Hepsiburada Announces Second Quarter 2023 Financial Results

ISTANBUL, Türkiye, Aug. 24, 2023 (GLOBE NEWSWIRE) -- D-MARKET Electronic Services & Trading (d/b/a “Hepsiburada”) ( HEPS), a leading Turkish e-commerce platform (referred to herein as “Hepsiburada” or the “Company”), today announces its unaudited financial results for the second quarter ended June 30, 2023.

Restatement of financial information: Pursuant to the International Accounting Standard 29, Financial Reporting in Hyperinflationary Economies (“IAS 29”), the financial statements of entities whose functional currency is that of a hyperinflationary economy must be adjusted for the effects of changes in a general price index. Turkish companies reporting under International Financial Reporting Standards (“IFRS”), including the Company, have been required to apply IAS 29 to their financial statements for periods ended on and after June 30, 2022.

The Company’s consolidated financial statements as of and for the three months ended June 30, 2023, including figures corresponding to the same period of the prior year, reflect a restatement pursuant to IAS 29. Under IAS 29, the Company’s financial statements are presented in terms of the measuring unit current as of June 30, 2023. All the amounts included in the financial statements which are not stated in terms of the measuring unit current as of the date of the reporting period, are restated applying the general price index. Adjustment for inflation has been calculated considering the price indices published by the Turkish Statistical Institute (TurkStat). Such indices used to restate the financial statements as at June 30, 2023 are as follows:

Figures unadjusted for inflation in accordance with IAS 29, denoted as “IAS 29-unadjusted,” “unadjusted for IAS 29,” “unadjusted,” “unadjusted for inflation,” or “without adjusting for inflation,” are also included in the summary tables of the consolidated financial statements and under the “Highlights” section and explanatory notes as relevant. The press release also includes tables that show the IAS 29 adjustment impact on the consolidated financial statements for the periods under discussion. Figures unadjusted for IAS 29 constitute non-IFRS financial measures. We believe that their inclusion facilitates the understanding of the restated financial statements in accordance with IAS 29 and our year on year growth and profitability guidance. Please see the “Presentation of Financial and Other Information” section of this press release for a definition of such non-IFRS measures, a discussion of the limitations on their use, and reconciliations of the non-IFRS measures to the most directly comparable IFRS measures.

Second Quarter 2023 Financial and Operational Highlights
(All financial figures are restated pursuant to IAS 29 unless otherwise indicated)

• Gross merchandise value (GMV) increased by 42.9% to TRY 19.0 billion compared to TRY 13.3 billion in Q2 2022.
  • IAS 29-Unadjusted GMV increased by 100.5% to TRY 18.5 billion compared to Q2 2022.
• Revenue increased by 42.8% to TRY 5,893.6 million compared to TRY 4,126.0 million in Q2 2022.
• Number of orders increased by 94.6% to 27.5 million compared to 14.1 million orders in Q2 2022.
• Active Customers increased to 12.0 million compared to 11.7 million as of June 30, 2022.
• (Order) Frequency increased by 56.5% to 8.1 compared to 5.2 as of June 30, 2022.
• Active Merchant base increased by 14.2% to 101.3 thousand compared to 88.7 thousand as of June 30, 2022.
• Number of SKUs increased by 49.5% to 194.7 million compared to 130.3 million as of June 30, 2022.
• Share of Marketplace GMV was 67.1% compared to 64.0% in Q2 2022.
• EBITDA improved to positive TRY 154.6 million compared to negative TRY 820.7 million in Q2 2022. Accordingly, EBITDA as a percentage of GMV was at 0.8% on a 7.0 percentage points improvement compared to Q2 2022.
  • IAS 29-Unadjusted EBITDA improved to positive TRY 374.0 million compared to negative TRY 246.2 million in Q2 2022. IAS 29-Unadjusted EBITDA as a percentage of GMV in Q2 2023 improved 4.7 percentage points to 2.0% compared to Q2 2022.
• Net income for the period was TRY 881.1 million compared to a net loss of TRY 782.7 million for Q2 2022.
• Free cash flow was negative TRY 607.1 million compared to positive TRY 276.8 million in Q2 2022.
  

