Zalando SE (ZAL) Earnings Call Transcript & Summary

Hello. Welcome to Zalando's Annual Press Conference and Strategy Update 2024, whether you're at headquarters here in Berlin or joining virtually. My name is Simon Thiel, and I'm heading Corporate Affairs and one of your hosts today. On a personal note, it's really lovely to see so many people in the room, analysts, investors, journalists, and let me introduce you to my co-host, Patrick Kofler.

Thanks, Simon, and good morning also from my side, and welcome, everyone, here in person. Thanks that you made all the way up here to Berlin. And also welcome to the ones who are joining us virtually today. Over to you, Simon again.

We are going to start in a second to talk about our updated strategy, talk about the next chapter of Zalando. And for that, we have our co-CEOs and Co-Founders, Robert Gentz and David Schneider on stage. And they will be available for questions afterwards, first, for journalists and then for investors. What else do we have planned, Patrick?

Well, we already started this the day this morning with our earnings call and our press call. So Q4 and 2023 is covered. So we can fully focus now on what's ahead of us. And therefore, we have planned a lot of things, not only the keynote, but also deep dive afterwards with a couple of Q&A sessions. So a lot of time for you all to really ask questions. A bit of a timing thing. So we'll have around 11:30 AM CET, we'll have the Q&A for media with our the co-host Simon, where then analysts, investors as well as part of the investment bank can enjoy the exhibition out there as well enjoy the lunch out there. And we will then come back here at 12:30 PM CET to have the Q&A session with David, Robert as well as joined by Sandra. Well, with that said, I think I'm happy to introduce our Co-Founders, David and Robert for their presentation of what's next -- over the next few years. With that said, Robert, David, the floor is theirs. Please go ahead.

Thank you, Patrick and Simon. And yes, this a very warm welcome, and thank you as well from us who are here in our headquarters in Berlin, who made it through these strikes here to Berlin. We're very excited to have you here, but whether you're as well watching us via live stream. Thank you very much for watching us. I think we're very excited to spend the day with you. Good. We thought actually the best way to start, actually, would be actually to talk about why we're actually here today with Zalando. So what actually brought us here. Because we strongly believe what actually made us successful in the past is about what makes us successful in the future as we leverage these unique assets that we've built with Zalando over the last 15 years, that Dave and I are doing this. So yes, so David and I started this company 15 years ago. And yes, if you ask us, I think what is actually -- what actually made us successful. I think it was not with the one single product, the one thing innovation and one thing algorithm. I think what really made us successful at Zalando was actually, I think, like really the culture -- corporate culture we've built with Zalando. Corporate culture that always strives for the best customer experience, the best partner experiences and executes on their behalf. And at the same time, and I think this is very, very important to us, stay humble, stay open to new shifts and the new opportunities as they emerge. And I think that at the end, really explains how this [indiscernible] German-focused shoe shop here that you see on your right-hand side, like focus on shoes and free delivery, free returns with the logistics center and the basement of our office back in the days. We returned like 15 years later into this Pan-European mobile e-commerce platform like serving tens of millions of customers across Europe, with like a logistics center and purpose-built for fashion and upsell that is really unprecedented in Europe in scale and efficiency and in excellence. So the one thing that we experience is with this corporate culture of innovation or pushing customer experience, pushing partner experience. And as we're saying humble in terms of when the new opportunities emerge. Yes. So I guess this is really, I think, how we created like in the last 15 years, the most important meeting point where people and lifestyle brand meet each other, where -- we have about 50 million people that actually shop fashion on Zalando per year, where we have 6,000 different brands that are connected to our platform. And from the global headliners such as Nike and Adidas, so like the local stars is like [ COS ] from France or like -- or the specialist like [ Lancome ] in beauty. So like really the best brands on one platform. And this is actually really something really, really proud of our ability to connect all these brands from deep relationships with these brands and drive that strategy throughout Europe. So -- and this is the way of how actually people really love to shop is in a multi-brand environment. So this is the most preferred way of how people actually shop online. And this is what we get on a daily basis from our customers, the positive feedback of the experience we provide. And our customers, on average, actually have 15 different brands that are shopped through Zalando per year -- in their lifetime. So as a multi-brand destination, we're clearly leading here in Europe by all different dimensions. So we are the most visited multi-brand destination in Europe by a factor of 2.5 to next one. We're the most downloaded fashion app by a factor of 3. We're the most -- we have the biggest scale in terms of our customer base by a factor of 2. So by all means, we're the leading multi-brand destination in Europe. And so by building all this, we financially always delivered. So we grew twice the CAGR of the online segment since the IPO in 2014. So more than 20% CAGR. And we always worked every single year we work profitably even in the adverse years in the last couple of years with inflation and pressure on consumers' discretionary spending. And the strong cash generation results in a very healthy balance sheet, and it now puts us in to a very different [ state ] as many of our competitors that we can actually invest into growth and into opportunities. And at the heart of our success in the last few years is really our platform strategy. So the way of how we open up to partners and let them sell through our platform. The way of how we open up today, they invest into our platform. So it really propelled our growth over the last couple of years. So since 2019, actually, our active customer account actually went up by 60%. And the people have spent more than EUR 500 with us, which we consider our deep relationship customers actually went up by even 80%. And if you look at our partner business, this actually has grew by a factor of fivefold. And items shipped via Zalando Fulfillment Solutions for our partners has even grown by eightfold factor in -- since 2019. So the partner -- the platform strategy really was at the center of the growth of our strategy the last few years in the center of the success. And this is now the starting point for the future. Over to you, David.

Yes, as Robert described, like we're actually a fairly small platform just a few years back, and we have built this into this quite big powerful machine. So now if we look forward, we have quite an exciting growth phase ahead of us. And I think the great news is we can build this entirely on this powerful machine, but we can think it a whole lot bigger as a whole ecosystem for fashion and lifestyle. But before we dive into this, maybe we thought we'll get everybody in the mood with a video. [Presentation]

So before we dive into what that ecosystem actually is, I want to explain quickly some underlying shifts and trends we've seen in customer behavior in the market. And that actually open up big opportunities for us. So first of all, the buying power is shifting to a digital first generation of customers. By 2028, 45% of all the population will be Gen Z or millennials. Secondly, generative AI actually transforms quite radically how customers can engage with customers with fashion and lifestyle. So it will get a lot more social. It will get it a lot more conversational and it actually allows us to create high-quality content at scale. Then thirdly, consumers and regulators will push for a lower environmental footprint. Customers might be drawn to very low price points right now. But in the midterm, customer expectations will increase and even more those of regulators and that will push for a change. And then the fourth point, if you take these 3 shifts, and then combine it with a highly fragmented European market, and it makes it increasingly challenging for all brands to succeed and then be in control of their brand at the same time. So there's an increasing need for strong partnerships. And Robert mentioned at the beginning, I think our strength has always been to anticipate brands -- anticipate trends and then act on those consequently in the right moment of time. And I really think this is -- again, this moment of time because these shifts, they open up big opportunities and everything we've built over the last 15 years helps us to capture those. So now with these opportunities in mind, we expand our strategy and build an ecosystem that grows beyond our current scope. And maybe I'll explain quickly how we got there. So here, if you see at the bottom, 15 years ago, we started building a retailer that captures like the strong move towards online and mobile customers. And why we succeeded was -- especially around like a large selection and convenience. Then we expanded and from this retailer mindset to a platform and thought, okay, we think beyond inventory ownership and build the starting point for fashion that connects customers and brands and the other way around. And that platform, it was all about making any fashion purchase possible. And so now I think now it's really the time for the next phase where we create a whole ecosystem for fashion and lifestyle around and also beyond the current scope of Zalando. And I'll explain in a second, but here it's also important for us. It's not just a different word. For us, it's really about expanding into bigger opportunities and also having a higher ambition to cover a larger share of the overall market. So now if we double click, yes, we can look at our consumer business first. So this B2C side here. Of course, we'll continue to serve customers whenever they have -- need to buy fashion items. And we've built a very strong machinery around it, and we'll continue to proof of that. But now moving into an ecosystem, means actually moving beyond that in 2 dimensions. So first, we move beyond fashion and expand into more lifestyle areas. And second, we move beyond transaction and go a lot more towards inspiration, entertainment that actually engages with customers earlier and deeper than just in the moment of purchase. So with that, with the B2C. I believe we can capture a very good market share. And then we open up a whole new dimension and new growth vector for us by building a strong B2B business. Yes. And on the B2C side, so far, I mean, we have enabled partners to connect their inventory to drive business on Zalando as an ecosystem. The next one is like opening up, offering solutions that actually allow partners to not only drive the business on, but also off Zalando. So they can leverage all our capabilities and use them as an operating system. And that also allows us to tap into and enable many, many more transactions in fashion and lifestyle then we directly capture on the B2C side. Yes. And so for us, that ecosystem, yes, it's expanding our scope while building on well-proven strengths we have. And then what is also important for us is why we expanded scope, that also means our impact growth, and our impact, for example, on the dimension of sustainability, can do much more. Fundamental belief we have is that the industry needs to change. And I think getting there, we need to have like a collective goal in net zero, that's the collective goal as a whole industry we should have. So that's exactly what we commit to. We commit to net zero by 2040 in our own operations and private labels and then by 2050 across the whole platform. And that said, we know the way the industry currently operates. That's a highly challenging goal. And one thing we have learned over the last years is like if everybody tries to find solutions within their own system, industry will not get to net zero. So what we're doing as an ecosystem now. So on the one end, we think bigger because we rather think in like how can we actually find solutions that can drive a long whole industry on certain dimensions. At the same time, we're more focused by exactly focusing also on these areas where we have a unique impact. And these are especially around how to enable better customer choices and therefore, also really impacting customer behavior. And then if we make that a scalable business that incentivizes also partners to drive along. We can also enable partners to better inventory efficiencies, less overproduction, more circularity. So for us, this is about like finding scaling solutions that support both business and have a positive impact. And with that said, I think enough for the overarching strategy. Now we can click a bit deeper into B2C and B2B. And I guess we'll start with the customer, right? .

Yes. Let's first start with B2C and our growth factor here. So going forward, our growth pillars for the B2C strategy will be based on 3 major pillars: so #1 is the differentiation through quality; #2 is the expansion into lifestyle areas, so going deeper and going broader into the lives of our consumers and unlock more potential; and #3, is the investments into entertainment, inspiration to as we get more eyeballs, get more time of our consumers. So these are the 3 growth pillars. And now let's go one by one into these pillars. So #1, the investment through quality. So we believe that a dedication to quality is needed and is very, very important today in this fashion and lifestyle world much more than ever. There's masses of unbranded labels like every day entering into the market is a lot of -- yes, there's [ intransparent ] supply chains. There is a lot of different and conflicting messages in social media. So dedication to quality and being known for and being a north star for quality for consumers and for brands is a key strategic lever for us for driving growth and a clear differentiation in the future. What does it mean specifically? In assortment, it means aligning ourselves to those highly relevant, high-equity, high-quality brands that are out there that really invest into a clear positioning, long-term oriented and have a reason to be in the long-term. So -- and we continue to invest to bring the greatest international brands into Europe and bring the greatest local brands across Europe. In terms of our digital experience differentiation to quality means investing in those high-quality question marks about innovation. So for example, in fashion and lifestyle, a good example is exercise and fit. So how do we -- how are we able to solve the question of -- if an item actually that you order online, if it fits, so through algorithm, through computer vision through augmented reality. So those are the high quality problems that we are deemed to solve in our strategy. It is what means taking a long-term stance on fashion and lifestyle and investing into those areas that help the consumers to actually make more sustainable choices on investing as well to get more adaptive selection on our platform. So this means there's all different as to quality taken here long-term stance. And as well, differentiation through quality as well means excellence in terms of our customer experience. It means walking the extra mile, running the extra mile for our consumers when it comes to local context, especially in Europe. We know every single customer has a local context. So what's the best experience we can provide the most excellent experience we can provide for a customer in the north of Finland to the customer in South of Sicily and how do we invest to make that experience happening. So that's differentiation to quality. And this is a really, really important foundation for us in the future as we know that our customers really care for it. So 2/3 of our customers actually are willing to pay more for quality. So it's a content to drive loyalty. It's a content to drive our active customer growth because it's rooted in the [indiscernible], it's rooted promises and over delivering on these promises. And this is what where brands care for. So brands are very seek out to us as a point of differentiation for quality. So -- and even lastly, when we embarked on this route to shift from [ quantity ] to quality back. We actually saw that in major markets, we already were able to increase our sales rates on the full price basis a lot of our brands. So these are really things that brand care for customers care for that, and this is why our heritage is coming we're great at is pushing excellence, pushing quality. And this is a true driver for us, and that's why we -- why we're doubling down on this area. So first pillar differences to quality. Second one?

All right. And the second pillar on our B2C strategy is to expand further into a lifestyle destination that can serve customers also beyond fashion. I think one thing we have definitely learned and know from our customers that they have very diverse interests and needs across all the different aspects of their lives. And actually to follow these lifestyle journeys that opens up a big potential for us. Maybe we look at the fact quickly first. So European household spends on average around EUR 13,000 on discretionary items, much in like categories that we already cover, like from fashion to beauty to accessories, sports, et cetera. Now if we talk about lifestyle expansion, we do not talk about like adding a category or like adding more and more and more items. First of all, what it means for us is that we can really follow our customers' lifestyle. And I guess I can take myself as an example, yes. I'd say I'm fairly engaged with fashion, not only professionally, although I keep buying the boring stuff maybe. Then I like and engage with several sports probably much invest much more than my skill level would suggest and then have a big family, and they have like many family members also have all kinds of needs. So now I wonder what can Zalando do for me, yes? So I think what we do is like we aim to build the go-to destination that can actually connect all these different aspects of lifestyle on a personal level. And then at the same time, we can actually go deep and really create distinctive worlds about specific lifestyle areas that have unique characteristics. And that is then what we call a proposition. So proposition is building like this distinct world, that actually cover specific customer and also partner needs. And so far, yes, I mean, we've done this -- here you can see for -- we have done this for lounge. We've done this for our design. We've done this for beauty and very early stage also for pre-owned. Now if the customers engage with several propositions, the results are really outstanding. If you look at our furthest developed markets, customers who engage with 4 or more propositions they spend actually 8x more in GMV per year. And then on the right-hand side, you also see, the more they engage with several propositions, the retention rate gets actually close to 100%. So you see that this engagement across multiple proposition that really deepens the relationship with customers and brings us to much higher share of wallet. And then think about the potential, not only per customer, but also if we roll out all propositions to full extent. Our existing portfolio of propositions, we haven't been rolled out to all markets that alone will drive growth. And then on the adoption level, we're also fairly early stage. If we get to similar adoption levels for all proposition as for fashion, there's also a lot of room to grow into. And then, of course, we don't only talk about existing propositions, but we can also venture into new propositions. The 2 next big ones we see with a high potential of sports and kids and family. For sports, and we know this is an increasingly important part of our customers' lives. It's a huge market. It's almost EUR 80 billion market. The online segment is still growing at a 16% CAGR and will grow. And already more than 40% of customers of online shoppers across Europe already consider Zalando as a -- in this category. And yes, we already sell some sports items. But we still feel we've barely scratched the surface here. And if you think about like -- I mean, you might know it or if you're passionate about the sport, it's much more than items, right? It's like U.K., it's about weekly habits. You care about personal improvements. You follow athletes or teams you like. You kind of put that you're part of a community. And that's why we're also quite excited to actually build a world that actually caters to these needs. And I would love to talk more, I love the topic, but I'll leave it to the deep dive later. So Anne and Martin can give you a bit more impression later how that starts to come to life. Yes. And then the same for kids and family, I can also tell you from a very personal experience about the challenges of having family from teenage daughters to toddlers. I'm not going to say what are the challenges. But the point is here, like if you have like different family members, the needs are very different. And guess what? I mean growing up kids is also very predictable needs. And catering like then 2 of these family needs that also opens up a quite big potential. It's almost a [ EUR 15 billion ] market. So for both areas, yes, we feel we have a quite unique position and also very clear differentiation through the quality approach Robert described earlier. So here, we're entering markets with tailwinds. We have actually a perfect audience for these areas and also better customer insights than anyone else. With that, we can build really a personal experience at scale. And we also have very strong brand partnerships behind that make it very unique. So this whole, it opens up a good growth pillar for us on the B2C side. And I think now maybe Robert can tell you how we boost this even further by moving more into engagement and entertainment.

