Hepsiburada

Prospectus Summary

PROSPECTUS SUMMARY
This Prospectus Summary highlights information contained in more detail elsewhere in this prospectus. This Prospectus Summary does not contain all the information that you should consider in making your investment decision. Before deciding to invest in our ADSs, we urge you to read this entire prospectus carefully, including the "Risk Factors," "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections and our audited consolidated financial statements, including the notes thereto, included in this prospectus.

Our Mission

Our mission is to be the reliable, innovative and sincere companion in people's daily lives and to make each member of our community feel 'I am so happy I have Hepsiburada'.

Our Vision

Our vision is to lead digitalization of commerce. To that end, we have evolved from an e-commerce platform into an integrated ecosystem of services centered on making people's daily lives easier.

Company Overview

We are a leading commerce platform in Turkey and, in 2020, we connected 33 million members, 9 million Active Customers and a fast growing base of approximately 45 thousand Active Merchants. We provide high-quality customer experience by relentlessly focusing on selection, price and delivery:

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Selection: As of December 31, 2020 we had over 44 million stock keeping units ("SKUs"), including variants (color, size, etc.) across 32 different categories offered through a hybrid model combining a first-party Direct Sales model (1P model) and a third-party Marketplace model (3P model);


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Price: We seek to provide the best value for our customers by offering products at highly competitive prices;


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Delivery: We operate a large, fast and scalable in-house logistics network with robust last-mile delivery capabilities based on a proprietary technology platform.

Founded in 2000, Hepsiburada has been one of the early pioneers of digitalization of commerce in Turkey and has become a household brand in the country. Our brand, which corresponds to "Everything is Here", is synonymous with a seamless online shopping experience and benefits from very strong brand awareness, with Hepsiburada scoring 96% for aided brand awareness (with the two closest competitors in Turkey scoring 95% and 92%, respectively), 78% for spontaneous brand awareness (with the two closest competitors in Turkey scoring 74% and 63%, respectively) and 91% for highest preference score (with the two closest competitors in Turkey scoring 89% and 87%, respectively), according to FutureBright Research Brand Health Report in 2020. Additionally, our brand had a market leading Net Promoter Score ("NPS") of 66 for the three months ended March 31, 2021 according to the company's internal reporting and has been named Turkey's favorite e-commerce brand several times by Mediacats' Lovemark, a survey which aims to reveal the brands consumers value within a given category. Supported by the strength of our brand, we benefit from substantial organic traffic, with approximately 70% of traffic being unpaid traffic, for the three months ended March 31, 2021.

We believe that our commitment to five central pillars of our business culture is the reason we have risen to become a leader of e-commerce in Turkey as evidenced by our brand awareness track record. The five pillars of our business culture are:

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customer-first mentality;

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entrepreneurial business acumen;


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meticulous execution;


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relentless innovation; and


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social consciousness, diversity and inclusion.

Our aim is for customers of Hepsiburada to come to the platform and be able to do the following:

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Hepsiburada: Shop a wide range of products online;


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HepsiExpress: Order groceries and essentials to be delivered within 30 to 60 minutes;


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HepsiGlobal: Discover and purchase products from international merchants online;


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HepsiPay: Use different online payment options; and


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HepsiFly: Buy airline tickets online.

We have 20 years of e-commerce experience in Turkey, and our local know-how allows us to better tackle the needs of our community of customers, merchants and suppliers across the country. Our leadership team's commitment to our vision, mission and culture is one of our main differentiators and is the foundation on which our ecosystem continues to build in order to accelerate digitalization of Turkish commerce. We have grown together with our merchants located across the entire country and have contributed to the local economy and employment. Furthermore, Hepsiburada is one of the few female founded technology companies globally, and we have been actively promoting and empowering women entrepreneurship in Turkey.

