In conclusion, we see our negative net working capital as a key element of our business model, and we'll focus on keeping net working capital negative to maintain our strong cash conversion. Moving on to CapEx. Our CapEx consists mainly of self-developed software, and only to a smaller degree, warehouse CapEx. Whereas the technology CapEx will increase roughly in line with revenue growth, we will realize our future warehouse capacity expansions without significant CapEx. Let me elaborate on the financial aspects of our warehouse expansion plans. Now our current warehouse setting, we can manage approximately EUR 600 million of revenue, which implies a capacity headroom of around 50% versus 2020 levels. Accordingly, we will have sufficient warehouse capacity for 2021 as well as the first half year of 2022. Let me remind you that Q4 is always our strongest quarter, and in Q1 to Q3 usually we do not face any capacity constraints if we are well prepared for the upcoming Q4. To ensure enough capacity for growth and sufficient headroom to operate efficiently, we are planning to go live with new warehouses from 2022 onwards. We will continue to rent our warehouses and the bigger share of the equipment and installations needed to operate the warehouses. With this approach, we will not only be able to significantly increase our warehouse capacity but also maintain our best-in-class cash conversion. Having shared our midterm targets, let me now give you our view on the exciting long-term opportunity ahead of us. Before we go into the financial details, let me zoom out and frame the massive long-term opportunity. We are building a very profitable business in a huge EUR 120 billion market, which is moving increasingly online and provides very, very attractive growth rates for the years to come. Even at our target size of EUR 1 billion in 2024-'25, we will still be small compared to the overall market with a market share of less than 1%. So we are truly only at the beginning and manage our business accordingly with a long-term focus on the opportunities ahead of us. To pinpoint this long-term opportunity from a financial point of view, let me give you some more color around the long-term financial profile of Westwing. We consider our targets 2024-'25 as an interim step on the path towards our long-term target P&L. We are confident that we have the right model, strategy and team in place to deliver attractive growth by outgrowing the Home & Living e-commerce market in the long run. We are also confident that we can achieve even higher profitability than we target for 2024-'25 and are hereby raising our long-term profitability target to 15% adjusted EBITDA. While profitably growing, we continue to show best-in-class cash conversion driven by negative net working capital and low CapEx. To realize our long-term profitability target of 15% adjusted EBITDA, we see the following 3 strategic drivers. So that's, one, increasing our scale will deliver significant operating leverage going forward; two, driving the Westwing Collection share to our strategic target of 50% and its very high margins; and three, saving the value opportunity in our International segment by reducing the margin gap we currently see compared to our DACH segment. With those 3 drivers, we have a clear and very actionable plan how to expand our adjusted EBITDA margin to 15% in the long term. While we are extremely confident to improve towards such profitability levels in the long run, we will continue to prioritize growth above further expanding profitability levels compared to the targets we aim for in 2024-'25. Let me now give you an outlook how our long-term target P&L will look like on a line level for your financial models. Contribution margin, we're targeting roughly 32% based on higher Westwing Collection share. Marketing, we plan to move towards the 8% to 10% corridor that we believe we need for long-term attractive growth. G&A, while growing, we will deliver further operating leverage and reduce our G&A ratio to 10%. With the resulting adjusted EBITDA margin of 15% and our best-in-class cash conversion, we're building a highly profitable, cash-generating growth business. Before taking your questions with Stefan in our Q&A session, let me summarize the key takeaways of the financial section. Based on our consumer love brand strategy, we have reached a very strong profitability of 11.5 percentage points adjusted EBITDA and are free cash flow positive at EUR 40 million and 9% free cash flow margin in 2020. We are investing decisively and profitably into growth to lay the foundations for our long-term success. Our 2024-'25 target is to grow to EUR 1 billion in revenues and realize a very attractive profitability of 10% to 12% adjusted EBITDA while maintaining our best-in-class cash conversion. We are highly profitable and cash-generating, high-growth business. And we target 15% EBITDA margin profitability long term. There are 3 clear strategic drivers to get there: one, scale; two is to grow our Westwing Collection to 50% share; and three is to seize the value opportunity in our International segment. Thank you for listening, and we will be back with our Q&A shortly. Thank you.

[Audio Gap] Creativity, inspiration and loyalty are at the very core of Westwing. This is what we need to do to be a consumer love brand, and this is how we differentiate. Number three, the opportunity is huge in our EUR 120 billion market due to a dynamic e-commerce adoption and our brand's transformational power to make everyone a home enthusiast. Four, with our Western Customer Experience 2.0, we follow a clear strategy to grow to EUR 1 billion revenues by 2024-2025. Five, we are a highly profitable and cash-generating business targeting 15% adjusted EBITDA margin in the long term. With that, we're happy to go to Q&A.