First Half of 2023 Financial and Operational Highlights
(All financial figures are restated pursuant to IAS 29 unless otherwise indicated)

• Gross merchandise value (GMV) increased by 28.7% to TRY 35.0 billion compared to TRY 27.2 billion in H1 2022.
  • IAS 29-Unadjusted GMV increased by 90.0% to TRY 33.3 billion compared to H1 2022.
• Revenue increased by 29.1% to TRY 10,821.5 million compared to TRY 8,381.1 million in H1 2022.
• Number of orders increased by 77.3% to 51.6 million compared to 29.1 million orders in H1 2022.
• Active Customers increased to 12.0 million compared to 11.7 million as of June 30, 2022.
• (Order) Frequency increased by 56.5% to 8.1 compared to 5.2 as of June 30, 2022.
• Active Merchant base increased by 14.2% to 101.3 thousand compared to 88.7 thousand as of June 30, 2022.
• Number of SKUs increased by 49.5% to 194.7 million compared to 130.3 million as of June 30, 2022.
• Share of Marketplace GMV was 67.7% compared to 64.8% in H1 2022.
• EBITDA improved to positive TRY 162.3 million compared to negative TRY 1,976.8 million in H1 2022. Accordingly, EBITDA as a percentage of GMV was at 0.5% on a 7.7 percentage points improvement compared to H1 2022.
  • IAS 29-Unadjusted EBITDA improved to positive TRY 549.8 million compared to negative TRY 549.0 million in H1 2022. IAS 29-Unadjusted EBITDA as a percentage of GMV in H1 2023 improved 4.8 percentage points to 1.7% compared to H1 2022.
• Net income for the period was TRY 675.8 million compared to a net loss of TRY 2,081.4 million for H1 2022.
• Free cash flow was negative TRY 770.9 million compared to negative TRY 2,194.8 million in H1 2022.
  

Commenting on the results, Nilhan Onal Gökçetekin, CEO of Hepsiburada said:

“We delivered a strong set of results, exceeding our financial guidance for the quarter despite the continued challenging macroeconomic environment. Our customer-centric approach in execution, compelling value proposition that includes high quality logistics services and attractive affordability solutions as well as continued cost optimization efforts have contributed to this solid performance. Accordingly, in the second quarter of 2023, we doubled our GMV growth year-on-year and recorded 2% EBITDA as a percentage of GMV, both unadjusted for inflation.

“We have continued to expand the benefits of our loyalty program, Hepsiburada Premium to include further commercial deals, generating more customer savings. Having marked its first anniversary in July, the program has attracted 1.3 million members as at the end of the first week of August. The array of affordability solutions on our platform, which position us uniquely among Türkiye’s e-commerce players, contribute to customer convenience which expedites conversion to sales. Furthermore, our leading Net Promoter Score in the Turkish e-commerce sector confirms customer appreciation for these programs and services.

“Meanwhile, we retain a laser focus on our logistics services and fintech propositions for third parties. This quarter, HepsiJet has expanded its customer base to almost 1,600 merchants with its distinguished delivery capabilities. Recently, Hepsipay introduced its “Pay with Hepsipay” solution through integration with a third-party service provider and aims to replicate this with many more. With its own debit card, payment with QR ability, Buy Now Pay Later offering and ability to facilitate bank loans, Hepsipay is committed to establish itself as a leading Fintech player in Türkiye.