Since the launch of our Marketplace in 2015, Hepsiburada has become a trustworthy partner for merchants in Turkey by providing access to 33 million members and 9 million Active Customers and comprehensive end-to-end solutions to empower merchants to thrive digitally. In 2020, our 3P-based Marketplace model accounted for approximately 59% of our GMV, following the successful transformation of Hepsiburada from a 1P-based Direct Sales only business to its current hybrid 1P and 3P-based model. Our aim is for Hepsiburada's merchants to enjoy a seamless set of integrated e-commerce solutions:

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HepsiLojistik: Fulfillment options across Turkey;


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HepsiJet: Last-mile delivery services;


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HepsiPay: Online payment solutions; and


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HepsiAd: Personalized ads and data insights.

We believe powerful network effects are created by our leading brand, hybrid commerce model with a unified 1P and 3P-based catalogue, and strong customer and merchant value propositions. Our expanding selection of products and services, as well as price competitiveness, has allowed us to attract a growing total Active Customer base from 4.8 million in 2018 and 6.5 million in 2019 to 9 million in 2020 and increase the frequency of orders on our platform from 3.1 in 2018 to 3.5 in 2019 and to 3.9 in 2020, which in turn draws more merchants and further enhances our customer value proposition. In addition, our proprietary data and insights collected over the last 20 years enable us to understand the needs of our customers and merchants and help us develop new services, expand into new verticals, and continuously innovate and strengthen our value proposition reinforcing the network effect.

Our large, fast and scalable logistics network has been critical to our success and we have been continuously focusing on improving our logistics capabilities and offerings. We have a robust operational footprint enabling fast delivery and merchant integration. As of March 2021, we operate:

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a nationwide infrastructure including six fulfillment centers in strategic locations that encompass a total area of more than 120 thousand square meters;


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our HepsiJet business is one of the fastest growing logistics companies with an on-time delivery performance of 95% in 2020, and operates in 63 cities with 115 cross-docks as of March 31, 2021; and


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our HepsiMat business is a pick-up & drop-off (PUDO) network with more than 950 branded parcel lockers and pick-up points as of March 2021 and has partnership with local stores, gas stations and retailers.

We are a technology-driven company and have invested heavily in developing our own highly scalable proprietary technology to support the large and rapidly growing order volumes generated on our platform. Our in-house developed IT infrastructure is central to our ability to execute our business strategy and ensure a seamless experience for our merchants and customers with our single mobile app that connects our offerings and services.

Our business has experienced a long history of strong growth as a result of our commitment to meticulous execution. Our revenues increased by 33% from TRY 2.0 billion in 2018 to TRY 2.6 billion in 2019, by 145% to TRY 6.4 billion in 2020 and by 66% from TRY 0.8 billion in the three months ended March 31, 2020 to TRY 1.4 billion in three months ended March 31, 2021 and our total GMV increased by 56% from TRY 5.1 billion in 2018 to TRY 8.0 billion in 2019, by 111% to TRY 17.0 billion in 2020 and by 95% from TRY 2.3 billion in three months ended March 31, 2020 to TRY 4.5 billion in three months ended March 31, 2021, fueled by increasing purchase frequency, greater customer loyalty and an expanding pool of Active Customers from 4.8 million in 2018 to 6.5 million in 2019 and to 9 million in 2020, a compound annual growth rate ("CAGR") of 37% over the period. We had Free Cash Flow of TRY 119.0 million, TRY 310.4 million, TRY 341.4 million in 2018, 2019 and 2020 respectively, and TRY 60.5 million and TRY (158.8) in three months ended March 31, 2020 and 2021, respectively.

Our Industry

As a member of the G20, Turkey is the 13th largest economy in the world by gross domestic product ("GDP") based on purchasing power parity in 2019 according to the IMF World Economic Outlook report dated 2021 and a total GDP of US$717 billion in current prices for 2020 according to Turkstat. Turkey is one of the fastest growing economies in the world, with real GDP CAGR of 5.2% from 2010 to 2020 based on Turkstat. In 2020, the year marked by the COVID-19 pandemic, Turkey was one of the only two G20 member countries with real GDP growth (1.8% year on year according to Turkstat), along with China. The Turkish economy is expected to grow at a CAGR of 4.1% between 2020 and 2025 supported by fiscal stimulus and recovering consumer and business confidence according to a forecast from ADL.

