It has now been just over a year since the marketplace group CDON Group, which also includes the sister site Fyndiq, raised 45 million Swedish krona to finance four identified growth initiatives. When the company now presents its report for the third quarter, it is clear that the expanded investment in tech and AI has resulted in a clear trend reversal.
During the quarter, the total gross merchandise value (GMV) increased by 18 percent to SEK 567.5 million, while net sales rose by 3 percent to SEK 113.4 million. But the real turning point came at the end of August when the development team launched a new service for article grouping.
Combined Duplicates – Immediate Effect
The new technology combines duplicates of identical products into a single advertisement, which both improves the customer experience and has enabled the group to significantly expand its product feeds to Google Shopping. Together with a new AI-based search function from Google, the results were not long in coming, states CEO Fredrik Norberg in the report.
The effect was immediate. In September, GMV grew by 32 percent, compared to 11 percent for July and August combined, while comparable GPAM grew by 10 percent, compared to minus 3 percent for the same period. The improvement has continued into October, primarily driven by Fyndiq. What makes me happiest is that this is only the first step.
The expansion of product feeds came as a lifesaver after a sluggish summer. On July 1, the EU introduced a new fee of 3 euros for deliveries from countries outside the union, which had a significant impact on the conversion rate for Fyndiq's direct imports. However, thanks to the tech boost, Fyndiq managed to turn the headwind into an eleven percent GMV growth for the quarter as a whole, while the flagship CDON climbed by 21 percent.
Self-Criticism Regarding the Advertising Platform
The work to attract major European retailers is also continuing to bear fruit. These so-called "European Giants" have generated approximately SEK 85 million in GMV since the beginning of the year and now account for 6 percent of the group's total sales volume, up from under 1 percent a year ago. As many of the large retailers sell consumer electronics with lower commission levels, this puts pressure on the group's average margin in the short term, but contributes with a wide range and increased gross profits in krona terms.
At the same time, markets outside of Sweden are growing rapidly with an increase of 45 percent, and at the end of September, CDON launched its largest brand campaign in several years. But not everything is going according to plan. When it comes to the investment in the advertising business, CEO Fredrik Norberg does not mince words.
Our retail media platform is up and running but has not yet generated any significant revenue, which is a disappointment compared to the ambition we presented in July. Above all, we need to expand sponsored products to the areas where retailers reach customers with high purchase intent, which we aim to launch during the fourth quarter.
Books Last Cost for Own Warehouse
On the bottom line, the quarter is weighed down by substantial one-time accounting items. Operating profit landed at minus SEK 26.1 million, compared to minus SEK 9.6 million in the same period last year. The decline is mainly explained by a goodwill impairment related to Fyndiq of SEK 16.7 million, as well as SEK 6.4 million in liquidation costs for the company's own warehouse sales (1P), which it decided to scrap earlier this year. According to Fredrik Norberg, the 1P chapter is now completely closed.
Adjusted for one-time items, adjusted operating profit (EBITDA) amounted to SEK 1 million, a decrease from SEK 11.5 million last year, partly due to the fact that SEK 5.3 million has been plowed into the new growth initiatives and that traffic has increasingly come via paid channels.
Ahead of the year's most important sales quarter, the group has also strengthened its management by bringing in Emma Danielsson from the beauty chain Kicks as the new Chief Commercial Officer (CCO) starting October 1. The long-term goal for 2027 remains firmly in place, meaning that the group should reach an EBITDA profit approaching SEK 100 million.