“The prevailing macroeconomic conditions are expected to continue to pressure customer purchasing power for some time yet. Regardless, we maintain a steady footing with full confidence in our brand and capabilities. Building on our strategic stance and existing market projections, in the third quarter, we expect continued GMV growth of around 110% year-on-year compared to the same quarter of last year, unadjusted for inflation. We also expect to achieve an EBITDA within the range of 0.5% - 1.0%, unadjusted for inflation in the third quarter and expect to print full-year positive EBITDA, unadjusted for inflation. We are motivated to continue elevating customer experience and fostering sustainable and profitable growth while preserving prudent capital management. We thank our shareholders, our customers, our partners, and our exceptional team for their continued support. Together, we will boldly navigate the challenges and build a better future for Hepsiburada and the communities we serve.”

Summary: Key Operational and Financial Metrics

The following table sets forth a summary of the key unaudited operating and unaudited financial data as of and for the three months ended June 30, 2023 and June 30, 2022 and the six months ended June 30, 2023 and June 30, 2022 prepared in accordance with IFRS. Unless indicated otherwise, all financial figures in the tables provided are inflation adjusted (in accordance with IAS 29).

^{Note: The abbreviation “n.m.” stands for not meaningful throughout the press release.}

Note that Gross Contribution, EBITDA and Free Cash Flow are non-IFRS financial measures. See the “Presentation of Financial and Other Information” section of this press release for a definition of such non-IFRS measures, a discussion of the limitations on their use, and reconciliations of non-IFRS measures to the most directly comparable IFRS measures. See the definitions of metrics such as GMV, Marketplace GMV, share of Marketplace GMV, gross contribution margin, EBITDA as a percentage of GMV and number of orders and active customer in the “Certain Definitions” section of this press release.

Outlook

The below forward-looking statements reflect Hepsiburada’s expectations as of August 24, 2023, considering year to date trends which could be subject to change, and involve inherent risks which we are unable to control or foresee. The financial outlook is based on management’s current views and estimates with respect to existing market conditions. However, there are several uncertainties including the inflationary environment both in Türkiye and globally, local currency volatility, low consumer confidence, pressure on purchasing power, regional geopolitical headwinds, supply chain disruptions, the new regulatory environment for our activities in Türkiye and the evolving competitive landscape. Management’s views and estimates are subject to change without notice. See also the “Forward Looking Statements” section at the end of this press release.

In Q3 2023, we expect to continue our positive IAS 29-Unadjusted EBITDA performance and deliver IAS 29-Unadjusted EBITDA as a percentage of GMV within the range of 0.5% to 1%. Underpinning this performance, we also expect IAS 29-Unadjusted GMV growth of around 110% in Q3 2023 compared to Q3 2022.

Looking ahead, we are poised to print full-year positive IAS 29-Unadjusted EBITDA in 2023. We intend to remain focused on sustainable and profitable growth with a prudent approach to capital allocation.

Q2 2023 Business and Strategy Highlights

As at the end of June 2023, the rate of inflation followed a downward trend mainly due to the high base effect compared to the corresponding period:

• The annual inflation rate published by TurkStat as of June 30, 2023 was 38.2%, down from 78.6% as of June 30, 2022 and 50.5% as of March 31, 2023. The monthly inflation rates during the second quarter of 2023 were 2%, 0.04% and 4% in April, May and June, respectively. The Consumer Confidence Index was 85.1 as of June 30, 2023 compared to 80.1 as of March 31, 2023.
  

In Q2 2023, IAS 29-Unadjusted GMV increased by 100.5% to TRY 18.5 billion compared to Q2 2022. This exceeded our GMV growth guidance of around 95% by 5.5 percentage points.