Thank you, Stefan. So I will take the questions, and then we will answer them for you. First, there was a question from Ajay from Citi. What gives you the confidence that the off-line to online shift will continue in the medium to long term?

Yes. So we think that consumer behavior really has changed structurally. Many consumers have, for the first time or in a way more intense way than before, experienced the advantages of Home & Living e-commerce or e-commerce in general and it's more convenient and the shopping experience is better. And of those, many adopted online shopping as a new lifestyle. And typically, consumer habits don't reverse when they provide a clear advantage. I mean people didn't go back to dial phones, they didn't go back to horses from cars. And at the same time, when we look at kind of now after the kind of lockdown anniversary, what we see in Q2 and what we showed to you in the current trading, this onetime forward shifts in consumer adoption of e-commerce is gone. But from all we can see, repurchase rates, all customer behaviors are pretty much the same than -- from those new customers than it were from the old customers. So we don't see any difference. We don't see any reason to believe that it will reverse. We believe it provided, let's say, a 2-year shift forward on the consumer S curve towards e-commerce. And it will now continue quite strongly, not as rapidly in terms of growth rates as before.

Yes. A second question from Ajay is on margins. So what's the driver of the 15% long-term margin guidance with the 10% you've guided? I think it's very simple to answer, probably not simple to achieve, but there's one major change in what we believe is now different in that we're targeting now much higher contribution margin. That much higher contribution margin is driven mainly by Westwing Collection, where we have learned over the last 2 years that it's much more profitable than we anticipated back then. And also, what we have seen in the last year is that the scale and fulfillment has significant positive impact to contribution margin that we underestimated [indiscernible]. I'm going to questions from Christian Salis from Hauck & Aufhäuser. First one is on marketing. Apple has restricted access for advertisers on its iPhone operating system recently. Is there any negative effect on Westwing's marketing as such?

Not really a lot. I think there's effects for marketing strategies that rely a lot on [Audio Gap]

A question from Christian on tech. Are you going to develop tech capabilities organically? Would you consider acquisitions using your [indiscernible] cash position?

Yes. I mean we're going to invest a lot into technology. We already have invested a lot in technology. And from the very core, Westwing is a technology company. We will invest across all our technologies. At the current time, we don't really consider acquisitions. This might happen, so I don't want to exclude acquisitions on a technology space, but there's nothing on our horizon right now. So we plan to -- maybe to expand on that answer, we plan to develop a lot more capabilities internally. We also plan to use a lot more SaaS [indiscernible]. When we started the company 10 years ago, there was not a lot of Software as a Service, so most of what we had to use we had to develop internally. Right now, there's a lot of great SaaS companies. So we run our customer service partially with Zendesk. We run kind of some of our buying pipelines with Salesforce. We run some notifications with a company called Braze. So there's a lot of technology partners that we integrate into our core technology, but that's kind of via subscription or buying their capabilities. Internally, we are going to continue to develop the core, both our consumer experience and the platform. But acquisitions might have -- none planned yet.

The next question is on our own delivery. What's the time schedule for rollout of Westwing delivery service?

So the Westwing delivery service, we talked about that the first time, I think, in year 2 or 3 of Westwing seriously and then we were always too small to really do it. We're not going to do it right now because we just had the pilot started in Munich, but we're probably going to roll out this year a couple of more cities; next year, maybe another 5 to 10. And at some point, then we're also large enough to cover full regions, full countries, full of Europe, but there's no concrete schedule right now. We just believe that gradually, we have to roll out metropolis by metropolis and then, at some point, take a decision to go like, okay, now we're going to cover a full region. But there's no concrete time line yet. We're going to take it quite aggressively though.

Next question is around our third-party brands. So how is the share of third-party brands [indiscernible]. Are you seeing increasing traction from those brands as you get more success?