Yes. So now let's come to our third growth pillar of the B2C, inspiration and entertainment. So we are investing here to get more of the eyeballs and time of our consumers and our platform in success. This will be a major growth lever for Zalando in the future. So why do we do it as you may ask. So -- and the reason why we're pursuing this is because it's both a challenge and it's really a great opportunity for lifestyle e-commerce. So we hit this over and over again from consumers across Europe or across different age groups. And I'm sure you hear this as well, right? So we hear I'm overwhelmed with information and noise. So e-commerce can today even be quite stressful. So we hear why is fashion e-commerce still so clunky and stupid? So why does personalization not yet work better? So why is there not more help on navigation and curation like in the age of AI. So why, why, why? So all these things we hear. And I mean, bringing together inspiration, entertainment and e-commerce in a personalized way is one of the holy grails that we're after. So not only ours, there's many companies out there that try from very different angles. But we believe we're actually in a very, very good position to succeed here. So we are the biggest fashion -- multi-brand fashion destination across Europe. So we have all the relationships through all these brands in their trust, and we get access to their content and information. So we are -- we have more than 10% of the European population that actually transacts with us. So we have their trust, and we have those relations with customers. And as I said, we solve quality life side e-commerce on a Pan-European level. And most important, we will have the culture. We have the culture of innovating, we have the culture of pushing customer experiences, innovating on their behalf and make it happen. So this all really puts us into the position that we can solve this. And some -- we already see some early traction and generate insights. So basically, we see that consumers already start to interact with us in a different level beyond the transactional. So we did last year already a first large-scale experiment to integrate high-quality content within the e-commerce experience with the launch of stories. And since the launch, we had already 5 million people interacting with their content. So we learn of how to source content and how to display content who is interested in which content and as what are the technical capabilities needed for it. Another example is the assistant we launched just a few months ago. So it's actually a proprietary assistant we launched based on the large language model integration with OpenAI, so which gives us the contextual context, and we then make a proprietary for the fashion contents for the Zalando consumers. And I think what we actually see here already is like it's in beta still, but we see here already that consumers actually starting to act with us in a very different way. They ask us questions that go much beyond what you would actually imagine e-commerce companies. So they asked a question around occasional wear about tips. And it's really like every fifth customer actually has more than 10 consecutive prompts that they ask us. So it's really a different way of how consumers start to interact with us. And this is a great news and great first indication, but maybe let's maybe watch a video of how this actually can turn into. [Presentation]

So driving growth through personalized content at scale is a big price to win. And we will tap into a very different source of content generative AI content as [ CNV ], but as well content from brands, content from creators and that's what content from the customers and users themselves. And so with that, we aim to generate a lifestyle destination that is inspiring, that is entertaining and helpful at the same time to navigate consumption lifestyle choices throughout Europe. And the more we succeed, the more eyeballs we get, the more time we get from our consumers from consumers throughout Europe. The more we see it as well in the engagement metrics of Zalando and as well the more we will see it in our ability to drive advertising revenues. So this all won't be easy. It's not that success is guaranteed here. So therefore, we'll move cautiously but very determined because we know the price is very big for this. So speaking of advertising opportunities or ZMS proposition, the updated B2C strategy actually offers plenty of opportunity for ZMS proposition to grow further. So first, with the lifestyle, with the quality differentiation. Actually, what we see is that as that measures the share of ZMS revenues divided by the GMV is actually in Germany last year, still twice as much as in other countries. So by bringing our brands more international, there's plenty of opportunity to grow our ZMS business going forward. With the lifestyle expansion we see in some of these newer propositions such as beauty, that already here where we go very deep, actually, we see that we get 4x the ZMS share than in other category -- in other propositions. So by going deeper and going broader into lifestyle areas, there's actually much more potential for ZMS in these areas. And last but not least, in inspiration entertainment. Today, the ZMS business is still largely based on performance-based solutions. So -- and the more we actually succeed in getting more time from our consumers, the more is actually our ability to as well generate more brand campaigns. So that's actually a factor of 5. So there's plenty of opportunities for us to grow the ZMS business with this updated strategy going forward. So summarizing our B2C strategy and the growth pillars. So there's 3 growth pillars: differentiation of quality, the lifestyle expansion and the expansion into inspiration and engagement. And we will see like tentatively these pillars coming through the difference as to quality through customer loyalty through active customer growth and retention of our customers. We will see the lifestyle expansion actually coming through on our share of wallet and the active customer spend. And we'll see the inspiration entertainment actually coming through on our user engagement and time spent on our platform and as well in the midterm, on the advertising opportunities. So these 3 pillars offer us plenty of room to grow, to return to strong growth again and we're very excited about them. And yes, and I think that's the B2C the first vector. And now we come to the second vector of our growth going forward. Yes, exactly. Let's turn to the second growth vector B2B, where you say we build the operating system to enable e-commerce across Europe on and also off Zalando. Maybe we can take a look at Europe from a brands point of view, yes? If you imagine you're like trending U.S. label, you want to conquer the European consumer landscape. And then you look at Europe, of course, huge potential, right? You have 600 million people spending over EUR 450 billion in fashion, you have a growing online share. And so now in theory, you could say, okay, that's -- you have U.S. and China and then Europe, that's a huge market. It's one market. But then the reality looks quite different because it's a combination of many unique markets. You have 40 different countries, 30 languages, 30 currencies, many, many different payments, delivery, return solutions, et cetera, you have many different sales channels. So as a brand, if you want to succeed in that and then take that in combination, what we discussed earlier, the shifts, increasing customer expectation with like a generation shift, new technologies, increasing regulatory environment that makes it very complex and increasingly complex for brands to succeed and also stay in control of their brand. So the good news is we have spent 15 years to actually build a system to solve all that complexity of Europe and also that complexity of fashion and lifestyle. Our logistic network, but now it features 12 fulfillment centers, 20 return centers, more than 40 carrier integrations. And we very purposely built all of this like for fashion lifestyle, with a superior service quality with also designed for cost efficiency and also for more sustainable operations. And so far, we have offered them brands to use these capabilities to sell on Zalando. And you actually see here how well that already works on Zalando, yes. It's more than EUR 2.4 billion in GMV is enabled by our fulfillment services, and that also results in a steadily growing ZFS revenue and more and more partners actually counting on these solutions. So now the next step for us is then to open up that system for brands and retailers to not only sell on Zalando, but also off Zalando. So in fact, they can run actually the entire e-commerce business on our operating system. We've already gotten started with that. We have the first 26 brands live, connect them to 11 markets, across 6 different channels. And then what we're going to build, you see the scheme here in this triangle. So we have our logistics services as a strong base, so brands can really tap into all of our network. Then we can build software solutions like connecting them, for example, to all the different channels and then also add other services, be it in customer care or content production. And here, also wait for the deep dive. David and then Jan can tell you a bit deeper what that means. But here, just roughly for brands, what they get out of it is much similar Europe. You have just one simple integration to all channels. You have one efficient stock pool, a huge difference, actually. A big one control panel, and you can benefit from having one box in case of multi-brand orders. That then in combination, it really then unlocks the potential of Europe. Because suddenly, you get access to all markets to many, many more customers. Our quality approach also helps with loyalty. Then you have both growth and margin potential is going up, and you benefit from like the investments we do in efficiencies and then also in sustainability. And then I can tell you from also many talks to brands I've been in that the interest is really high, like the resonance is really strong. And then you also see like this year, our B2B revenue is already getting close to EUR 1 billion in revenues. All right. With that, I think we covered B2B and B2C. And I think we finished also with that outlook. So maybe time for to quantify the outlook a bit more.

Yes. So now let's come to our opportunity. And here, we're really excited. So our opportunity, it is huge, as you see, as you see here. So our opportunity is huge. So we operate in this massive EUR 450 billion market, which has a structural trend towards more online and digital. And yes, while in the last few years, there was some noise with pandemic shifts and consumer sentiment so on and forth, the long-term trend towards digital and online is really undebatable. So that will happen. And like some research actually suggest is now like growing next few years at a CAGR of 5%. But even if you zoom out a bit and you actually see like where actually European fashion e-commerce is in comparison to China or the U.S., it actually still is lacking massively behind. And there's actually no reason whatsoever why that should be. So Europe e-commerce will catch up and will actually grow much more -- grow much more further and catch up to the levels that we see in the U.S. and China. So it's massively growing. So -- and with our [ EcoSim ] strategy, we now -- will cover a market -- we cover a market share of more than 15% going forward. So which is much beyond the 10% of the B2C market share that we previously aimed at. So why do we say we cover more than 15%? Coverage means we split our view between B2C and B2B. In B2C, we own the transaction and B2B, we enable the transaction. But in both, we actually impact the transaction and we earn money with it. So therefore we say we cover. And in the long-term, we as well see that our long-term margin target will stay the same in B2C, our view remains unchanged at its 10% to 13% in the long-term. And as in B2B, we see a margin target for us of 10% to 13%. So taking this all together, our opportunity is massive.

Yes. And I also think we have all the capabilities that we actually need to capture that opportunity. I mean, first of all, we have the customer reach. We have a very well recognized brand across all of Europe, and we have a customer base of 50 million people. And secondly, we have the best relationships to actually the best brands in the world. So we appreciate and know about really brand equity, and that's why also brands bet on us. Then I think sustainability is an interesting one because we made this an integral part of our operations and being able to make more sustainable choices, a scaling business. And then at the same time, helping brands in this regulatory environment, that's a capability that will be needed more and more in the future. And then fourth, our logistics networks, it's the biggest purpose-built logistic network for fashion and lifestyle. We operate 12 sites in 5 countries. We've already invested more than EUR 1.5 billion into this network. And then finally, also on tech and data. I mean, first of all, we have a team of 2,000 software engineers and data scientists to continue to focus on all the challenges in fashion and lifestyle. And then we also have all this like customer data proprietary insights that we can actually now utilize more and more to actually have the systems learn about it. I mean if we talk about in the future about personalization, if you talk about a eye driven size advice, if we talk about AI driven content, all these things like they need strong data, and that's exactly what we have. So we can utilize these new technologies at a whole different level than others could. And so this -- I think these capabilities are quite unique. And I think also in that combination, very strong. And I think the opportunities were laid out. I think those are exactly the capabilities we need to capture those. And yes, we will focus still on organic growth and investments, but we can also to support our strategy, selectively add some M&A like we did with the acquisition of Highsnobiety. With that, I think back to the numbers.

Yes. Now let's talk about our path to 2028. So now we have a vision and a strategy that actually offers new opportunities, new horizons for us. So going beyond B2C, going to B2B, going beyond fashion, going beyond lifestyle, going beyond transaction into inspiration and entertainment. So a lot of new horizons we actually can execute through cycle. There's nothing we did that can stop us that it's within our hands. And while some of these growth benefits will already come through within the cycle. Even more important for us, it actually positions us long-term in a very, very good spot. So when they tied towards more digital and e-commerce in fashion and lifestyle in Europe shifts again, we are really well positioned, both in the B2C as well in B2B area. So -- and that's where we were after. So we as founders and leaders of the company with the strategy we clearly have the ambition to return back to double-digit growth. So for the GMV now and the revenue for the time between '23 and '28, we now forecast a growth CAGR of 5% to 10%, so both for the GMV and as well for revenue. Why is it the same? because, yes, on the one hand, we have the partner program, which actually will grow 0stronger than the retail will continue to grow strong in retail on the one hand. But the other -- on the other hand, we have as well a B2B business, which by its nature, only affect us revenues and is strongly growing. So those factors level out. So therefore, the revenue on the GMV CAGR will be the same. So 5% to 10%, this is returned to strong growth that we have a very clear path for and are very excited about. And at the same time, it means that we continue to outperform the market. It is not only a strong growth. It's as well we as we target to increase our EBIT margin in the same timeframe. So by 2028, we get to a [indiscernible] of 6% to 8% adjusted EBIT margin, which at the midpoint means that we're doubling the EBIT margin from last year of 3.5%. And we can do so because there's so many potential in our business while driving the growth strategy that we can execute and will execute on. So last but not least, we will achieve a strong free cash flow throughout the period. Now let's go a little bit deeper on the margin side. So as I said, 6% to 8% at midpoint is means doubling the margin that we had last year. And we see a lot of potential, and we're very excited to drive these potentials, maybe especially on gross margin. Gross margin, we see like on a group level, more or less stable trends, which comes from a dilutive effect from B2B. But on the B2C side, we will continue to have an uptick of the gross margin going forward. And on OpEx line, fulfillment marketing and admin taken jointly, we continue to see like a good potential to actually drive it to the lower 30s by [ 28 ], which brings us on a group level to 6% to 8%. So that's the task ahead, driving a strong growth and at the same time, increasing the margin for Zalando. So it's exciting. It's doable, and we will make it happen. So coming to the end of our keynote presentation. So there are 3 key messages that we wanted to deliver to you today. So #1, we have now ecosystem strategy that serves customers beyond transactions, serves partners beyond our platform. And this strategy allows us to go after even higher coverage of the entire fashion and lifestyle market. Number two, we have 2 growth vectors, B2C and B2B. In B2C, we will drive it with differentiation quality, expansion into lifestyle and expansion into inspiration. And in B2B, we enable more brands to unlock their full potential in Europe. And #3, our opportunity is huge, is massive. And we have a clear path to return to strong growth again and continue our margin expansion with it and yielding a very attractive financial profile at scale. With these 3 messages. Thank you very much for your interest and listening and yes, and then see you for the Q&A.