• Adjusted for inflation, GMV increased by 42.9% to TRY 19.0 billion compared to Q2 2022. This performance was attributable to our value proposition supported by the appeal to the customers of our Hepsiburada Premium loyalty program, attractive affordability solutions and data-driven marketing campaigns.
• For Hepsiburada, GMV growth is a function of the growth in number of orders and average order value. We achieved continued order growth of 95% in Q2 2023 compared to Q2 2022. Order growth came through the continued rise in order frequency and customer growth. Our Active Customer base increased by 2.7% to 12.0 million as of June 30, 2023 and order frequency (LTM) grew by 56.5% to 8.1, up from 5.2 as of June 30, 2022. A strong customer demand for our digital products (which mainly include sweepstakes and gamified lotteries as well as the first monthly payment of Hepsiburada Premium membership subscription) contributed to the rise in order frequency. Excluding the orders of digital products, order frequency would have been 5.9 as of June 30, 2023 compared to 5.0 as of June 30, 2022, corresponding to 17.3% growth. Accordingly, order growth excluding that of digital products was 20.5% in Q2 2023 compared to Q2 2022. While these digital products generated nearly 1% of our GMV in Q2 2023, we value the repeat interaction they enable with the participating customer segments.

The discussion below elaborates on our progress in Q2 2023 within each of our strategic priorities:

a) Nurturing loyalty

• Central to our strategy is prioritizing customer loyalty and retention. Our loyalty program, Hepsiburada Premium, plays a key role in achieving this. Meanwhile, focusing on retention helps us to reduce and optimize our marketing and advertising spend.
• Hepsiburada Premium is a paid subscription service where members enjoy access to a wide range of benefits that include free delivery and 3% cashback subject to certain conditions, plus free access to an on-demand streaming service, discounted services, among others. The monthly subscription fee as at the end of June 30, 2023 remained at TRY 14.9. This quarter, we further enriched the program’s offering by including summer special deals and exclusive campaigns.
• Based on the results of market research conducted by FutureBright (a local research company), Hepsiburada Premium members’ Net Promoter Score (“NPS”) was 83 in June 2023, which is 10 points above the Company’s overall NPS. This indicates a strong satisfaction level from program members.
• As of the end of Q2 2023, we had a total of 1.2 million Hepsiburada Premium members (with approximately 500 thousand additional members joining in the six months period) and by August 7, 2023, the number of members reached 1.3 million.
• Hepsiburada Premium members have continued to generate higher order frequency compared to non-members. Data for the second quarter of 2023 indicated that Premium members’ monthly order frequency was 1.4 times the frequency they had generated before joining the program.
  

b) Capitalizing on our clear differentiation with affordability and lending solutions as well as high service levels on the platform and superior delivery services

• We are focused on leveraging our sustainable differentiators by providing our customers with best value through our affordability solutions (through Hepsipay) and superior delivery services (through HepsiJet). Our solutions set us apart from the competition by demonstrating our commitment to customer satisfaction.
• In Q2 2023, we had an overall NPS of 73 compared to 75 in Q1 2023 (according to the results of the market research conducted by FutureBright on behalf of Hepsiburada). Our high NPS evidences our leading position in the Turkish e-commerce market. We believe that our fast delivery services, wide range of affordability solutions and the depth and breadth of our selection were instrumental in earning customer appreciation and trust.

i) Hepsipay

• Our wallet and payment gateway solution, Hepsipay, registered approximately 12.5 million Hepsipay wallet customers (representing users who have opened their wallet account by giving the required consent to Hepsipay) as of June 30, 2023. In Q2 2023, customers with a Hepsipay wallet generated 86% of GMV compared to 78% in Q2 2022, confirming strong performance in migrating Hepsiburada customers to Hepsipay.
• We remain the only e-retailer with licenses in payments and consumer finance as well as first in market to launch a “Buy-Now-Pay-Later” (“BNPL”) solution. Our BNPL solution had been used by over 207 thousand customers as of June 30, 2023. In Q2 2023, around 159 thousand orders were processed through our non-card affordability solutions (including BNPL and shopping loans), corresponding to a 5.0% share of total GMV for the quarter, compared to 3.2% in Q2 2022. Around 51% of this GMV in Q2 2023 came through shopping loans provided by banks. We diligently manage credit risk, while maintaining our focus on growth optimization.
• In May 2023, Hepsipay launched the Hepsipay debit card available through the Hepsipay wallet. Through the Hepsiburada mobile app, any consumer who completes the required authentication steps can be issued a debit card upon request. The Hepsipay debit card is also linked to the QR payment feature allowing customers to use their Hepsipay debit card at any off-line retailer which accepts QR payments (and we expect to be able to extend this to include any other credit card that customers carry in their Hepsipay wallet). Additionally, Hepsipay debit card holders are able to top up their e-wallets by way of consumer loans (from three leading banks in Türkiye) in addition to making money transfers from their bank accounts. This capability adheres to our “always full wallet” motto.