Yes. We see a lot more traction from brands not just as we become more successful, also as we have developed our model forward. So one of the key things that in the last, let's say, 5 years and then increasingly in the last few years we could offer to all those brands is a distinct content production capability that we can then roll out across not only our own channels like our apps, our sites, but also across social media. So the brand partners that work with us now not only get this fantastic customers, the millions of people that are on our sites, the home enthusiasts that we already have, but we can also feature them across social media channels, across all those formats and social media. So we can get a partner millions of reach within a day. So we become not only their kind of sales partner but also their marketing partner, and that has helped a lot with traction. Second factor has been, of course, kind of everything that's related to the COVID effects. So a lot of brands, a lot more ability to have discussions with the highest level of the companies, a lot less kind of restrictions on online versus off-line, which in the past is always kind of our off-line channels are protected and we need to see what goes with online right now. There's a much more willingness to work with online, and we benefit from that. So the share of -- or the number of brands we have been talking to has increased. The number of brands we have closed has increased. At the same time, your concrete question was has the share. The shares actually declined simply because our share of the Westwing Collection on the overall business has increased, right? So the total volume has increased a lot, but in terms of share, the Westwing Collection has increased.

Yes. One more question from Christian, and that is, is there any update on planned regional expansion?

No, not really. So as we've been saying since IPO, we're already right now in 11 markets; outside of the DACH segment, in 8 markets. And we're not done with developing them forward, right? As you can see from both the development of the Westwing Collection share, of the profitability of those, we're not on the level where DACH is yet, right? So we want to develop those further. In terms of thinking about further regional expansion, there's currently no concrete plans. But the way to think about it is kind of 3 circles. One is kind of neighboring countries, Denmark, Portugal, countries that we would basically run from an existing country like Portugal would be run by Spain or Denmark could be run by Germany. So that will, at some point, happen but probably not in the next couple of years [indiscernible]. Then the next circle is covering full of Europe [Audio Gap]

[indiscernible] calculate for one warehouse and how many do we need for the EUR 1 billion revenue target? I will answer that question. I think it very much depends on what warehouse type it is. So basically, we operate a cross-dock warehouse, on-stock warehouse. And on-stock warehouse is much cheaper than a nonstock warehouse. But it's also highly depending on the way we finance it and account for it. Historically, all major warehouse investments are sort of public providers so that the cost of those ultimately ended up on our IFRS 14 financial cash flow we did not account for that as CapEx. So whilst having said that, we're still committed to the 2% to 3% CapEx target ratio that we gave you, and we will kind of manage from that. And how much warehouse more do we need for the EUR 1 billion revenue target, actually Stefan explained it very well in today's presentation that we have one concrete plan for next year then one more year after that should be enough for the EUR 1 billion. But from then on, obviously, we have to invest in the capacity to bring us to a level above EUR 1 billion, so we will not stop investing to warehouse and [indiscernible]. Second question from [ Henrik ] is, is it a reasonable assumption that you need for roughly EUR 500 million more revenue around [indiscernible].

So I think there's no relationship between the revenues and the technology investments that we do. The way to think about it is kind of how do we think about our platform and what do we want to develop, let's say, the delivery service that we want to roll out. If we do that, there's no direct increase in revenue. Of course, we hope that over time and we expect that over time, loyalty and growth effects from that and the better live shopping, social media, everything around kind of that Westwing Customer Experience 2.0 program, that will require a lot more technology employees, and so we will invest quite aggressively.

Okay. Next, let's go to questions from Volker Bosse from Baader Bank. Which [ role ] and impact on your 2024-'25 targets will contribute to Westwing now? Any targets in regards to sales and profitability contribution? Now let me take that one, Volker. I think we'd rather think integrated across both business models. Hence, we do not publish the split between our permanent assortment, daily themes model in terms of sales and profitability contribution. And as described for the most important strategically to increase profitability going forward is our Westwing Collection share. Next one is from Catharina Claes from Berenberg. Why do you see a difference on profitability between DACH and International to last in the long term? Or why else is the long-term margin target higher than 15% where DACH already overachieved this? I think in general, that's a very good question. So basically, we believe that there are several elements where DACH profitability is currently higher but also quite high in the long term. That is driven by some of the local characteristics of some markets and also driven by the logistics setup that we kind of serve these markets with. And we also believe that current profitability as we have described also in the presentation.

So that's kind of the 3 drivers were the Westwing Collection share and the actual scale of the business being the biggest driver. So you can always assume that International over time will have some percentage points less margin than DACH. And that drives the total group target margin.

And there are some more questions by individual parties. So first one, since you've already have a big community, are there any plans regarding the secondhand marketplace community? Any thoughts about a rental or lease model for your products?