Thank you, Robert. Thank you, David. Thanks for really giving such a great insight into our future. So let me kick off now a bit the sessions with a bit of an admin before. So firstly, we'll start the journalist Q&A in a cent, but we have different mix of groups today, so let's split it up a bit. So I would now ask investors and analysts to join me outside for lunch, and the exhibition, if you're not sure which group belonging to, if you're having a yellow lanyard, then you're joining me and the purple ones can here stay directly with -- for the media Q&A. For the ones joining online for the Q&A, let's keep in mind, you have the slider link on the right-hand side of your screen. You can already type in your questions and we take it either in media or in the investor Q&A. For the ones joining online at 12:30, we are back with the Q&A for Sandra and Robert and David on the keynote. And yes, with that said, yellow lanyards, please follow me. And -- but of course, you're happy to join this session as well, but I think there's still enough plenty of opportunities for you afterwards. And yes, with that, please come and join me outside. Thanks. [ Break ]

Hello, and welcome back after the short break and thanks, everyone, for joining online. Before we now start into the Q&A, let me first give a bit of admin staff. So how do you ask a question in the room is rather easy. Raise your hand and then, the ladies will come with a microphone, and you have enough time to ask the question, but please wait until the microphone arrives. Otherwise, I have to repeat the question. My memory is not that good. So keep that in mind. Secondly, for the ones joining online, please use on the right-hand side, the slide or one type in your questions, and do it. We are now back with Robert, David as well as Sandra. Important information now like this is one of a few Q&As we'll have here. So we'll now focus really on what David and Robert presented in the keynote. I know there are lots of question gambling around also when it comes to B2C and B2B. I'm also pushing that out for the sessions with a deep dive afterwards. Same, by the way, applies for the dedicated financial questions with Sandra afterwards. So again, there's enough time to ask questions. With that said, yes, let's kick it off, and I'm seeing the first question coming from Adam, Deutsche Bank. Please go ahead with the microphone. Yes.

A question really relates to when you're looking at the B2B offer what gives Zalando the right to win in that space? There's a lot of other people that may offer alternative services. What is it that the brands are coming to you that is either different from what other people are doing? And what is the opportunity, whether it's increased sales, cost savings that the brands get by utilizing your services?

I mean, first of all, I'll start with that I think we moved into this in a quite natural way, right? I mean we have been working with partners for many, many years, and we have very close relationships with brands. And with our platform offer, we already enable them to leverage like our services to drive the business on Zalando. So that we've been already doing. And I mean, again, you see already the scale, I mean, EUR 2.4 billion of GMV that is already enabled through our fulfillment services. So the natural next step, we got that actually as feedback a lot from the brands that we expand that further because the issue with that is that you have a bit of like a one-way street with inventory, right? Because if you only sell on one channel and then you have different inventory pools for different channels or for your own e-comm. So if they have a meaningful share already with us, that's a very logical next step to expand that. And I think that also goes into like what are the benefits? So I think there's one inventory pool that's a very tangible benefit you get because you do not have to have like this fragmented, very inefficient inventory pools where you have to manage sell-through in an isolated way, yes. And I think the next one, I mean, is Reach. I mean, we have built a network, also logistic network to reach almost all markets in Europe. Yes, you get like the immediate reach. And I think also like what we described in terms of quality, the leveling up like the convenience, they are -- so we're pretty much best-in-class there and that's, you can completely make use of this, which drives actually also growth but also drives loyalty for the brands. So I think these benefits and I think the logistics, the network we have built, that is very unique. And again, then we already have the experience to build more on top because logistics is only like the base, the software layer with Tradebyte, we already have a lot of experience in there to then help brands connect to all these different channels. And the more we move into, I think the more we also and right to offer more and more holistic services and which is also triggered by what brands actually need and what they also ask us to do more.

Other questions from the audience. Miriam in the second row.

Yes, just a follow-up on that. So I mean you've just said there that you feel the logistics side of things is quite built out. But how should we think about what's needed now from an investment point of view in terms of building out the software and then the services side? And even on logistics, could you perhaps talk about sort of how you think about how this fits into your sort of midterm plans in terms of capacity and then CapEx?

Miriam, we'll dive a bit deeper in the financial detail about the CapEx number you saw in the midterm guidance, as you say, capital investment will remain level -- like at the same, at a similar level, around 3% of revenue. So what that means is that, of course, at the moment, we have a logistics footprint with 12 warehouses where we are currently adding 2 more. And as the business scales, we will increase our footprint.

And then on the sort of services and software side, what do you need to add to have the capabilities that you want to offer brands?

So at the moment, what you see in the midterm guidance basically reflects what we have already, yes. So it is about our [indiscernible]. It is about the multichannel fulfillment offer that we have created. And it is about trade pipe being the integral software that enables that logistics product. So those are the main revenue drivers for the growth that we want to achieve in B2B.

Perhaps just a follow-up out of the slide from Jurgen Kolb here. Are there any start-up CapEx or cost necessary to implement the B2C or B2B strategy?

And so are there what?

Any start-up CapEx or cost necessary to implement our strategy?

Any start-up CapEx. Well, I mean, on the B2B side, I think it's, like there's plenty of utilization of logistics. So, there is no, at the moment, there's no need to build out further CapEx in there. And on the B2C side, especially, I think on inspiration and entertainment, I think there is some capabilities that we are in the process of building up but I think that's actually part of the plans that we have represented so that's already reflected in there.

Yes. Perhaps a good call out from you. Robert, a follow-up from Jurgen on that one. During the presentation, we made comments about the engagement and entertainment. And it was said that the expansion with more entertainment will be done cautiously. Why is that? And where does Zalando see a risk in the execution and implementation of that entertainment strategy?

Yes, I think it's actually a good question. So why cautiously? Because I mean, I would -- I would give 2 answers to that. I think first of all, I think from a consumer perspective, when you actually like you need to manage, I think, the consumer interaction, I think, in a cautious way to not overwhelm a consumer in a way because like if a consumer goes to someone because you have a specific e-commerce need in mind and here as well, overwhelmed with inspirational content. You just actually want to get to transaction, once you get the transaction, you actually have to keep consumers on hand actually burn as well, you're right and develop the ratio with the consumer that you actually offer something more than just e-commerce, you actually have content, you have more inspiration. And it's actually a meaningful place to spend quality time on. The second reason is actually when it more comes to how do you see it? And I think as an e-commerce company, you are very much used to conversion rates, active customer share of wallet. So what drives the wallet? Like transaction. So this is what e-commerce is actually really made up for like entertainment companies, they think of users, they like the users, once the active users engagement time spent the ARPU like advertising revenues per user. So it's a very different way of how to actually manage success and manage dosing. And bringing these actually together in a good way, that it actually is one floor and actually making sure where do you invest in the right way is actually something that we as organization as well need to learn, need to get comfortable with. And therefore, I'm saying we're moving determined it cautiously on it. Because it's actually a lot of like organizational capabilities, organizational things that we actually learn while doing so.

Thanks, Robert. Perhaps a follow-up on there a couple of quality questions coming online. Perhaps I start with the one from William and Tyson exactly to what you just said, is like William from Bernstein asked what gives you the conviction that lifestyle expansion, the quality angle and the content will actually drive the inflection back to the 5% to 10% top line growth. And what is different to what you are doing today?

Yes. I mean we, I think on the B2C like 10% is like overall the group has B2B as a vector and has B2C as a vector. So B2B is growing very strong but as well the B2C vector, we predict to grow it as well, return to very strong growth. And like these are, I think, the 3 pillars that we presented. So focused differentiation to quality. Like excellence in everything what we do. So this actually is by itself already bring up the retention active customer growth again because it's actually deeply rooted in the trust, in the excellence of the experience. And that's well noted. I think even more so, I think in the future, this quality differentiation in this very massive world will be a big turning point where consumers will go to and say, okay, this is actually place where I know what I get, actually come back with what I get. So that alone will bring up the active customer growth. Lifestyle expansion, as David said, is so much like we have 50 million, we have 50 million relationships with consumers. And all these consumers, they actually we solve a problem for them. We know, we have these relationships with these consumers. And they don't only spend like money in fashion but they actually have a whole life what they actually have consumption area. So nurturing this relationship and going into different areas, that will actually increase the share of wallet. And those 2 aspects alone will bring us much beyond the segment growth. And I mean this entertainment and inspiration angle, as I said, like it's not an easy one. It's not where success guaranteed. But if we solve for that, I think there's massive potential going forward. I think in these 3 things, there's nothing that keeps that from executing on them. So it's not that we have to wait for the economy to return. So we can execute on these things to move forward. And I think in the long term, then we will be in awesome position.

Cool super. There's another follow-up from Andreas Riemann on the quality focus, probably, David, that goes to you is like, is it mainly about the premium execution? Or does it affect the range of brands that you offer? Does it mean you may drop brands at lower price point? And does it also affect the addressable market?

So explicit and no, we're not reducing like our addressable market. Fuss is much more about I mean, we do want to cover a very high share of wallet with our customers. That's why we also talked so much about like how we engage customers to spend more time with us, how do we engage them beyond the transaction, how do we engage with customers also be on fashion, then across like different, all these different lifestyle areas. And within that, we also know customers, of course, have like a range of price points, items they buy and we definitely want to be able to cover that and then cover like all the customer needs. Important for us is, however, how we differentiate? Because we believe like there's a strong reason why it will come to us and don't go anywhere else. And that is like the quality aspect we're talking about here. We do have an assortment, brands that we only, in that combination have, yes. I mean only if you look at 11,000 exclusive items, we have last year alone, I think 300 drops we did that were exclusive like where every single day, something new is happening and people, that's why they come and then the high equity brands, I mean that's what drives in and then what we are quite unique. The same holds through the non-experience side. I mean we can get customers better recommendation, maybe size advice, et cetera. These are things like we have better insights where we actually get customers like unique recommendations and that goes all the way through the experience. So that is, for us, important like the quality is like the differentiation. I think that is something unique that in the combination where customers get something they cannot get anywhere else. But we know once we engage with them and then also across different touch points and across different areas of lifestyle. We know also they will spend more and more also like throughout their wallet. And of course, we see that they, at the same time, also shop on lower price points on basics, which, of course, will still continue to offer.

Super, thanks. We have so many people here on site. So any further questions. Emily, in the last row on the left-hand side, please.

Emily Johnson from Barclays here. I've got one perhaps [indiscernible] quite basic question on the B2B business. Who exactly are your customers on that side? Is it that the B2B ecosystem is mainly for brands owned D2C offerings, leveraging more of your kind of software and hardware? I think you called out in your release earlier ASOS, about you, who are obviously marketplaces and your direct competitors. So who is the person directing Zalando to fulfill that item? Is it the brand who wants Zalando to fulfill a parcel that's being ordered on about our ASOS? Or is it ASOS and about you who are partnering with Zalando for fulfillment in specific geographies?

Yes. I mean, you can also, the gentlemen right next to you, David and Jan will talk much more about that. But here again, for us, in the case if you build a strong B2B business that makes the brand or also a retailer than our customers. And I mean, we are then here to actually unlock this full potential and connect them to wherever they want to connect to and how they want to address like their audience. So I think that's in our role and that's then also if they want to connect and this business I mean, typical customer in that sense would be, for example, a brand that sells on Zalando might also sell, of course, have like their own e-comm approach and sell through their own app and website. They might also connect to ASOS or ABOUT YOU or like other platforms. And I think that's exactly what we didn't make possible. You can have like this one inventory pool across all these channels. We can integrate them across all these channels. They can easily merchandise and manage it then. So more like one the kind of one control panel. And then also benefit from like this one box. I mean only if you can consolidate orders across brands, you added also economic benefits. So I think that's what we aim for. And again, all brands, I mean, that we already work with. Of course, those are like also like a clear where we also see like there's a strong interest. And once brands are already in ZFS, again, it's a logical step. But even beyond that, yes, I mean, we have, for example, if we talk brands was not a strong European footprint, for them, it's, of course, highly relevant because they get access all at once to all Europe. But then we can also go beyond that and then expand that target group even more.

For other questions from the audience. Let's go into the third row gentleman.

Eric [indiscernible]. When you are going into further into the Lifestyle segment, do you see that you will do that via B2B or B2C?

So I mean we get also both? Yes, both. I mean the lifestyle expansion, we primarily discussed here now as our B2C approach, where we leverage like our customer relationships and then deepen these and follow more like these different lifestyle aspects of our customers. So that's why we think that's a strong growth driver and the driver for deeper customer relationships more share of wallet. But of course, we also want to enable that through ZEOS, through our B2B offer, which, again, we have like this strong network. I mean if we concentrate on logistics first, already for, of course, for fashion. But same, we also built it all up for beauty, for example. And the more we cover, that's also the good thing, both sites benefit from each other because the more we grow in lifestyle areas and the more we grow into like sets of brands on the B2C side. There's also a clear inroad then for ZEOS to build it out further, and the better the network for ZEOS gets, like also the bigger the inventory pools get. Again, like the B2C side can also benefit from that because these inventory pools make it more lot more attractive and also beneficial on the B2C side.

Yes. Let's move to the next row. Now to Jorg Philipp, please? All the way back. Next time, Jorg Philipp, you sit in the first row then the way is not that far.

It's Philipp from Warburg. Actually a bit on the entertainment part. Do you consider actually going multichannel basically, meaning spanning from your own website to YouTube, Instagram, whatsoever. And to what extent do you think you are going to link that with product, meaning you do certain entertainment formats where you feature particular brands? Do you expect to get a renumeration connected with ZMS or need a bit going a bit back again into private labels to monetize that? Just some thoughts on this part.

Yes. So I mean, I think a little bit like how we, how we describe our party entertainment and the inspiration entertainment is a little bit by crossing river but tapping the stones in the water. So I mean we actually see like how different kind of content formats actually help us to get more time of our consumers and what actually the consumers actually are really interested in. So it requires, I think, some different things, more startup thinking, I think, in that front, to actually see like how live shopping is perceived, how well like user-generated content is perceived. What the brands and like larger entrants can actually bring to our platform that draws consumers into experience. And I think fundamentally, it's about getting more eyeballs, getting more time of our consumers in order to help them in a quality way with the lifestyle consumption choice. And this make some good examples as well outside of Europe, like in China, we're actually, I think this actually can really work well at scale. And I think that's sort of like where we're heading. I mean how you combine like the inspiration and entertainment, I think, with e-commerce adoption. I think our view is very much, like I think our inspiration and entertainment shouldn't be limited of what is available on our platform. But I think what is available on our platform should be seamlessly integrated. So because for a consumer, this -- the switching cost of entertainment, I see something on TikTok. I see something on here. And then I want to buy it. The switching costs like those experience needs to be like very seamlessly integrated. So not limited by what is available on our platform. But what is available on platform needs to be seamlessly integrated.

Maybe also to quickly add, it's also important, like I think the platform thinking holds true like also what we've done on the merchandise side. For this, he is also not about like us producing much content or so. It's more than how do you think about yes, we want to engage with like interesting, also unique content. And I think we also have access better than many others here because we have access to like all the brands. But then also thinking about like how to involve brands are also creators, which then yes, spans already across like to also more social media and then also how to leverage consumers much more. Make things shareable, use the power of consumers themselves. But there, I think we always find, try to find like these unique angles like where we have like a strong right to play because we do have again a strong quality and also unique access to specific stories.

Further questions in the audience. And let's move on to the second row. Next time we start from the first row. So you can all sit in the next session in the first row to ask the first question.

Yashraj Rajani, UBS. So my question is, I'd love to get your thoughts on, or some color on how different is the return on investment where on the one hand, you're actually promoting at a bit more normalized level without much marketing, but on the other hand, increasing marketing to sort of sell a bit more at full price. So how different is the return on investment of those 2? And going forward, how do you think about optimizing the assortment to make sure you have a healthy balance between the 2 so that you get the maximum return?