ii) HepsiJet

• HepsiJet continued offering its competitive services, including oversized delivery, that differentiate us in the market. We believe swift delivery is a core customer expectation and, in Q2 2023, HepsiJet delivered 83% of orders placed through our retail arm (1P) within the next day (compared to 84% in Q2 2022).
• HepsiJet is also a key component of our value proposition for our merchants. In Q2 2023, HepsiJet increased its coverage within our merchant base, delivering around 66% of our total parcels, up from 60% in Q2 2022.
• In Q2 2023, HepsiJet had an NPS of 88.9 according to our internal survey results, reflecting its high quality service. Through HepsiJet, our customers enjoy flexible delivery options and value added services.
• Our oversized package delivery service handled delivery of 59% of oversized parcels ordered through our platform in Q2 2023, up from 51% in Q2 2022.
  

c) Pursuing profitability by focusing on core operations, growth in non-electronics and step change in opex

• Continuing the trend from the first quarter, we delivered a positive IAS 29-Unadjusted EBITDA of TRY 374.0 million in Q2 2023. This was achieved mainly through a stronger Gross Contribution, optimized advertising spending and prudent operational expenses strategy. EBITDA was also positive at TRY 154.6 million in Q2 2023 compared to negative TRY 820.7 million in Q2 2022.
• We continued to invest in our in-house merchant application, Hepsiburada My Business Partner, which, among other capabilities, facilitates proactive campaign and ad management as well as customer communication. This application’s ease of use increases merchant appreciation, while increased autonomy allows merchants greater control and flexibility in showcasing their products and engaging with customers.
  

d) Offering payment, lending and last-mile delivery services to third parties

• Our strategy to extend our services and solutions beyond our platform by offering the services to other retailers benefits both retail partners and customers. We see great potential for Hepsipay and HepsiJet to leverage their assets and increase their revenue contribution to our Company.
• HepsiJet today serves nearly 1,600 external customers including household-name retailers. We believe HepsiJet is best positioned to build on this momentum and grow its share in the logistics market.
• The share of external customer volume in HepsiJet’s operations surged to 24.8% in the second quarter of 2023, up from 22.1% in Q1 2023. Total parcel volume delivered of third parties in Q2 2023 showed a solid increase by 26.3% compared to Q1 2023.
• In July 2023, Hepsipay introduced its one-click check-out (Pay with Hepsipay) service on another platform. The envisaged growth in one-click check-out integrations will become instrumental in Hepsipay’s off-platform expansion.
• Hepsipay's solid 12.5 million wallet base, diverse affordability solutions, own loyalty program (Hepsipara Program) and fast and reliable check-out attribute to its competitive advantage. Hepsipay targets the consumer loan market which had a total size, as August 11, 2023, of $33 billion (source: Banking Regulation and Supervision Agency) and the card payments market for domestic cards with a size of $173 billion in 2022 (source: the Interbank Card Center) each in Türkiye.
• Following the second quarter of 2023, Hepsipay has taken strategic steps towards solidifying its position in the Fintech arena, including:
  • in July 2023, entering into a five-year strategic partnership with Visa Inc. in relation to Hepsipay’s card scheme.
  • on August 23, 2023, making a $1 million investment in one of the leading payment gateway service providers in Türkiye, Craftgate Technology (“Craftgate”). Craftgate helps e-commerce companies easily integrate and manage the virtual point of sale of all banks and e-money institutions from a single platform. Our investment in Craftgate is aligned with our vision of leading the financial technologies market in Türkiye and we believe that it will further foster the growth of our e-commerce partners.