Not yet. So one of the things -- let me talk about the first thing, secondhand marketplace, and circularity obviously is a big important topic especially when you talk about sustainability being more important for our customers, also for our company and being a strategic pillar. Circularity is very hard for furniture or any large products really because when you think about any secondhand marketplace or anything that's kind of changing from consumer to consumer, you need a consumer-to-consumer logistics model. And when you take like, let's say, fashion or CDs or something, that's easy because you go like the DHL or the local Post and put it in a small package and ship it to your -- kind of to the person on the other side of Germany or other side of Italy, and that costs you a couple of euros. To do that with a chair, that's basically impossible right now for a consumer to handle properly. And when you do that for like table, dining table, that's really impossible because there is no consumer offering from the logistics side. So there's -- kind of we wish to do that and we will probably do it at some point, but we need to develop multichannel retailers like Maisons du Monde or the online offerings of IKEA, et cetera. So we think they're all competitors. Do we focus a lot on competitors? No, we specifically built the model, and you can see that in our margin structure and our marketing model and kind of everything that we've explained today in the Capital Markets Day. We're specifically set up to be a very unique company. So we're not really worried a lot about competitors. When you think about -- personally, I worry the most at some point is another start-up that does something that we currently think might be stupid but actually is very clever, just like the off-line competitors 10 years ago thought what we do is stupid but maybe it's not so stupid; or where 7 years ago, a lot of people thought Instagram is just a medium to do selfies and not really a commercial platform, and now it is. So I think that's the biggest competitive point that I worry about day-to-day. It's kind of who's doing something right now that's actually really good and really interesting and really clever and customers will love it in 5 years, but nobody sees it right now and we don't see it right now. But by definition, we don't know that company yet.

And I think we already answered that. I would ask you again, but maybe you want to comment on that as well. Is Wayfair's new growth strategy a threat for your mid- to long-term ambitions?

I don't think so -- we don't think so. I think Wayfair is a great company. It's a great model. Obviously, it's something a lot of things to learn from. They're massive in the U.S. I think they will be very big in Europe. They have a very different strategy from us. I don't know the exact number, but they have has something like 7 million or 9 million products. So they're a marketplace, and they do that extremely well. But they are very different. [Audio Gap]

[Audio Gap] lease or rent fee on that. I think for the last-mile delivery is the same. So currently, we work on the assumption that we will -- I mean what do we need for that. First of all, we need like global, small warehouse hubs that is usually low rent, low equipment costs. And on the other hand, you need the last-mile delivery fleet, and that's something that we also believe we're going to ramp going forward in lease. So I don't think that we should expect significant CapEx there. And if we develop a different strategy, we will inform and let you know on that front. And I think that also answers the next question. So what do you mean exactly by the CapEx light? I think it's that. I think we follow a strategy from the past that's also like not too many -- too huge, too big commitments into the unknown. But we rather like -- we are learning over time before committing to, let's say, a huge EUR 200 million warehouse or something that's not something we are planning. But we are rather like learning over time and then do the right commitments and also not committing too much CapEx upfront, but rather then finding a partner who does this with us so that it is, for us, more cash-efficient. Yes. Next question is on the hiring plan for you, Stefan. How many new employees are needed to reach the EUR 1 billion by 2024-'25?

I think we have no exact hiring plan because the hiring depends a lot on kind of how we hire. Let's take a warehouse right now. Right, in our main warehouse in the, we call it, ELC 5, European logistics center 5 in [ Rohrbach ], our main warehouse. We have around 400 own employees and we have around 500 to 700 temporary workers, right, from -- and also, we believe they're spotty for a few months, and at some point, the situation will normalize. So right now we just pay out. That's fine because, in the end, that's not a huge part of our total cost base. The nice thing about running a high-margin business in a love brand scenario where kind of your customers buy based on kind of their emotions, it's not that we have to directly kind of compare every single price in the market. So we can kind of float that. So yes, you could say some of that we pass on to consumers. Some of that is just being eaten up by scale, and we can easily pay up for those containers because we have such high margins. In general, talking about raw material price inflation and logistics, pricing thing, the bigger topic actually is not the actual price inflation, it's the scarcity. So the scarcity actually worries us more. So we need to deal with kind of day-to-day much more with that, right, that suppliers cannot deliver. That situation in India right now, we can't get the products. And also, the talent that we hired and technology from India is not able to come here. And notwithstanding the human tragedy in those countries, the actual topic that we deal more right now is the scarcity. Over time, I think inflation will be more prevalent on the raw material side, et cetera. I mean every company is talking about it, that's why your question. And we think we can kind of float that mostly in the margin. We might have some short-term impacts, but nothing that I would consider significant. Do you agree with that?