So basically, what our ambition is that, ultimately, the customer uses us as their choice. And with that basically, the whole performance marketing piece is moving away. So you're moving towards brand marketing. You're really trying to target the customer in a way where they come to our platform and then we intrigue them with other things. So I think there is that piece of the equation. The other piece of the equation is then how do you now monetize the inspiration and entertainment piece, which creates marketing revenue, yes. And so I would say we need to differentiate a little bit between when we say at the beginning, quality and expansion into lifestyle because here, the marketing invested that we're taking won't change. It will just be a change in the mix. And then the inspiration and entertainment, that is one where actually the advertising revenue that we can generate from it because all of a sudden, we can really leverage that full funnel experience is where we will drive the return on investment on yes? And that is then similar to or that is basically the ZMS revenue, which you will know is highly margin accretive is at the gross margin level and at the EBIT margin level. So that is a very attractive proposition. That will take time to build up, yes? Because inspiration and entertainment is nothing, as Robert also said, that you can just switch on overnight, yes. So this is where we will have to test the different stones in the water and find our way. But when we said the long-term margin ambition is the double-digit 10% to 13%, this is where this plays in.

Sandra, there's also a quick question. I think it's rather yes and no question. From William again on in our Q3 results, we talked about more focus on buying for growth in wholesale for this financial year and a more balanced mix of the partner program raised. Is this still the case going forward?

Yes. No change to that. When we talked at Q3, this was the time when we signed off the autumn-winter buy for 2024. And yes, we are returning to growth as we said this morning. And when we talked about the more balanced mix, you will see later on in my financial deep dive that we are holding firm on the partner share. And with that, the partner business will grow faster than retail. But I think the last 2 years, there was a stronger disconnect between the 2.

Thanks. Before we continue with our first deep dive on B2B, perhaps the last question to you, Robert. We also mentioned today in our keynote, our ZMS, Zalando Marketing Service, and Ben from Stifel is asking, it's notable that the ZMS still only stands at 2% of the GMV whereas peers like Amazon are closer to 20% of revenue. Where do you see ZMS going as a percentage of GMV until '28? And would this only be driven by adding branding? Or could you get even more aggressive in performance?

And I think maybe before I answer this question, maybe actually go on set back. I think like the strategy we choose here is definitely not like, we don't make it very easy for us. So first of all, because I think the easiest way to actually boost ZMS revenue and so on would be actually to have brands competing with retailers on a platform like let them really compete on a product level, like buy box competition, like increase, like open ourselves up like to all these Chinese labels, get them on the platform and have them competing against the brands, exploiting loop holes in Europe. So I think that would be the easiest path. So I think it's tempting because I think you see that you can actually really grow threat in this sense. But what we are doing is actually taking a long-term stance. And our long-term stance is deeply rooted in our conviction what is right conviction for Europe in the long term? And that's actually rooted in brands -- in the brands and lifestyle brand. That's out in excellence and quality in these European values and sustainability in those areas. So I think that's actually what we think will be the future -- of [indiscernible] sector in Europe play out. And that's as well like why our ZMS share is not 20%, yes. So because we don't let like the retailers compete on a buy box with the brands because it would be actually totally counter enabling brands in Europe and actually helping them with actually unlocking the full potential of Europe. And with our entire strategy of quality like lifestyle expansion in the segment, we're actually going the harder, but the high route and the more long-term routes with that. And I think our ZMS share will for sure has potential to double and more in that period as with internationalization, as with the Lifestyle expansion, and if we're successful, I think, in the inspiration entertainment, I think there's actually a lot of room and a lot of music of what doesn't mean that we're not going to music don't worry. Like there's a lot of music in this area, what it actually can become a long term.

Thanks a lot to Robert, David and Sandra. That concludes the keynote Q&A. I know there are still some open question also on Slido. We haven't forgotten you, but we have a couple of other Q&As coming up. So we'll tackle that question for sure. Now, let's turn the focus on our B2B deep dive, and I'm happy to introduce Jan our SVP for the B2B and David Schroder as our COO. The floor is yours, and happy to get some insights from you.

All right. Welcome, everyone. Good afternoon. As you've heard in the keynote presentation, this morning from Robert and David. B2B is a key part of our evolution towards an ecosystem. And Jan and I are here today to tell you even more about it. In this B2B deep dive, we talk about why Europe is such a big opportunity for fashion brands and retailers in the fashion and lifestyle space. We'll also talk about the many complexities and challenges they face when it comes to unlocking that big potential. And then we'll have good news to share, which is how Zalando can actually help with its solution to enable growth, profitability and also a more sustainable future for Fashion & Lifestyle in Europe. And last but not least, we'll obviously also mention the huge value creation potential that holds for consumers, for brands, but also for Zalando and its shareholders. So let's get started with the opportunity first. Some of these numbers will sound very familiar to you because David already mentioned them during the keynote. So when we look at Europe, we are talking about 600 million people that spends more than EUR 450 billion each year on fashion and lifestyle products. What we also need to realize, though, is that when we look at online penetration, actually, Europe is still trailing behind, right? So Europe the online penetration in the fashion and lifestyle space in Europe is only 26%. Whereas in China, it's already above 30%. And in the U.S., it's even approaching 40% and I think that creates a very important question and that is why is Europe so behind? Why are consumers not using these digital channels even more, why our brands not tapping even more into this opportunity? And from our perspective, the answer has a lot to do with Europe itself, right? Europe is complex. Europe is not this one huge market that we maybe see when we think about the U.S. Europe is actually the combination of many unique markets with different cultures and different consumer preferences. When we talk about Europe, we talk about more than 40 countries, more than 30 languages, many currencies, and we also talk about many different payment methods, local ones, global ones. We talk about different delivery preferences and return options. And all that beautiful complexity is what Europe is all about, but it also makes it complex at hard. And so what does it all boil down to it? Well it boil downs to consumers actually having different preferences and expectations in all these different markets. To just give you 2 examples that we know from our own experience at Zalando. When we think about delivery, for example, in Germany, many of our customers to this very day, prefer home delivery, whereas actually, our neighbors in Poland, they prefer delivery to a locker box, 24/7 available for pickup. Or if we think about payment preferences, our customers in the Nordics, they have largely adopted mobile payment methods already and that's their preferred way to pay. Whereas in Italy, our customers still by majority actually pay cash on delivery. And so you see there many, many key differences in these experiences. And in order to really provide customers with a great experience, brands and retailers need to deliver on those. But it's not just about different customer preferences and shopping habits. It's also complexity that is driven by a multitude of different channels. So when we talk about these 40 different countries in Europe, we also talk about different channels that matter to customers in all of them. Typically, in each market, we see 2 to 3 key destinations that customers go to. Some of them might be pan-European in nature like Zalando. Some of them might be more local in nature. Like Auto in Germany or [indiscernible] in France. And then there's obviously also the most important channel for brands, and that's their own e-comm website or app. And in all these channels, consumers expect the same seamless experience and convenience that they use to from places like Zalando. But the reality is different, right? Whereas consumers' expectations are constantly evolving, whereas shopping experiences are evolving the operations and the infrastructure that power all these experiences is not really keeping up. And that creates significant challenges for brands and retailers that want to unlock the big opportunity that Europe holds. And today, I want to talk mainly about 4 key challenges that we see brands facing and that we talk to brands a lot about. The first challenge is that there are dozens of integrations that you need to make happen and also maintain over time if you want to tap into this big European opportunity. You need to connect to multiple market places. You need to connect to a lot of different carriers. You need to connect to dozens of different payment methods. And that creates a lot of effort, not just onetime but also to maintain all of these integrations over time and to make sure that they continue to work seamlessly. The second big challenge is split inventory. We already heard from David and the keynote and the Q&A, that's actually a major issue, right? So if a brand or a retailer selling across multiple channels, it's normal that you don't get your demand forecast right for every single channel, right? So you will overestimate demand for some channels, you will underestimate it for other channels. Now if you have your inventory allocated to the channels before, demand materializes, that automatically means you'll have too much inventory in some of the channels. And that will mean overstock and discounts potentially, and you will have too little inventory in other channels, and that will mean lost sales. And that's obviously 2 things brands don't really like, right, because it hurts their opportunity and it hurts their brand equity. The third challenge I would like to talk about is lack of visibility. So let's say, brands operate on different channels. One key issue that hurts them every single day is that there are silos of data and silos of insights, right? You can have a dashboard on Zalando that tells you how you're doing with your sales on Zalando. And maybe you have the same thing on some other platform, you have the same thing on your own dot com. But there's not this one single dashboard that tells you the full story of your whole e-commerce and also helps you to optimize across all these different channels. And then last but not least, there are many unnecessary parcels being sent around. I think we've all had this experience also in our personal lives that when we order from a multi-brand destination and we make one single purchase with multiple items from different brands, we oftentimes get multiple parcels with single items. And we all know we pay for it, and we all know the planet pays for it, right? And that's creating yet another challenge for brands and so these challenges really sum up to lost opportunities, lost opportunities in terms of growth, lost opportunities in terms of profit and also lost opportunities when it comes to making the fashion and lifestyle industry a more sustainable one going forward. But there is hope at the end of the horizon. And I think that hope has a lot to do with the 15 years of experience that we have at Zalando in -- yes, growing across Europe, reaching customers across Europe, creating great experiences for customers across Europe. We've learned many lessons. We've built up great capabilities and now it's time for us to make all these great learnings and also great capabilities work for brands and retailers to unlock their full potential on and off Zalando. But before we talk about what the future holds, and Jan can tell you all about it, let's take a brief look at our journey so far.

Good afternoon. I'm going to talk about our next chapter. And that next chapter is multichannel. That is, we are now going beyond the Zalando channel, and we are supporting our merchants with sales on other marketplaces like AUTO, ABOUT YOU, ASOS and also on their own e-commerce, so their brand dot com. And to this end, we founded ZEOS. ZEOS stands for Zalando's e-commerce operating system and it is here to serve the entire fashion and lifestyle industry. Over the last 15 years, we have been building an operating system, an operating system that fueled the growth of Zalando and made it to the EUR 15 billion business that it is today. And we think it's actually a great operating system. And we think it can do much more than just serving Zalando. And therefore, we are now opening it to the external world, to merchants, that is brands and retailers across Europe. And with that, we are externalizing our proven capabilities in e-com that we have grouped along 3 layers: logistics, software and services. And these 3 layers can be used either stand-alone in a modular fashion or they can be used fully integrated as one operating system. And let me unpack these 3 layers for you. So logistics. Logistics is our infrastructure layer. Here, merchants get access to 12 highly automated fulfillment centers, 20 return centers, 40 local carriers, all close to European consumer. Basically, they get the access to the frictionless convenience that Zalando consumers are already enjoying so much today. Secondly, software. That's the key value-adding layer. Here, we are offering tools that help merchants to seamlessly integrate into marketplaces, tools that help them to optimize their trading across different channels. So basically, we give them one control panel to manage all their e-commerce matters. And then thirdly, services. That's a great example for the ecosystem that we want to build. So here, we offer third parties to offer their services on top of our operating system. For an instance, a content producer could offer content production services that we then seamlessly integrate into our logistics flows. And this all works towards one target picture. That target picture is as a brand, you just need to send us a container with the goods that you want to sell online. And from there on, you can take a step back and you just need to open your computer and you can manage all your e-commerce matters from wherever you are. And when building ZEOS, we take a lot of inspiration from the cloud industry. So here also, it started on a strong infrastructure layer. So consolidating data center operations into a shared asset, the cloud. But the real value add was coming from the second layer, software, starting with software that manages the cloud more efficiently, but then also adding further value-adding domains such as libraries for machine learning algorithms. And now the services ecosystem has developed on top of it. And that's what we now take as a blueprint for ZEOS. So here, we are also starting from a strong infrastructure layer. So basically the most advanced logistics network for fashion and lifestyle fulfillment that Europe has to offer. We add value via software and then also build an ecosystem on top of that. And the main question now is how do we create value with this. And for that, let's recall the 4 challenges that David had been introducing, which is dozens of integrations, split inventory, lack of control and too many parcels being sent around. And here comes a solution, and that solution is simple. It's all rooted in the word One. So one integration in order to unlock all of European e-commerce, one stock pool to serve all European demands, one control panel to manage all e-commerce matters and one parcel that can be shared by multiple merchants. Let's go a bit deeper. One integration. One integration is best explained based on an example. Let's take the Polish brand Kazar, that we recently brought online on ASOS. They were already live on Zalando using ZFS and they wanted to extend their marketplace offer and that's what we did. In the past, this would have meant for them integrating their internal systems into the ABOUT YOU marketplace, then mapping their articles, and that's a really tedious task because what might be called Navy blue in their internal system is being called Marine blue in the ABOUT YOU marketplace. And then the real hassle starts and that hassle is integrating country by country. So if they wanted to go live in Denmark, they would need to integrate with GLS as a carrier; for Sweden, they would need DHL and so on. And the bad news is that with every other channel that they want to integrate, that hassle starts from scratch. Now instead of thousands of brands figuring out for these complexities, one by one by one, we can solve it once and for all, for all of them. So we are already integrated into the major marketplaces in Europe, and now Kazar only had to integrate into the ZEOS, and we could bring them live on ABOUT YOU. We can also now bring them live on many other major marketplaces, that's simple, just like flipping a switch. One stock pool. You heard about that multiple times, but let me maybe explain that based on an example. So let's extend the example of Kazar. Let's assume they produce some 200 units of a certain boot. So today, it's inefficient. Today, they need to make early allocations in the season. So they produce that boot 200x and now they may need to make a decision. For example, they put 100 units into their own warehouse to sell them on their own e-commerce on kazar.com, and they put another 100 units into ZFS to sell them on Zalando. Throughout the season, they might be learning that this winter boot is selling quite well on Zalando, but not as well on Kazar.com or vice versa. And that would then lead to the situation that they run out of stock on Zalando while still having overstocks in their own warehouse. And this, in return, would then either lead to costly relocation operations, if time still allows for it, or to heavy discounting on kazar.com. And here comes the solution. With us, they can put just all the 200 units into the ZEOS Logistics network and sell them in parallel on kazar.com, on Zalando and also any other marketplace that they might want to add over time. So that means less overstocks, less stock outs, less discounting pressure and in the long run, also less need for overproduction. Third example, one control panel. One control panel to manage all of European e-commerce, be it stock listing, pricing, discounting, inventory placement, returns management, campaign management, marketing, profitability management and so on, all out of one place. And let me explain the power of this idea based on a recent conversation that I had with one of our retailers, [indiscernible]. [ Roman ] told me, Jan, the biggest problem that I have with returns is actually just caused by a few articles. A few articles that end up in return rates of 80% plus. And these articles are burning a big hole into my P&L. And the worst thing about it is I can only identify those articles after the fact. So once the majority of returns have been coming in. You as Zalando, you must have solved for that. Can't you give me some tooling to tackle this problem. And that's what we are now doing. He's right. We solved for it at Zalando. And now we are building tooling to early on forecast high returners and then also suggest actions like deactivating certain problematic market channel combinations for those specific articles. Fourth example, one parcel. Here, we are making, example, let's assume a customer is ordering on the AUTO marketplace jeans from Pepe Jeans and the shirt from Marks & Spencer. Today, that would result as a marketplace order in 2 parcels being delivered. Going forward, as we have both of these brands, Marks & Spencer and Pepe Jeans already in our ZEOS Logistics network, we can fulfill that very same order with just one parcel. And that is a huge savings lever. We believe that in the long run, with ZEOS, we will be able to save some 100 million parcels per year, and that creates a win-win-win situation. The customer wins because she only receives one parcel. The brand wins because of better order economics. We win because we can take a certain gain share of the profit pool that we are creating. And actually, there's even a fourth win, and that's for our planet. 100 million parcels less means that we can save some 60,000 to 70,000 tonnes of carbon emission per year. And that is the equivalent of the annual emissions of some 50,000 cars. So quite some impact that we can achieve here. Where do we stand today? Today, B2B is already a quite sizable business. In 2023, we already generated close to EUR 0.9 billion in revenue, and it's profitable. And at the same time, we have a strong basis to scale from. So with logistics, we have included Zalando Fulfillment Solutions that serves already more than 1,000 partners operating in 23 markets and we've recently extended it to ZEOS Fulfillment, adding 6 further channels, so marketplaces and on e-commerce, and that number is growing. And also on the software side, we have a strong nucleus that we can scale from. In 2016, we have acquired Tradebyte and since then, we have developed Tradebyte into the leading multi-marketplace integrator in the fashion and lifestyle space in Europe. So they have the richest set of marketplaces for fashion and lifestyle in their offering. More than 90 of those and more than 1,000 brands are already using their services operating across 30 countries. And that's the great foundation to further scale on, to build further digital tools and then add our services ecosystem on top of it. But now enough of me talking, let's rather give the voice to who matters most to us and that are our B2B customers. Here is an example from AWWG Group, that's the mother company of Pepe Jeans, Hackett London and others, and they share back on how they create value growing into our ecosystem. [Presentation]

