Allegro: Smart Unit Economics & Inpost Relationship

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In terms of unit economics could you walk us through the unit economics of the Smart! program?

If you assume 12, 13, or 14 zlotys is roughly the cost for one delivery with VAT, and you take out the tax, it's about 9 or 10 zlotys per delivery. That's the cost the platform incurs for free delivery. So far, we have 12 to 14 zlotys of commission or take rate, and 9 to 10 zlotys of delivery cost. We also need to add the component of the delivery cost that the merchant contributes. Every merchant selling with the Smart! badge agrees to contribute towards the cost of free delivery. There is a complex set of tables listing different delivery methods and order values, indicating how much they need to contribute. It's complex, requiring sophisticated analysis to determine the average. If you assume a 50/50 split, you won't be terribly wrong, though it could be 60/40 or 40/60. Assuming 50/50, this means that of the 9 zlotys Allegro pays on average for delivery, 4.5 would be contributed by the merchant. For the average transaction, let's say it's 14 zlotys average order minus 9 plus 4.5. This helps us land at 9 to 10 zlotys of average contribution per order. Adding back the subscription fee, allocated at one order, that's 1 zloty. So, on average, for a Smart! transaction, Allegro makes about 10 to 11 zlotys per transaction. When you look at the EBITDA numbers, it aligns.

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In terms of unit economics could you walk us through the unit economics of the Smart! program?

The big question is, and has always been, does the investment Allegro makes of these 4.5 to 5 zlotys in its portion of the delivery cost make sense? Without that cost, they would make 15 or 16 zlotys per transaction instead of 10. It boils down to why Allegro launched Smart! and why it's been a significant investment for the company in recent years. Essentially, there are two critical reasons. One is financial and the other one is strategic. The financial one relates to the substantial increase that occurs in the frequency of purchases and therefore spend on the platform when a person joins Smart! In the IPO and recent results, Allegro has reported a 30% to 50% uplift in GMP per person. To add some substance to that figure, my team ran A/B tests on different customer cohorts to understand if comparable customer groups really did spend more, and the answer is yes, I've seen it. I certified the numbers. So that was definitely true when I was there.

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