ESG Actions

• On May 23, 2023, Hepsiburada published its first Sustainability Report for the year 2022 (the “Report”). Certified by the Global Reporting Initiative, the Report is also a first for Türkiye’s e-commerce sector. The Report presents Hepsiburada’s sustainability approach within four key focus areas: (i) an equal and inclusive corporate culture; (ii) social benefit projects; (iii) ethical and transparent governance; and (iv) environmentally responsible solutions. Notably, the Report highlights that:
  • Hepsiburada is a member of the United Nations (UN) Global Compact and is committed to the Ten Principles of the UN Global Compact related to human rights, labor, the environment and anti-corruption, and supports the Sustainable Development Goals.
  • To ensure an equal workplace, Hepsiburada signed the UN Women’s Empowerment Principles in 2022, committing to seven principles to develop company policies for gender equality in the workplace and women’s empowerment.
  • Hepsiburada increased the female employee ratio from 41% in 2020 to 46% in 2022, and the female executive ratio (manager and above) from 31% in 2020 to 34% in 2022.
  • As part of the HepsiTürkiye’den (All from Türkiye) program, Hepsiburada has continued to support local produce by backing over 330 local producers.
  • As part of the “Renew the Old” project, Hepsiburada recycles used electronic devices, optimizes the use of materials through responsible packaging practices, and reduces its environmental impact through more efficient and innovative activities to manage resources.
  • Hepsiburada has continued prioritizing Circularity and Waste Management to reduce its operational waste-related environmental impact.
• Our “Technology Empowerment for Women Entrepreneurs” (“TEWE”) program, launched in 2017 to develop women’s role in the Turkish digital economy, reached an additional 2,057 women in Q2 2023. To date, the program has supported around 45.4 thousand women entrepreneurs. Furthermore, the number of women’s cooperatives on our platform has reached 213 as of June 30, 2023.
• Since the earthquakes that hit the southeastern region of Türkiye in February 2023, as part of the TEWE program, various NGO collaborations have been established to provide sustainable support to the impacted region. As of June 30, 2023, the number of active women entrepreneurs and women's cooperatives in the earthquake zone has reached 1,795 and 24, respectively.
  

Subsequent Events

E-Commerce Regulation Challenge

On July 13, 2023, the Constitutional Court rejected the lawsuit filed by the Turkish opposition party before the Court in September 2022 regarding the cancellation of certain provisions of the E-Commerce Law. As such, the E-Commerce Law remains in effect. In addition, an e-commerce market player has filed a lawsuit against the Ministry of Trade, before the Council of State, requesting annulment of certain provisions of the E-Commerce Regulation. On May 8, 2023, the Council of State ruled to suspend execution of certain provisions of the E-Commerce Regulation. As of the date of this press release, the case regarding the E-Commerce Regulation remains pending.

Class Action Proceedings

As disclosed in greater detail in our annual report on Form 20-F for the fiscal year ended December 31, 2022 filed on May 1, 2023 (the “2022 Annual Report”), in September 2021, a class action lawsuit was filed before the Supreme Court of the State of New York (and in October 2021, a second class action was filed before the United States District Court Southern District of New York) against, among others, the Company, its board members and management at the time of the Company’s IPO and TurkCommerce B.V., alleging that the Company’s prospectus and the registration statement filed with the U.S. Securities and Exchange Commission in connection with the IPO, contained untrue statements of material facts or omitted facts necessary to make the statements made therein not misleading. In December, 2022, the parties entered into a settlement agreement according to which Hepsiburada agreed to pay $13.9 million to resolve the actions in their entirety, without any admission of wrongdoing (the “Settlement”). TurkCommerce B.V., currently a holder of the Company’s Class B ordinary shares, is expected to contribute $3,975,000 towards the Settlement amount.