Yes. I think we are also passing it on to the customer to a certain degree, but not quite specifically. This land is now 10% more expanded than what we expect. Next one is how shall we think about share-based compensation expenses going forward. So I think it's a very philosophical question. So we don't think about share-based compensation as an expense the way it's accounted for because I think -- what we'd rather think is about the dilution effects that come from it. So I think it's also what shareholders are thinking, like kind of what we show in the P&L on a yearly basis but rather what does that mean in terms of potential cash outflow or potential dilution at some point in time. We also believe that share-based compensation is a very important piece of the compensation of the management board, but also key employees up to -- maybe at some point also to a larger share of our employees. So we're going to do that. I think we are quite transparent about that. There's a chart on the quarterly presentation, where you can actually see all the programs that we currently have outstanding. Majority of that is either vested or large part is vesting by the end of 2022. And knowing that kind of share-based compensation is a good incentive, we will also, in due course, obviously to develop a new program to kind of incentivize our key employees, management board as well to really work on shareholder value creation for the coming years. That's something that will go through our AGM. We'll inform you upfront about that, but we continue to believe that share-based compensation form part of incentive scheme of employees going forward, but we will ensure that kind of its focus on value creation [indiscernible]. [Audio Gap]

[Audio Gap] cater to a core of enthusiasts over time can transform the majority of consumers into enthusiasts and then kind of that perceived time restriction from an investor perspective actually doesn't exist. I mean the same question like Starbucks, right, when they started, whatever, 20, 30 years ago and then how big is the TAM for people who go to the coffee store and get a Frappuccino or a coffee at EUR 3 per piece, right? Not very much. But over time, it scales. How much -- how big does is the TAM for the iPhone in the beginning, much smaller than it is now. What's the TAM for athleisure? In the '80s, wasn't very high. Now it's huge because everybody is wearing athleisure. So I think we believe that we are capturing a market with an almost infinite TAM. We have EUR 120 billion of spend in Home & Living in Europe. Around 66% of that is done by the top 25% of households. At least that is our TAM. We believe, over time, most of those consumers will shop online. What the exact kind of online share in a decade or in a couple of decades will it be, nobody knows, but it's going to be rapidly increasing by now. And if it only increases by, let's say, 20 percentage points from now, that's 24 billion going online, and we're talking about 0.5 billion companies. So for how we think TAM is not the issue. So we think our ability to kind of develop the company in a way that we can capture that, for all intents and purposes, infinite TAM, that's what we believe. I know that's not exactly how investors think about it. That's why we tried in the Capital Markets Day today to explain that most businesses, initially, when they have a new business model or how big was the TAM for the Internet 25 years ago. So I think that's always the same question. I think the TAM is infinite, and that's how we run our business.

Okay. One more question on channel strategy. Do you have any plans to operate Westwing physical stores and create an omnichannel experience?

Not right now. So I think we already ran 3 or 4 pop-up stores in the past. These were marketing and event-driven for a few months. I think in the next 5 to 10 years, we certainly will have, let's say, 5, 10 flagship stores where these are kind of museums for our Westwing Collection to create customer experience and have kind of events there and have our customers interact with that. But in terms of kind of stores to create revenue, we don't believe in that. Others do a good job in that. We also believe that, that's not a business model that has a technology advantage. We believe that the Internet business model of e-commerce is growing quite rapidly and physical stores will not benefit from that, so we're not going to invest in that technology. We're going to invest in the technology that is online. So that's the -- that's how we believe omnichannel experience. When you think about then -- kind of taking your question further in omnichannel, like when you think about the delivery service or the interior design service, where we interact in our customers' kind of offsite -- outside our current site, that's an important omnichannel experience that we believe kind of takes what we develop as a core and what's an attractive customer experience. And it kind of takes that and takes it to the next level. Like the Westwing delivery service is someone from Westwing with a Westwing uniform or Westwing vehicle, a super nice kind of whole experience coming to your house and delivering something and creating another touch point for Westwing. Or your hour-long conversation with our interior designer who then gives you a 3D concept of your home that you then put into reality with our products, that's the omnichannel experience that we will focus more on than kind of physical stores in the sense of selling through stores.

Okay. Thank you. So I don't have any further questions.

Okay. Cool. Thank you very much, all of you, for attending our Capital Markets Day where, as you can tell, we're extremely excited about the coming years in our journey towards reaching those targets, to inspire and make every home a beautiful home. Thank you very much. Have a great day, and speak soon.