Yes, what a great success story. And obviously, our ambition at ZEOS is to create many more of these success stories to unlock a lot of potential for brands, but to also significantly enlarge the opportunity for Zalando. And so I would like to come back to a picture that by now should be very familiar with you because we look at the overall European fashion market again and the position that we want to achieve as the largest ecosystem within that. So talking a bit about the market first. The market, as it stands right now, is still highly fragmented, right? There are lots of different brands and consumer destinations, and we actually believe that fragmentation will continue going forward on the consumer side of this market. But for us, this creates an even clearer case for consolidation on the infrastructure and operations side. Why? Because with that consolidation, we can actually unlock a lot of value and create true win-win-win opportunities for consumers who get a better service, for brands who can have a much more successful business and as we've heard, also for the planet through all the great sustainability initiatives that we have driven and will continue to drive. And last but not least, we think that will also unlock significant additional value for Zalando because it will allow us to increase our coverage to more than 15% of this overall market and to also tap into the opportunity that exists outside of our own platform. From our point of view, ZEOS is distinctly positioned to capitalize on this tremendous opportunity. And the main reason is that ZEOS can out-of-the-box leverage all the great capabilities that Zalando has built over the past 15 years. So ZEOS can leverage the more than 6,000 brand relationships that Zalando has built over the years. ZEOS can leverage an infrastructure and technology stack that powers millions -- hundreds of millions of transactions every single year. And it can obviously also leverage all the great sustainability solutions and efforts that Zalando continues to drive and rather than just monetizing all these great capabilities on our own platform, ZEOS now gives us a way to monetize all these capabilities also outside of Zalando. When we look ahead, we think ZEOS will be able to continue to deliver strong growth, mainly along 3 key dimensions. The first dimension is verticals, right? So we'll start in fashion because that's where Zalando is strongest. But we'll also follow Zalando in expanding into more and more lifestyle verticals where ZEOS is also a great partner to serve not just fashion, but also other lifestyle verticals. Second dimension is geographies. We'll start with the 23 Zalando markets that we currently already serve via ZFS, but to us, there's no limit, right? We ultimately want to unlock all of Europe, all the countries for our brands and retailers. And last but not least, we see a lot of growth coming from our product portfolio. As Jan mentioned, we can already rely heavily on the great products that we already have in place, namely ZFS Multichannel Fulfillment, which we now call ZEOS Fulfillment and also Tradebyte. But there are many more products and services that we want to add to this operating system to make it even more compelling and powerful for our brands and retailers. So before we finish the presentation and move into Q&A, let me maybe summarize the key takeaways from the steep dive. First, I hope you all understood that there's a lot of potential in Europe, but that it's also sometimes quite hard to unlock that full potential due to the many complexities and challenges the brands face in tapping into it. Second, I think with ZEOS, we have found a way and will provide a great way for brands and retailers going forward to unlock their full potential in this incredible market. And most importantly, with ZEOS, we can create true win-win-win opportunities for consumers, for brands and also for Zalando and its shareholders. Thank you very much for your attention. Now turning to Q&A.

Thank you, Robert. Thank you, David. Thank you, Jan. So everyone is awake again. So let's directly jump into Q&A and there has been a couple of questions also on Slido. So I'll start on Slido before I move into the crowd here. There are already two more or less similar questions like, when we talk about offering the B2B thing. Is that -- are we talking about stock integrations like Tradebyte? You're not planning to start running the websites for the brands. Also when you talk about running all the e-commerce for the brands, is that their own website? A similar question also came for Jan. What are our plans to productize the Zalando web shops, so perhaps you can elaborate on that one.

So I think we have a great asset, which is Tradebyte, and that asset integrates with multiple frontends. So with marketplaces, but it can also integrate with shop frontends. And if you look at the web or shop platform market, then we see that, that market is quite fragmented. So therefore, I think we have value in creating connections to many different web shops. And overall, as described, we want to build an operating system. We integrate with the internal systems like an ERP system, like a product information management system. We get all the data into our operating system, we connect the stock pools and then we directly link our stock information into the web shops or into the marketplaces as it's needed. That said, of course, over time, we will also build value-adding capabilities. So we could, for example, imagine that we externalize our size and fit capabilities that are very much proven on the Zalando channel. And add that as value-adding capability into multiple shop systems.

Thanks. Moving on into the audience here. Any questions from the audience? So let's go first with Adam.

A couple, if that's all right. Firstly, when you are thinking about your brand partners, is the decision for them still that they have to allocate their inventory to physical retail and online, and then you make all the decisions for them about where -- or no decisions, but the logistics about allocating that online inventory, whatever the channel, but they still have to have a separate stockpile for any physical retail that they do. And secondly, when you're thinking about the 10% to 13% margin, you've given 3 component parts there. Can you just break down, I'm not sure you're going to give me the exact numbers. But can you break down the relative EBIT margins by those different 3 categories? And then finally, bigger picture, are you actually making your own competitive environment for Zalando B2C more competitive by enabling your, let's call them, competitors about your ASOS to have them a bigger, better brand capability with potentially better delivery to the consumer. How have you sort of reconciled the B2B versus the B2C differential?

Okay, maybe Jan can take the first one, and I can take the two other ones.

So then let me start with the stockpile with regards to stores, so the offline world and the online world. So today, we focus on what we are great at, which is the online world, and that means that many brands still have 2 stock pools. Still, when it comes to store replenishment, we are discussing first use cases where we already refill into stores also from our infrastructure. That said, when we build ZEOS, we think it as an ecosystem. And we have a lot of partners, also partners that help us with our logistics today, and they are also great in omnichannel or in store fulfillment. And we are already in first talks also with first brands where we partner up, where a logistics partner is doing the store fulfillment but at the same time, tightly integrates that different type of warehouses rather than some bulk warehousing -- tightly integrate that bulk warehouse into our online fulfillment network. In that way, we can also pull that one stock pool. Therefore, I think the answer is, in the midterm, it's an ecosystem play, where we have ideas how to combine both.

Yes. And then on the margin question, I think specifically, if you talk about relative margin, I think it wouldn't come as a surprise that on the logistics side, the margin will be a bit lower than on the software and services side. Combined, however, we are more than convinced that we will get to a long-term target margin of 10% to 13%. I think we've also got strong proof points going for that. As you'll also see later in the financial deep dive. We were also already clearly profitable and margin accretive last year. And obviously, we'll build on that as we now move forward. And then on the important question of how do we think about B2B and B2C, also in the context of our overall ecosystem strategy. I think for me, that's actually -- the key change or evolution, I should better say, when we move from a platform business model to an ecosystem business model, right? Because as an ecosystem, I think you need to be more open for collaboration. You need to be more open to not always own the full transaction and the full value chain. And that comes with a big opportunity, which is all of a sudden, we can tap into all these transactions, right? And there are many more outside of Zalando than inside of Zalando, as we all know. We can tap into all these transactions and play a role in making these better for customers, better for brands and better for people and planet. And also for the B2C side, I would not see it as a threat at all. I would almost argue the opposite, which is the B2C side will benefit also from a much stronger infrastructure and much stronger technology foundation because we can invest so much more into that infrastructure and technology foundation because the return we can generate with both is higher than if we would only stay with B2C. And secondly, as David mentioned earlier in the Q&A, there are also clear benefits in terms of getting access to even more inventory and getting access to even better services also for our B2C business. And therefore, we rather see it as highly symbiotic and synergetic and not as a threat at all.

Thanks, David. Further questions from the audience? Second row please.

So just as a quick follow-up to Adam's question. In the current brands that you've already onboarded onto the platform, and let's say you've increased the total addressable market. Have you seen some sort of a cannibalization effect on your own platform for those particular brands by them actually going to other marketplaces or their own website? And again, can you give us some color on how much of the B2B revenue that you're generating from actually getting them on board is offsetting, let's say, the cannibalization impact, if any?

So we haven't seen any cannibalization at all. I mean, let's face it, right? We are enabling transactions that already happened, right? So we are not creating new transactions. We're just serving existing transactions. And so with all the brand partners that we are talking about, we rather see the opposite, right? So it strengthens their brand across Europe, strengthens their whole digital experience and therefore, it can even boost also their sales on Zalando because the brand becomes even more known, is even better distributed across more markets, across more destinations. And that's really the win-win-win situation that we aim to drive.

Thanks, David. Also looking a bit on time. Perhaps that's one final question, which is coming from [indiscernible] is like, and a quick one for you. Which categories could work on Zalando Logistics platform in B2B? Are you focused on fashion and lifestyle only? Or could brands and categories like home or pets also work on your B2B platform? I think there's a short answer to it.

Everything that fits into a parcel can be enabled via ZEOS. So I think that's exactly the great benefit of this B2B approach, right. Both in our technology stack with Tradebyte and in our infrastructure, we are very much vertical-agnostic yet. We think we have a sweet spot in fashion and lifestyle. But it is fashion and lifestyle, right, and it's broader than just fashion and shoes. So as long as you're not trying to ship groceries with us or your next bedroom furniture, then we can be your partner.

Super. I think that's a good closing remark for the B2B session. So thanks David, thanks, Jan, for giving a bit of insight, and I'm quite sure we will definitely hear more about our B2B section over the course of the next quarters.

With that said, let's move on to our next deep dive. So now we looked into B2B, so what's missing, it's all about our B2C. And I'm happy to introduce our SVPs, Anne and Martin. Anne is responsible for marketing and responsible for really driving customer engagement. Martin is responsible for exciting our customers and responsible for the proposition like fashion, beauty and designer. With that said, Anne and Martin, the floor is yours. Here you go.

Welcome, everyone. Great to see you all here. Martin and I are very excited to give you an update on outlook, what we are planning for our consumer business. Let me start with a quick recap. You heard it this morning in the keynote by Robert and David, we clearly set the standard of e-commerce in Europe. We've done so by giving our customers access to products and brands they love. We made it very easy and convenient to shop online, starting with the moment that a customer puts a product in their cart, receives a parcel or sends it back. We've given our customers more sustainable choices, offering sustainable -- more sustainable products and an inclusive assortment. And last but not least, we've created an experience that is tailored to them, reflecting the individual needs and wants of our customers. All of this has allowed us to build an incredibly successful business over the last 15 years. And this is reflected in some of their key metrics. We've achieved very strong GMV per customer, a very strong average basket size and most importantly, a very healthy and very large customer base of approximately 50 million customers across Europe. Now looking ahead, we see new opportunities on the horizon. There's evolving customer needs that we want to answer. One, there's growing customer expectations. There's a lot of more products out there, and hence, customers have to think a lot more about what they are buying and why they're buying it. We know that 59% of our customers are willing to pay more for quality. Secondly, they continue to invest into their lifestyle, into their activities, hobbies, their passions and interests, and that makes products mean a lot more to them. It's about how they spend their time, not just only the resources. And thirdly, inspiration is becoming a key part of the shopping journey. There is more offer out there. There's more time to invest. It means more to them and hence, the research phase to buy something is a lot more important and meaningful, not only for younger generations, but it's obviously very dominant and prevalent for younger generations who have been growing up with the existence of social media. Now we take these signals as a very big signpost towards the future. We see that there's a new frontier and that we are entering a new era in e-commerce that we not only want to define, but also conquer. Martin?