In May 2023, following preliminary approval of the Settlement by the United States District Court Southern District of New York, the Company paid $13.9 million (corresponding to approximately TRY 282.6 million) into an escrow account in accordance with the terms of the Settlement Agreement. The escrow account is deemed to be in the custody and jurisdiction of the court. On August 1, 2023, following a settlement fairness hearing, the United States District Court Southern District of New York gave its order and final judgment approving the Settlement as fair, reasonable and adequate. The Settlement remains subject to a final approval and/or entry of judgment by the Supreme Court of the State of New York, County of New York, Commercial Division. There can be no assurance that the Settlement will be approved by the court.

Hepsiburada Financial Review

Restatement of financial information: Pursuant to IAS 29, the financial statements of an entity whose functional currency is that of a hyperinflationary economy is reported in terms of the measuring unit current as of the reporting date of the financial statements. All amounts included in the balance sheet which are not stated in terms of the measuring unit current as of the date of the financial statements are restated applying the general price index. In summary:

(i) Non-monetary items are restated from the date of acquisition to the end of the reporting period.
(ii) Monetary items that are already expressed in terms of the monetary unit current at the end of the reporting period are not restated.
(iii) Comparative periods are stated in terms of measuring unit current at the end of the reporting period.
(iv) All items in the statement of comprehensive loss are stated in terms of the measuring unit current as of the date of the financial statements, applying the relevant (monthly) conversion factors.
(v) The gain or loss on the net monetary position is included in the statement of comprehensive loss and separately disclosed.

Note: All financial figures in the tables provided are expressed in terms of the purchasing power of the Turkish Lira at June 30, 2023 (in accordance with IAS 29) unless otherwise indicated.

Note: Unless otherwise indicated, all discussions and analysis provided in this section are based on inflation-adjusted IFRS figures and non-IFRS measures.

Revenue

Our revenue increased by 42.8% to TRY 5,893.6 million in Q2 2023 compared to TRY 4,126.0 million in Q2 2022. This was mainly due to a 32.1% increase in sale of goods (1P) revenue (comprising 74.5% of total revenue) and a 86.5% increase in Marketplace revenue (3P) (comprising 13.3% of total revenue), compared to Q2 2022. Our delivery service revenue, comprising 9.2% of total revenue, rose 66.5% compared to Q2 2022. Meanwhile, other revenue which mainly consists of HepsiAd (our advertising platform), HepsiLojistik (our fulfillment services provider), and Hepsiburada Premium subscription revenue streams tripled compared to Q2 2022.

While GMV increased by 42.9% in Q2 2023 compared to Q2 2022, the 1P and 3P revenue growth during this period was 38.2%. The difference in growth rates was mainly due to a 3.1 percentage point (pp) shift in GMV mix towards 3P, which was partially compensated by lower customer discounts in our 3P operations during Q2 2023 compared to Q2 2022 and a change in the 3P GMV generation among categories. The slight increase in returns and cancellations ratios in Q2 2023 compared to Q2 2022 was another factor.

The 66.5% increase in delivery service revenue compared to Q2 2022 was mainly due to i) annual rises in unit delivery service charges, ii) an increase in delivery service revenue from off-platform customers of Hepsijet, iii) an increase in the number of parcels delivered and iv) the 3.1pp shift in the GMV mix towards 3P (where we generate higher delivery service revenue compared to our 1P operations).

Gross Contribution

Gross contribution margin improved by 4.4pp to 9.3% in Q2 2023 compared to 5.0% in Q2 2022. This was mainly attributable to a 2.5pp rise in 1P margin mainly due to (i) the lower quarterly inflation impact on cost of inventory sold (quarterly inflation for Q2 2023 was 6.3% compared to 15.2% for Q2 2022), (ii) better inventory management resulting in lower inventory turnover days and (iii) the change in the 1P GMV category mix; and a 1.0pp increase in 3P margin due to the change in the 3P GMV