Yes. Thank you, Anne. And what a great opportunity to step up our B2C strategy. So with this new frontier, we think we have an amazing opportunity to do more for customers and brands in Europe. Now what is this strategy going to look like? And you heard it already today in our keynote, our B2C strategy, it builds on what is already working well. And that is our multi-brand platform. So customers really look for multi-brand inspiration. They look for multi-brand choice that has been working well. It does work well for us, and we believe it's going to work well also going forward. Now on that multi-brand platform, we will build 3 growth pillars for our strategy. Differentiation to quality being the first one, lifestyle expansion as the second vector, and the third one is around inspiration and entertainment in e-commerce. Now today, Anne and I are going to give you a bit more insight. You've heard at least the headlines in the keynote today. And in this session, we would like to give you more color on what we mean, and we're also happy to take your questions. Let's start with the first pillar, differentiation through quality. Now we will step up quality across all aspects of our platform going forward. And the first thing naturally is the assortment. So going forward, we will increase the quality of the assortment we offer on our platform. How do we do this? We will focus on offering high equity brands, high equity brands that have a rich heritage, that have amazing products and unique stories to tell. Because for us, that is really what quality means. And you will see us at more of these high equity brands across all price ranges on our platform. Now why do we do this? It's fairly simple, because our customers want it. So the good news is more than 60% of our customers, for them, brand is a major factor. So they really look for brands when looking for fashion and inspiration. Even the youngest customers, even Gen Z, for them, quality is a key factor, ahead of price, ahead of convenience. And the good news is, naturally for our business model, customers are willing to pay a premium. So they really favor, they really reward a quality offering. Now that also makes us the preferred partner for brands, because we give them access to this consumer that is looking for quality. And oftentimes, they give us the most demanded products they have, sometimes even as exclusive. In fact, today, we have an example of how that looks like. And those brands, they choose to work with us because we can do storytelling. We can help them tell their story. We can help them let their products shine. Now that's the idea. Let's take a look at how that looks like in practice. And the example we have brought here is Lacoste. Lacoste for us is one of those high equity brands. It's a French brand, has been in the business around 90 years, has some truly iconic products. I'm pretty sure many of you actually have a Lacoste piece at home, and it has some amazing stories to tell. Now we have been working with Lacoste for quite some time. And earlier last year, we actually approached them. We said, hey, there's more we can do. Why don't we team up and they love the idea. And so what they created for us was a capsule collection. So an exclusive collection of pieces only available on Zalando. And the thing is they trusted us do the storytelling. So in France, where Lacoste is a favorite brand for many consumers, it's their home market. That's where they trusted us, do the storytelling for them. And so we created a campaign that was offline, it was online, it was on TikTok, on Instagram. We really created the talk of the town. We really engaged consumers across France in all major cities and online to share the story around this capsule collection. And we saw some amazing results. So massive uplift in traffic at the start of the campaign, 65% more, which also translated into conversion and ultimately, a very nice sales uplift. That's what we did. We did the storytelling we teamed up with a high equity brand in order to re-engage customers in France. The thing is when we talk about high equity brands and quality in our assortment, there's actually more to it what we did here and that was bringing the story, bringing the storytelling to all the other markets in Europe using ZMS marketing services because only we have the proprietary data, and we can create customer journeys that integrate the ads in a way that make that fun and engaging. The thing is, as we work with high-equity brands, they not only look for a partner who helps them drive sales. These brands look for a partner that helps them increase the strength of their brand, really drive the brand equity. And that's something we can do. We can create full funnel marketing campaigns. Earlier today in the keynote, you also heard Robert and David talk about the opportunity we have here, really helping brands create a seamless journey, where we drive awareness, consideration and ultimately also conversion. Again, the results are very remarkable for us, almost 3 million more product detail page visits. What's even more important for a brand like Lacoste, is the brand followership. 27% more customers following Lacoste on our platform. That's important for them because it allows them to reengage. It allows them to follow up with those customers and keep sharing their story. And lastly, what also matters for these brands is they always look for audiences they can tap into. New audiences, high-quality customers who are looking for inspiration from a leading brand. And that's what we did here 60% of the customers were actually new to Lacoste. Now that's our definition. That's our thinking, when we talk about quality in the assortment. And going forward, you will see us do a lot more of these collaborations. However, as we also mentioned in the keynote, quality for us is a really holistic idea. And quality also shows in the quality of service. And the example I've brought here today is actually from our size and fit efforts. I think this is -- it's kind of a common place, but finding the right item, when shopping fashion online, is really a fundamental challenge. It's not unique. It's not particular to Zalando, for anyone who is looking to buy and discover fashion online, it's a challenge. And for our customers, it's irritating. They find an amazing product. We ship it to their home, only for them to find out it doesn't fit. And for us, it's also irritating, right? Because they have to send it back, they go through a quite complex process. And so size and fit is something we have been investing into for years. The good news is already today 60% of all items sold come with size and fit advice. Now the breakthrough I would like to share today is actually our newest piece of technology, which you see here on the slide behind me on the screen. We call this Size Advice with Body Measurement. And that is a new piece of technology we have created. So it builds on our acquisition of Fision back in 2020. And what it does is it combines computer vision with generative AI. For customers, it's very simple. You see it here. They just strike a pose. The technology helps them do the right thing, and we take 2 pictures. And from those 2 pictures, we can take accurate measurements. Now this is something we have launched last year. And the early results are very promising. We see an uplift, we see a reduction in size-related returns of around 14%. Sorry. Quite exciting. So this is for us, it's a major breakthrough. And with this as our first 3G growth pillar, let's talk about the second one, lifestyle expansion. Now this is also something we have been talking about in our keynote today. And Sports is our next major market. So it's a big market, EUR 77 billion. And the good news is 85% of our customers -- so it's a big market, 77% (sic) [ EUR 77 billion ] it has an above-average growth rate as we heard today. And 85% of our customers, we know they already do sports. And those customers are already on our platform. It's just that only 27% of them buy sports today. Now what do we need in order to succeed with Sports? We need, first of all, credible assortment. And the good news is we have all these brands. We have been working for them. You see it here on the logo wall. We have amazing brands such as Rapha. We added most recently, Lululemon and this year, actually on running a leading brand in the running lifestyle fit. Now just adding the assortment to our platform is not enough. What we also need is an elevated experience. And what we mean by that is we want to create exciting customer journeys that really go beyond and that showcase the products and the stories of Sports brands. What you see here behind me is one example, the running shoe finder, which we're going to launch in Q2, but that's not all. There's actually a lot more to it. And let me show you a video that gives you an idea. [Presentation]

So that was a preview of some of the journeys we're going to build for customers on our platform. We truly want to turn Zalando into the sports companion for our customers. Now differentiation to quality is the first pillar, lifestyle expansion as the second one. Let's hear from Anne, about inspiration and entertainment in e-commerce.

Yes. I hope this video gave you a little bit of a glimpse in feeling of what customers will experience on Zalando. One holistic journey, where they can find their running shoe, the gear, but they also get motivation and advice from like-minded people and also access to brands and their content. Speaking of content is for us, the third pillar, inspiration entertainment of the new frontier, we've been talking about. And why is that? We believe that through inspiration and entertainment, we can connect with customers on a much deeper and more emotional level, and we can go beyond transactions, be top of mind for them even when they don't have a purchase intent. Let me start though with the why, why are customers actually interested in inspiration and entertainment? If you think about yourself, very often, you don't have necessarily a specific product or brand in mind, when you go to a shopping app. In fact, you think about an occasion or a travel or party that comes up, only 31% do have a specific product in mind. And hence, everyone else is happy to be surprised and discover something they didn't expect. You can see this also very predominantly with younger audiences that make purchase decisions 70% of them during such an inspiration phase. There's actually no difference between inspiration and purchase anymore. They go back and forth. And 70% -- 72% of this inspiration happens online. Yes, on social media, but not only. And it's not only about the early stage of the shopping journey, but it continues afterwards when you want to share your excitement about the product you have brought with your friends and show it off. That's why last year, we launched stories on Zalando. A content-first experience within our app that puts the content in the center of the experience. Together with Highsnobiety, the global media brand we acquired in 2022, we created an immersive UI, that focuses on short-form video, easy to consume on mobile phones that celebrates and features brands and products, connects fashion and culture on a regular basis. And most importantly, it makes the transition from discovery and shopping really, really easy and seamless. We've seen some very promising results of customers coming back more frequently on a weekly basis. And almost 5 million customers have engaged with the stories experience. Also on the partner side, we've seen some really interesting signals, which is the brands featured on stories, show a higher number of search queries and then an increase in followership growth. So brand partners really appreciate having such an environment, where they can tell stories and engage and connect with customers in a totally new way. What's next for stories? We're going to continue to refine this UI. And we have some really exciting content coming up. We're going to feature a GAN collection with David Fischer from h Highsnobiety himself. And of course, we're going to help find our customers the perfect trail-running shoes as well. So please check it out. So the lines of content and commerce are blurring, but not only those, also the lines of fashion and entertainment. And that's because of the growing role of creators. Those personalities with a broad range with a point of view around culture, around the [indiscernible] that really inspire and influence what people have on their mind. We've been working with such personalities already in the past. We had Cara Delevingne featured in our campaigns. We worked with James Franco, and also most recently with David Alaba, that you see in the background. He was not only the star of our campaign, large-scale campaign in [indiscernible] but also guest editor on stories. So selecting assortment and products that he likes to wear outside of the soccer field. And hence, we really give them access to our platform to our consumers. And this type of content and personality is for many, many customers, a lot more relatable and authentic. They're able to build huge fan bases, and that's also very exciting for our brand partners, which often have also talent in their pipeline or we match-make them. Actually only yesterday night, we had not too far from here recording with Xavi Simons, the RB Leipzig soccer player, that Puma partnered up with. Also really encourage you to check out that live show. So we're really playing out with different formats and different ways, using different voices on Zalando, to entertain and engage our customers. And yet, when we say entertainment, we don't mean just broadcasting. In fact, we want to give customers to play a much more active role. If you think about it, the social aspect of shopping has been completely underleveraged until now. And yet it is a very social activity. Think about the moment of a purchase decision you're making. How often have you sent the product to your friends and ask what do you think? Or you wanted to send out your wish list for your upcoming birthday to your family, so you get the right presents. Or you created an outfit that you can't wait to share with your friends. These are exactly the type of social elements we want to add to our experience to make users to contributors. And really multiply their ideas, their creativity on Zalando. Already today, 8% of our customers click the share button on our PDP views. So for us, it's a natural extension into much more social activity on our platform. So what is the role of inspiration and entertainment, to drive the growth of Zalando? As a reminder, you've seen this before. personalized content at scale is for us a great way to engage customers more frequently and have them spend more time with us. For this, we need to offer content at scale, moving from just offering a limited amount of content to a much, much bigger number of fresh content and stories so that customers come back more often, and we can unlock more content sources coming from brand partners, creators, users or generative AI. By doing so, we'll generate more traffic, more eyeballs. And hence, can also capitalize on that through an increase in advertisement revenue. Nobody has achieved this before. We know it's going to be really, really difficult, but we believe we're going to be the first one to crack content and commerce. To sum up, the 3 strategic growth pillars of our B2C business. One, differentiation through quality will help us increase the active customer base and also retention. Secondly, lifestyle expansion is really about an increase of share of wallet. And lastly, inspiration and entertainment is driving user engagement, frequency of visit and hence advertisement revenue. Our contribution to the overall group value creation. One, we are leveraging, but also building new capabilities to use across these different pillars. Of this, the customer reach and brand engagement, the technology and the data, the strong brand partnerships, the investment in sustainability and obviously, the logistics infrastructure you heard before in B2B. To ultimately create value across multiple dimensions: one, through our retail business and transactions and on top of that, partner services and marketing services. We really want to capitalize on these 3 growth pillars, and we can't wait and are very excited to see how these pillars actually complement each other and benefit each other. Key takeaways of the session. One, we differentiate through quality. Second, we address more lifestyle needs and choices by expanding into those. And third, we're going to engage and entertain our customers a lot more, deepening our relationships and increasing advertisement revenue. One more thing. We've cracked really complex problems before, and we're going to do this again. Thank you.

Thanks Anne, thanks Martin. So we are back in a short Q&A. There are already first questions coming through Slido. So Martin, you talked about returns. So the first question comes from Christian Zalis. Could you please share feedback on the AI-based size recommendation? And have you seen material improvement in size-related returns?

It's a good question. So to start with the short answer, yes, we have seen that the new technology can drive a significantly higher reduction in size-related returns. The thing is if you think about AI or generative AI in a principled manner, you typically have 2 things to crack. One is you need the algorithm; and two is you need training data. And what we have accomplished over the last couple of years after the acquisition of Fision is that on the one hand, we have succeeded at training algorithms to understand the physical shape of garments and control for that when applying it to different products. And the other piece we have created is an in-house high-quality data set on taxonomy data because you need both things in order to really understand what is the computer, what is the vision really -- the system really looking at. And it's important to keep in mind, size and fit for us it's nothing new. We have been doing this for more than 10 years. However, in the past, those solutions, they were built on the returns data. So it was an indirect way of inferring on the size and fit of a product. With this new technology, the generative AI-based technology, we can directly measure the size and the shape of a customer and apply that to new products. And that's why we see, especially in some categories such as dresses, such as jeans, we see a remarkable uptick in size-related returns, which is why we refer to it as a breakthrough. And now we are working really hard to bring this to as many customers as possible.

Cool. Thanks, Martin. Looking into the audience, raising hands. Apparently, there are no question in the audience, waking up. Let's start off with Miriam on the right-hand side. Yes.

Just wondering how you think the demographics of the Zalando customer might change, as you sort of make this pivot towards quality? I know you sort of spoke about the 30% of Gen Z that focuses on sort of quality over pricing delivery, but then that sort of implies there's still a lot of people out there that are more focused on price. So is it that you're willing to sort of sacrifice those customers? Or you think that there's enough in terms of increasing spend with fewer customers versus being more mass market? Just wondering how you're thinking about that trade-off?

I'd like to refer to what Robert mentioned earlier. So I think right now, yes, we see given the macroeconomic environment, we see, let's say, an elevated interest of certain audiences, of certain demographics into more affordable fashion. But we believe long term, what will really matter for customers is actually quality. I'm struggling a bit with the sacrifice because I think it's not really about sacrificing those customers. It's rather we will -- and we do this already today, we find out who is looking for quality and who's inspired by the stories we have to share and the high equity brands we offer. And those are the customers we then focus on and try to deepen the relationship, try to get them to adopt more propositions. It might mean temporarily that there are some audiences where we're not serving as much and where our share of wallet is temporarily a little bit lower. But our strategy is not to give up or to sacrifice. It's rather really we want to offer those customers, who are looking for quality. We want to create amazing journeys for them.

Perhaps to give Martin a bit of a brief. There's a question on Slido for Anne. We talked a lot about content and engagement today, but when you look into our Instagram or TikTok, we are very weak compared to our peers. Why do we think will content on Zalando be successful, when our social content is not really driving engagement today?

Yes. Thanks, William. Great question. Indeed, the social platforms are developing quite quickly. And we've seen phenomenal growth of content in some of our organic and owned channels. And we keep experimenting and optimizing on how we use those channels, not just organic but paid. What we see and what is most important to us that we also don't want to drive engagement off-premise, but on-premise. So while we obviously learn and get inspired by content formats on social, we believe that we have a unique role to play by offering formats that work in our environment. So as an example, the product focus is something that clearly resonates with people on Zalando because that's where we are coming from and where we have strong credibility. And equally, the transition from discovery and shopping. So you see the video format working, but obviously also even how the product detail page is embedded. So we keep leveraging social channels to build our brand to connect with audiences but most importantly, to drive traffic to our site, which is where we wanted to take place, including the inspiration.

There was another question here in the second row, yes?

Maybe to expand on the social media aspect first. I guess I'm trying to understand how you see the app working? Are your customers supposed to want to open up Instagram, TikTok and in Zalando? Or is it they're doing their shopping. And by the way, Zalando has the social media like feed? I mean how are you trying to position yourself on that? And the second one is on the Sports element. You said that you're trying to push sports within Zalando. Have you been able to have any exclusive assortments with the big brands like Nike, Adidas and so on?

Yes. I'll start with the first question. So indeed, today, customers perceive us mainly as a retailer and shopping destination. We see that by moving into inspiration and entertainment, the perception will evolve and change. And the moment that customers will think about Zalando will broaden, not only when they have a shopping intent. Hence, we want to be the app that customers click on, when they want to get inspired around Fashion and Lifestyle. This is the space we own. This is the curation we can offer which is a lot more focused and goes a lot more deeper than any other social media platform, that offers -- has a lot more noise and quantity, and we rather want to also double down on the curation, the quality, the content at scale that really is focused on Fashion and Lifestyle.

And on the second question, perhaps there's also just a follow-up from Jurgen. In terms of sport running was mentioned as a category in which additional Sports categories you think you can enlarge the system? And do you need additional brands to round out the category? So I think that ties together. And Martin, you have ...

Let me start with the question here. So the short answer is yes. We do have exclusive products. Sometimes we even have entire brands exclusively. Lululemon is one such example. We're the only multi-brand retailer in Europe that offers Lululemon aside from their own e-comm. And also when it comes to, let's say, pinnacle assortment for specific occasions. So one example being the football Eurocup, that's happening this year, you will see us offering capsule collections, pinnacle assortment in balls sport, from all the major brands we work with. I think here to Jurgen's question, so yes, we mentioned running because it is by far the most practiced sports. It gives us the most potential to reach out to our existing customers because I think that's really key for us. Sports is lifestyle expansion. It's all about serving more needs of our existing customer base. This is not so much about acquiring new audiences. This is about serving more needs with our existing customers. Hence, we start with running. But we are also quite excited about fitness, working out, yoga is a big piece. And I think as of next year as an early glimpse, cycling will be another area where we invest into.

Any final question? Eric, over there, the third row, left-hand side.

Just to go back to the question Miriam asked. So given the fact that you are focusing on higher-quality brands, do you think there be a chance there to cut down the relatively lower quality brands. And is that -- is there any intention to do that?

Not just the intention, but actually, we have done this. But in a way that purposefully avoids too much noise and in a way that still respects the relationship we have had with some of these, let's say, labels. So as early as '22, we actually started raising the bar on what we define as quality, especially on our marketplace. And that's why -- so gradually, over time, we are shifting the entire assortment more towards a high equity brand composition. Which, again, doesn't mean we're trading up in price points. So this is really about across all the price points, the price ranges we offer today, focusing on brands that essentially have a story to tell. And in the past on our marketplace, we also had labels or let's say, products that were less compelling and not really fitting with our definition of a high equity brand. And that's why we have taken active measures to offboard such assortment to offboard such partners. But we do it in a discrete manner.

Thanks, Martin. I think that was a good rounding of the B2C section. Thanks, Martin. Thanks, Anne, for presenting that one. For the people on site. We have now a short coffee break out there. And we -- for the online crowd, we will be back here around 2:30 p.m. CET, with our financial deep dive with Sandra and to wrap up with our co-CEO, Robert afterwards. See you in a couple of minutes. Bye. [Break]

So welcome back. It's the last session of the day, but for most of you, the most interesting one. So take out your excel sheets. Now it's time to look into every cost line. Now kidding aside, I have Sandra with me. She will wrap up today's event with like putting a financial perspective on what we have presented today, how B2B and B2C are tying together and also how do we get to our midterm targets until 2028. With that said, Sandra, the floor is yours. Please take over.

Thank you, Patrick. I was getting worried. I don't know, at a certain moment. So welcome, everyone. This is not a financial deep dive. We'll now try and translate everything you've heard so far into financials. We spoke already a lot about our financial ambition throughout the various presentations that we gave. And in a nutshell, we heard in the keynote from Robert and David that we have -- we will return to strong growth. So we have a clear path ahead of us to return to strong growth. We heard just now in the B2C session with Martin and Anne that for our B2C business, we will continue to outgrow the online Fashion segment. [indiscernible] and we will continue to do so. And we had in B2B that we are actually adding a very exciting new revenue stream. Which also includes recurring revenues. Something which is also very interesting, and it will grow at a very fast pace. Besides growth on the agenda, we also have margin and we also have cash. And so with that, let me dive into the financial deep dive. Let's start. Let's first look back a little bit. So what have we achieved so far, since the IPO in 2014? So, here on the left-hand side, talking growth. Over the past 10 years, we have grown at a CAGR of 21%. So that's twice the market. During this period, we have consistently delivered profitability. And we did so while investing into the business, even throughout 2022 and 2023, when the times were a bit tougher. And in 2023, we're now sitting on a cash balance of $2.5 billion. So our strong focus on execution has delivered a really strong financial track record. And that financial track record is built on certain assets. And you had a lot of idea about our capability and assets, but there are 3 which I want to highlight again. So the first one, is actually our very large and loyal customer base. Today, we have 50 million customers. On average, they shop with us EUR 300. So that's 50% more than what they shopped 10 years ago. The second big asset, and that is really us now being powered by our platform, is our multi-brand Fashion platform. And we heard it in the keynote, we started off with Retail, yes. Retail still is the largest part of our platform. Retail built the solid foundation of our success. We then move to platform and with that, increased the partner share over the past years, especially in the recent years. And in addition, we have now ZMS, which is already a EUR 200 million revenue business. So you can see that the financial track record, that solid financial track record is both on our focus on execution as well as our assets of a large and loyal customer base, of the multi-brand platform, powered by its different business models, as well as what we see now on the next page, a large logistics network. It's the largest Fashion logistics network in Europe. So something that is truly unique in Europe. And it powers today EUR 2.4 billion GMV, more than EUR 700 million in revenue and it serves more than 1,000 partners. So the question is, with everything that you've heard so far, what do we do with it now? So how -- what do we do going forward? And in the keynote, we talked a lot about how we are moving from platform to ecosystem. And why are we doing that? I mean, the platform was a great move for us. The platform really accelerated growth. Throughout the pandemic, it allowed us actually to scale the business. And we saw that especially in '22 and '23, it injected also a lot of resilience. So we benefited a lot from the platform. But the move to the ecosystem now is really allowing us to capture even more of that European fashion market. It's enlarging the opportunity we have. So we can, with the ecosystem now cover more of our customers and partners' needs. And with that, we can boost the impact that we have, with our B2C and with our B2B business. And as we move from the platform to the ecosystem, we start steering the business by B2C and B2B. And because of that, we're also changing the reporting. So from 2024 onwards, we will now report by B2C and B2B. And on this slide now, we have translated the 2023 financials into the new segment reporting. So you can see GMV is generated by the B2C segment, revenue and then adjusted EBIT. When we look at the B2C segment, so what is included? B2C includes the Fashion store, off-price and ZMS. So ZMS previously reported in other segments. You can see it's EUR 9.3 billion in revenue and has an adjusted EBIT margin of 3%. Next fit B2B. B2B includes ZFS multichannel fulfillment, what you just heard in the deep dive, we call now ZEOS fulfillment. It includes Tradebyte, as well as Highsnobiety. And it is already today a EUR 0.9 billion business with a 5% margin. So I hope this gives you a bit of an idea of what the B2C and B2B segments look like. And this is the type of reporting that we will have going forward here. So with that now, let's move into the future. So how will we define the success of the ecosystem? And I will guide you through that along the 3 pillars of growth, profitability and cash, because all 3 are important to us. So we start off with growth. Starting off with GMV growth. So I already said GMV is what is being created in the B2C business. And when we look back, we have always outperformed the online Fashion segment, and we will continue to do so. When we look at the online Fashion segment, it is forecast to grow at 5% over the next 5 years. Our B2C strategy, as just presented by Martin and Anne, it's powered by the 3 growth pillars, the focus on quality, the expansion into Lifestyle and Inspiration and Entertainment. Those 3 pillars will allow us to outperform the online Fashion segment. And with that, we expect that we will grow with 5% to 10% CAGR over the next 5 years. So questions we already had a bit earlier around, what is the impact on customer metrics? So on active customer growth. Our strategy focuses on deepening the relationship with the customers and with that will come an even stronger retention, and that will help active customer growth. In addition, of course, to leveraging penetration in markets and in propositions. The second thing is the GMV per customer. Here with the move into multi propositions, we have seen we have plenty of room to grow. The more our customers shop might to propositions, the more they spend with us, the more engaged they are, the more loyal they are. So this gives us a lot of headroom to grow. We also saw the presentation on Sports and Kids. They are all propositions with double-digit growth. So therefore, it's important for us that we really get into this expansion of Lifestyle. And with that, create the propositions. What is new now? What is new now is the dynamic between active customer and share of wallet. Our strategy aims at deepening the customer relationship. So we have this large loyal customer base of EUR 50 million. It's now about making sure that we are taking a greater share of their wallet, yes. So in proportion, we will see a stronger growth on share of wallet then on the active customer numbers. So I think that's an important dynamic to understand. We then now move on to revenue. And on revenue, we expect to grow at 5% to 10%, over the next 5 years. So this chart is very complex. There's a lot on it. There's a little bit of like repetition because you have seen those 2 building blocks already in the deep dive. So what you can see here is the revenue building blocks for B2C, the revenue building blocks for B2B, and they're both powered by our purpose-built e-commerce platform capabilities at the bottom here. So starting off with, I would say, the graph, you can see that both graphs hint at an accelerated growth over time, yes? So that is true for both businesses, yes. Then when we look into the building blocks of B2C, retail stands at 90% of revenues today of B2C. Retail is our largest revenue building block, and it will continue to grow. Next up is the partner business. We will continue to grow the partner share. And with that, the partner business will actually grow at a faster rate than retail. And then in addition, we still see a lot of opportunity in ZMS. And with that, moving on to B2B. So B2B has a very interesting revenue streams. Here, we are building on existing revenue streams like ZFS and we are adding new revenue streams. And we are adding these recurring revenue streams. Over the midterm period, you will see that the priority -- the majority of the revenue is actually being delivered from logistics, yes? So sales fulfillment. In addition to Tradebyte, Tradebyte being our software business that is enabling the logistics product. On top of that, we will see additional revenue opportunities on software and on services, but they will only scale meaningfully beyond 2028. And what is interesting here is you may have already won is like we say GMV growth until we grow 5% to 10% and revenue growth, 5% to 10%, yes. So B2B is actually growing at a faster rate, significantly faster rate than our B2C business and therefore, adding incremental growth, which now brings GMV growth and revenue growth roughly in line. Okay. So that's all on growth. We are now moving on to profitability. On profitability, we expect to get to an EBIT -- adjusted EBIT margin of 6% to 8% by 2028. So that's a doubling of the EBIT margin from where we are today. So it's from 3.5% to 7% at the midpoint of the 6% to 8% range. We will get that primarily through actually leveraging the scale of growing into an ecosystem. So the move into an ecosystem is really helping us also on the margin progression. And on this chart, you see that the drivers of margin progression are twofold. One is gross margin, where at a group level, we will go from 38.7% to 40%. There is a dynamic in that, which is we will significantly increase the gross margin in our B2C business, but that's offset by the dilutive effect that the B2B business actually has, yes. And on OpEx, we are today already showing significant progress on OpEx, but by 2028, we want to be in the lower 30s. And with that, get to a margin in the range of 6% to 8%. And I think what is really important on this chart to note is that you can see both businesses, B2C and B2B are margin-accretive, yes? So they both will deliver additional margin by 2028. So we now dig into the 2 main drivers of the margin progression. We're starting off with the B2C gross margin, and I think everyone will be happy to hear me talk in more detail about the gross margin. We have been talking a lot in 2023 about gross margin. And I promise you that we are on a multiyear journey to improve our gross margin. And this is now explaining it a little bit more and what you can expect. So on the left-hand side, on the waterfall, you see that in 2023, we have a B2C gross margin of 41%. And we expect to grow that to the mid-40s by 2028. And retail partner business and ZMS will contribute to that positive gross margin development. So let's start off with the retail gross margin. Our focus in 2023 on retail gross margin was inventory management. And we delivered really well on that. yes. We had the prudent buy. We successfully managed the overstock and we did very effective in these in management. And we will continue with that focus on inventory. So that is not going away. But we are adding now. What we're adding is an increased focus also on COGS, improving COGS. Also as we gradually increase the wholesale buy. And of course, building on our strategy, driving the full price sell-through. And that is really important because our strategy is about deepening customer relationship and with that comes a higher full price sell-through, yes. Focus on quality, expansion in the lifestyle, inspiration. These are all things that drive full price sell-through. So that's the first building block of the gross margin. The second one is our partner business. And before we talk about that, there is one thing I have to inform you about, and that is that we are restating the KPI. In the past, we talked about partner business share as a percent of Fashion Store GMV. We now do the new segment reporting. So going forward, the partner business share will be a percent of B2C GMV. Yes? And in that, we are restating the number. So what you would have heard this morning in the update call now as a percent of B2C GMV, it equals 34%. And so the second building block of gross margin improvement is really scaling the partner business. And here, our target is to get it to 40% to 50%. We all know the partner business is highly margin accretive. So this is an important building block of gross margin improvement. And the last building block, ZMS. So on ZMS, we are also restating the KPI. It used to be a percent of Fashion Store GMV. It will now be percent of B2C GMV. And therefore, the 2% we heard earlier, now this translates into 1.3%. And our ambition here is to go to 3% to 4% by 2028. So we always had the ambition to go to 3% to 4%. We have now put a year with it, yes. So these are the 3 building blocks of the B2C gross margin. We will go from 41% to the mid-40s. The second big building block of profitability is the reduction in OpEx. And I mentioned earlier, we have done already quite some work on that. especially over the last 18 months. And so we improved our OpEx from EUR 38.4 million in 2022 to EUR 36.9 million in 2023. And we now expect to reduce it further to the lower 30s. And the drivers behind this are continuing on our efficiencies and really leveraging the scale now as we grow into an ecosystem. So if we go into the different cost lines, on the admin cost, here, we will continue our drive for efficiencies, but at the same time, we will also invest in growth pillars and in capabilities. On marketing, we had the question already earlier, we will maintain the marketing intensity. But there will be a shift. There will be a shift from performance marketing towards brand marketing as we are deepening those customer relationships. And then fulfillment costs, the biggest one, and therefore, also a very important one. Here, we see different dynamics, and I'm zooming into them here on the right-hand side. So the first one on fulfillment cost is we will benefit from scaling the B2B Logistics business, yes? Why is that? Because we will report a larger share of the logistics cost as cost of sales. And you see that at the bottom of the chart. Today, we are reporting 25% of our logistics costs in cost of sales. As we scale the B2B logistics or what we now call sales fulfillment, we will see more of the costs move into cost of sales. In addition to that, of course, we will continue our drive for efficiencies, cost improvement. How do we do that? Increasing utilization, increasing automization, we'll get the benefit of the use of AI. We will continue our drive forward economics, yes. So these are all the things that we will put in place there. And at the same time, We, of course, need to continue investing in convenience. Yes, we heard it with our quality focus. It is really important that we continue those investments. And of course, also, we will invest in more sustainable fulfillment practices. So on profitability, doubling of the margin at midpoint, it's coming from an increase in the B2C gross margin and a further reduction of the OpEx. With that, we move on to cash. So in 2023, we spent EUR 263 million CapEx. The split was 28/72 between intangibles and tangibles. We expect this going forward to be similar. We always spend around 25% in tangibles, 75% intangible assets. We had an investment level of 3% of revenue in 2023. And it was also a question already earlier. We expect for our strategy now we need a similar level of CapEx going forward, 3% of revenue is the investment level that we will see going forward. And in terms of cash, with the better margin, with continued negative net working capital, the similar levels of CapEx spend, we will have a very strong cash generation going forward. So I hope I haven't lost anyone yet. I'm now trying to summarize it all in our midterm guidance until 2028. I'm trying not to bring it all together on one page. So starting from the top, growth, GMV. We expect to grow at 5% to 10% CAGR. So we returned to strong growth, and we will continue to outperform the online fashion segment. On revenue, we will deliver 5% to 10% CAGR also on revenue. And this will be powered by the additional revenues recurring ones as well in our B2B business, which is injecting that additional growth and allows us to have a similar revenue growth range than our GMV growth range. On profitability, we doubled the margin at midpoint, so we get to the range of 6% to 8%. The 2 main drivers, B2C gross margin and lowering of the OpEx to the lower 30s. And then altogether, with negative net working capital, similar investment levels than before, the 3% will continue strong cash generation. And with that, a very short glimpse into the very long-term future. No, it's not that far away. We talked about the long-term opportunity already in the keynote as well. I mean, EUR 550 billion fashion market, that is a massive opportunity for us. It's a massive potential we need to tap into. We talked about the transactions that we have on the platform. We talked about how we can tap into the transactions that are offered at our platform. All together, we see the opportunity for us to basically cover 15% of this market. And this is a growing market, yes. So the EUR 550 billion is today. But not just does it give us a growth opportunity, it also comes with a very attractive financial profile because I'm happy to confirm for the B2C business, the long-term margin of 10% to 13%. And our B2B business in the long term will also come with a similar margin profile of 10% to 13%. So that's it from me. So to conclude now, you can see that we have a very big potential in the European fashion and lifestyle market in the midterm and in the long term. It comes with an attractive financial profile at scale. But given the strong track record that we have delivered to date, we are already today in a position of strength. And so with that, thank you for listening, and happy to take the questions now.

Thank you, Sandra. So yes, we're almost at the end of today's event, I would also welcome Robert to come on stage. So we'll wrap up that session, of course, focusing first on the financials, but we also have seen also on slide or some open questions on the bigger strategy. So yes, why don't we kick it off with the financials first here in the room. Any volunteers? Miriam, ah wonderful. You saved my day.

I'm sure there are more questions, probably. Just given the comments around cash generation, how should we think about the use of that cash going forward? I think on one of the earlier slides, you sort of spoke about supplementing the strategy through M&A. So should we expect you to be a bit more active going forward, perhaps in terms of number of deals and size of deals as well? And then also how you're thinking about cash returns as well going forward?

Yes. So -- we're in a very privileged situation with the EUR 2.5 billion of cash. So especially in times like these, it's very good to have a bit of extra cash available. But as well, it gives you opportunity to invest in organic growth opportunities or inorganic growth opportunities as they come up. And I think Robert already talked about it a little bit in the Q&A after the keynote. So of course, we're always also screening the market for any value-accretive opportunities. So we have I would say that room. The one thing I think to keep in mind is that we still have 2 convertibles outstanding and one of them is due in 2025. But nevertheless, given the strategy and the strong cash generation that we see there, I think it gives us financial flexibility. And so what I said at the end, I think we are ready to act from a position of strength. In terms of shareholder returns, it's something that we do consider, yes. always, of course. At the moment, we believe that there is bigger and greater opportunity for us to reinvest that cash in the business. But yes, we do consider those, of course, yes.

Cool. There's a question on Slide 1, and I also got it during the break from some of you and perhaps Sandra, you can allude on to that. We talked a lot about sales today. And perhaps you can remind everyone how we plan to charge the brands for that ZEOS system? Is it a cost plus model or something else?

Yes. I'm actually very happy that ZEOS is creating so much interest and attention. the way we charge for ZEOS is different to ZFS. We always said for ZFS, that it is a cost-plus sales is value-based pricing. So of course, it is competitive, but our partners benefit from us actually delivering additional services, yes? And so therefore, it is different to the cost plus, it is value based, and you also saw that in the financial, it is margin accretive with that.

Further question, Adam. Microphone, second last row.

It might just be me not being able to work it out. But when you looked at those slides on gross margin and OpEx, is that gross margin gain that you're forecasting, including the transfer of costs from OpEx to gross margin? So the actual underlying gross margin gain is a lot higher than you're suggesting because you're just pushing a whole lot of cost in there as well. Within the 41% gross margin, how important to the existing number, so I can see the building blocks, but I don't understand within the existing number, how much of that gross profit is created by the partner program versus the retail business. So it's sort of -- if I look at it, I don't know where we're starting. I don't know what we're adding to it to get to where we are ending. And then in terms of disclosure, what are you going to give us going forward, B2C and B2B? Are we getting all the cost lines across each of those divisions or just straight to EBIT and then the cost lines across the whole business?

So the gross margin improvement that I showed related to the B2C business. So on the overview chart, you will see that our group gross margin is moving from 38.7% to 40% like around the 40s, yes. So whereas the B2C gross margin is moving from 41% to mid-40s. So that offsetting effect is the growth of the B2B business which comes at a gross margin in the teens also given that -- like something like fulfillment cost is being reported in there, yes. So what I showed was just the B2C gross margin, yes, that goes to the mid-40s, that move of the fulfillment cost would be reflected in the B2B gross margin. And that is bringing down the group gross margin back to the 40s, yes. The question around disclosure? Yes. The question around disclosure, I would say, you saw in the appendix of the Q4 presentation that we showed the restatement from the old segment reporting to the new segment reporting. And that's about the disclosure that we will show. So what you get in addition is that you can see the gross margin for B2C and for B2B. And in there, you saw the 41% and the 12-point-something for B2B. So this is, I think, what takes out the logistics element, and you see a real B2C gross margin development. In terms of [ tender ] shares, because you also asked about like what's driving now to what degree the gross margin improvement, hard to predict exactly, yes. All 3 will contribute. I would say it's a question a bit around timing of it. Like we currently see very strong traction on the partner business. So you expect this one to be in the early years, the bigger traction whereas others like creating full-price sell-through and increasing that ZMS share may lag a little bit behind it. So I think it's more a timing question and a question of like what is contributing how much? And then on -- you also asked about the disclosure further than that. We said that the partner business share, 40% to 50%, we said the 3% to 4% for ZMS. We will continue to disclose those numbers, yes. So I think the logistics piece is well defined in the B2B. And then on B2C, we will give you additional data points that will hopefully help.

Wonderful. First, jumping into the queue on [ Slido ]. Midterm question related, Sandra. We are now guiding for an EBIT margin of 6% to 8% in 2028. After reporting 3.4% in 2023. How does our phasing look like of the profitability? And will it be linear? Or should it be more back-end loaded into 2028?

Yes. So on the phasing, basically, from 2024 onwards, you will see steady margin progression. Yes. If I just look back now into this morning's call about the 2024 guidance, yes, we said like 2023 was 3.5%. We are now guiding at the midpoint to 4%. So we will see a steady margin progression going forward. And it may also be interesting to then talk about the phasing on growth. So 2024, very clearly for us the year to return to growth, yes? So it's the first year of our strategy. It's when the strategy, certain elements start taking effect. In the second half, we believe there will also be an improvement in consumer sentiment. So that positive momentum, which gives us then the opportunity for next year to stop being in the corridor that we presented 5% to 10% and to accelerate from there onwards. So that's a little bit, I think, the answer to phasing of growth and phasing of the adjusted EBIT margin.

To give you Sandra a bit of a breather. Robert, there's another question coming in on [ Slido ], one we're regularly getting on the U.K. market. We again have included the U.K. market in our maps discussing Europe, what are our plans to pursue this market more aggressively and also with regard to B2B, what's our view on the U.K. here?

Yes. It's better read. And I mean, I think our -- so our strategy that we have presented doesn't include that we need to go into like on a consumer business into more markets that we are in. But it certainly doesn't mean that we actually drop out of any markets. So that is one more part of this race. So we're in the markets we're in. And I think we as well won't give up on U.K. At the moment, it's -- we are driving a better convenience in U.K. already by having faster shipments into U.K., better order economics. And I mean I think with the strategy, I think there's actually to inward as we were testing the one is the B2B where we get some outreach from brands as [ we can help them ] in the U.K. And the second enroll, this might as well be under inspiration and entertainment side that as well over some angle. So I think we will tap ourselves into this U.K. market and we see how we get there. But certainly, we won't drop totally off U.K.

Cool. Thanks. Further question on strategy or financials here in the room. Yes, let's start here with [ Nordea ].

How do you view the business risk in the 2 segments? And the reason why I'm asking is that as I understand it, in the B2C, Zalando holds the stock, right, but in the B2B, the merchants hold the stock. So -- but I'm sure that there's other business risks in that segment. Could you elaborate a bit on that?

So the risk in the B2C segment, I think they surfaced largely over the past 2 years. So you see that in wholesale, of course, you have a risk around the stock, as you rightly say so. Whereas the partner business gives you flexibility, yes. Whereas if you're an environment of like strong tailwinds, of course, the wholesale business also enables you to accelerate there. Consumer discretionary spend, is another risk that you have, but that's the reality of being a consumer business. But other than that, I think we are -- we have injected now so much resilience into our B2C business. And we have, I think, demonstrated really well over the past 18 months that we can manage the bottom line profitability even in this environment that I think this is -- the risk here, I wouldn't foresee as being that critical. On the B2B side, here, the view of the -- in terms of like the midterm targets, it's more around the time it takes to onboard those merchants, yes. So it's more a timing question than anything else. I think we have proven now that it's a really strong proposition. There's plenty of interest from the merchants. And it's just a question of like how quickly can you get them on board yes? But you may want to add, no?

Nothing to answer as well.

Then pass on the microphone here, [indiscernible] UBS.

So two questions from my end. So the first one is, again, on the operating cost piece, right? So again, you mentioned that the marketing intensity is going to be higher now -- does that mean that towards 2028, like the 5, 6 percentage points improvement is actually going to be visible mostly in the fulfillment line, obviously, also considering some of the reallocation of costs towards the cost of sales. So that's the first question. And then the second question is more related to marketing, right? So again, with things like stories on Zalando, I mean, at this point in time are some of the brands or partners that you're working with actually sponsoring some of that and then going towards the 6% to 8% towards the 2028 margin, right? I mean, do you sort of see or bake in some marketing sponsorship from some of your partners, which will actually give you some upside on marketing costs?

I'll talk about OpEx more generally, and then maybe you talk about the second part of the question. So the -- if you ask me, where is the improvement coming from? So we can see that there is some margin expansion due to the gross margin improvement, yes. that's what we showed, like the 38.7% going to roughly the 40%. And then the lowering of the OpEx, a large part of that, yes, is coming from the fulfillment costs. There will be a bit of leverage also on admin. But with marketing remaining stable, yes. So the biggest block then is fulfillment. But within fulfillment, just to remind you of the dynamic, what we are doing, and I think that's really important because we have to strive for steady margin progression. So it's important to understand that it's not just a shift from one to another. It is really also working on cost improvements there so that we can fund investments we want to take in convenience, investments we want to take in more sustainable operations. So there is an efficiency drive also in there, yes.

Can you repeat the second question again on the marketing?

Sure. So I just wanted to ask that with like stories and Zalando, is any of the marketing where you're working with brands to tell their stories, is some of that sort of sponsor or reimbursed by the brand? And going forward, I mean, do you bake in some amount of sponsorship from the brands for those marketings by which you get some more upside on marketing?

Yes, yes. Exactly. So like I think it's a bit like how we actually work with like a company as Google for example, you -- like there is actually something you can do for organic visibility and there's something you can do for paid visibility. And so -- and I think on organic visibility, is this really where it creates win-win situations for consumers and for brands. So where does it actually really help to increase the experience? Where does it help to get attention from users? And I think there are certain ways that actually brands can interact with us, where we actually see that it's actually a win-win situation that actually brings more attention, more time, more eyeballs on the platform. And then there are certain areas where, I mean, it's less of -- it's less of a win-win situation, where actually, like brands have to compete around visibility. So I think the more it's in the performance side, that's actually a sponsored program, PLA, we call it, the Product Listing Ads. This is actually where the ZMS at the moment is very strong in. And I think on the storytelling pieces, there will be a lot of areas where just brands can invest and we have to just give them the organic visibility because it creates this win-win. And there's some other areas, we're not. And here, here we ask for sponsorships. And at the moment, in story this is already helping. So for example, like when there is actually a very exclusive product drop that actually -- like a brand that has a very exclusive product drop and want to get us across to consumers who really drive for it, that's actually organic visibility. But like if it's actually something else, we'll just tell a marketing story for our brand, then we actually charge for it. But it's always very visible to consumers.

Perhaps last question to you, Robert, before wrapping up today's event. There's a question from Marco Barresi on B2B business and what do we see as the total addressable market in the B2B business? And with whom do we think we can compete with?

The total addressable -- well, I think the beauty of this B2B angle is actually it is -- I think in many ways, actually, it's in many ways expandable. I think at the moment, we talk about this EUR 450 billion market, I think, which in itself is -- it's big. There's no need to enlarge at the moment. But I mean, even beyond that, so like as David Schroder said today in his presentation, you buy more verticals, buy more geographies. And then even buy more product. And so the logistics in last is the first one, and Tradebyte is a second software layer. But I think the beauty of it, you develop once a relationship with the brand. So you talk once to the CEO, it is like all these 6,000 brands that we actually have developed these relationships to. And like there are so many ways of how -- what we have done for ourselves, how we can help them. So logistics infrastructure and in software space, it's not only trade, but I think this as well as some other software areas that David and [ Jan ] already alluded to. The services space is in the sustainability area as a lower space. So the product-led growth that we can enable there is the third area. So that's, I think, the beauty of it. So it just opens a whole set of new horizons that we can actually go after and it makes a lot of sense and just increase the coverage that we can actually as a European company. I mean in terms of the competition, I think there's actually not the clear one competitor out there in the space. Obviously, I think there's singular logistics companies obviously out there that the brands work with them. They are similar software spaces out there. But I think like this wholesale or like in the software space, we have like Shopify and so on and so forth. So -- but it's not like there's a singular competitor somewhere. It's really, I think, the ecosystem approach that we actually now pursuing on the B2B side is actually the very unique one. And where I think I very much believe in, the more we actually make it better and market bigger and the more we connect it, and the more partners on there actually, the clearer I get the sales argument to join this network. And yes, similar as in cloud. So like 10 years ago, everyone had like his own server farms. Now it's -- now everyone is on the cloud because it just makes more sense. And I think that's actually the comparison, I think, that I think works as well, especially for the European complexities in e-commerce, I think that David and [ Jan ] very much alluded to.

Thanks, Robert. I think that wraps up our today's session over the last few hours. I would now finally hand it over to Robert. And yes, to wrap up the day, to convey the key messages we have sent over the last 5 hours. And yes, over to you. And yes, go ahead.

Yes. Thank you very much for being here with us today and your interest, I think, in the story. And I think it's always so much better to meet in person. So although like the strikes didn't like permit everyone to join here like in person, but I think it's so great to see you in person and as well as you see us and see like what's behind actually the story and what's behind Zalando. So thank you very much for this interest and being here with us or watching by video. And here, I hope you found like the presentations of the teams today interesting and helpful for your understanding of what we're up to. Maybe 3 key messages to repeat again that we want to leave you with. So number one is we are on our trajectory on ecosystem vision strategy now that serves customers beyond the transactions. We move beyond fashion into lifestyle. And -- but as well, more than just a B2C, actually B2B arm. And those 2 actually now help us to actually go after a larger share -- larger coverage of the overall market that we are -- that we are up for. The second key message, in B2C, we have 3 growth pillars going forward, differentiation to quality, expansion to lifestyle and inspiration to entertainment angle. And next to it, we have B2B growth rate that we talked extensively today about. And at scale, this is a massive opportunity that we're after. So -- and we have a clear path back to a strong growth. We really are up for double-digit growth in the future, but it's a very clear path to strong growth, and we continue to have margin expansion. And at this scale, it's a very, very attractive opportunity that we're after. Thank you very much for your interest and have a great rest of the day. Thank you.