Turkey is the second most populous country in Europe with a population of 84 million as of December 31, 2020. Turkey benefits from attractive demographics, the second youngest in Europe (after Kosovo) with 46% of the population under the age of 30 according to Turkstat, and an increasing urban population share of approximately 75% based on UN data as of 2018, which is comparable to Germany.

The retail market is one of the largest and fastest growing industries in Turkey. According to ADL, the Turkish retail market grew at a CAGR of 15.3% from 2015 to 2020 and reached TRY 866 billion in 2020. The market is projected to grow at a CAGR of 15.7% in the period 2020 to 2025 and to approximately TRY 1,798 billion based on the forecast from ADL. Turkey's e-commerce market (exclusive of services, travel and betting) has grown significantly faster than the broader retail market, at a CAGR of 46.1% from 2015 to 2020, reaching a total market size of TRY 88 billion in 2020 (in terms of gross merchandise value excluding cross-border sales, B2B sales, VAT and services (e.g., food delivery); not excluding returns), according to ADL. ADL's estimation of the e-commerce market size in Turkey is consistent with the Company's analysis based on information published by the Turkish Ministry of Trade through ETBIS. E-commerce penetration has more than tripled during the same time period from 3.1% of the overall retail market in 2015 to 10.1% in 2020, according to ADL. Low e-commerce penetration in Turkey suggests significant room for growth when compared to penetration in other large markets, with South Korea at 35.8%, China at 27.3%, closely trailed by the UK with 24.2% and the US with 20.3%, and with Poland at 14.4%, Brazil at 13.9%, Germany at 13.6% and Russia at 10.5% in 2020 based on Euromonitor data.

The strong historical and projected growth of the e-commerce market has been supported by high internet penetration, wide spread usage of credit and debit cards for online payments and well-established logistics infrastructure enabling nationwide delivery of orders. As a result, e-commerce has grown to 10.1% of total retail commerce in Turkey as of 2020 and is expected to continue to grow as a share of total retail through 2025, according to ADL.

Since its founding in the late 1990s, the Turkish e-commerce market has witnessed the shift of traditional brick-and-mortar players online, the establishment of new local e-commerce players and the entrance, either organically or via acquisition, of global e-commerce players. The Turkish e-commerce market today includes traditional brick-and-mortar retailers with omni-channel capabilities, quick delivery players, online players operating third party marketplace model only, such as N11 and Gittigidiyor, and online players offering hybrid models that combine a third party marketplace with their own first party sales, such as Hepsiburada, Trendyol, Amazon and Morhipo.

Hepsiburada was among the first players to start operations in 2000 and since then, while its competitors either became acquisition targets or adopted a different business model, Hepsiburada has grown to become one of the main players in this space. Hepsiburada has a differentiated consumer proposition in the Turkish e-commerce market compared to the main marketplace competitors Trendyol, N11, Gittigidiyor, and Amazon. Hepsiburada has the most comprehensive offering in the Turkish e-commerce market across assortment, catalogue structure, fulfillment and inhouse logistics solutions (according to ADL), and it is the only marketplace with an e-money and payment service provider license in Turkey (according to the Turkish Central Bank's list of such licensed providers).

As of 2020, Hepsiburada has a market share of approximately 2% in the highly fragmented Turkish retail market which remains dominated by offline retail players according to ADL. As the second largest player by market share in the Turkish e-commerce market, Hepsiburada is well placed to drive the shift from offline to online retail and gain market share as a result. Based on ADL's analysis, Hepsiburada has a market share of approximately 17% of the total e-commerce market as of 2020, which represents an increase of approximately 8 percentage points compared to approximately 9% in 2015, also having increased its market share despite strong competition after the acquisition of Trendyol by Alibaba in 2018 and the entry of Amazon into the Turkish e-commerce market.

Our Strengths

We believe the following strengths are the basis for our success.

Proven Team with Deep Local Know-How and Commitment to our Vision and Mission

Our business is led by an entrepreneurial management team with a strong track record of growth and a clear vision to lead digitalization of commerce. Our management team has a complementary and diversified skill set, with significant e-commerce expertise in multiple geographies backed by diverse backgrounds from technology, retail, banking and operations in Fortune 500 companies.

At the core of our culture is our commitment to our customer-first mentality; entrepreneurial business acumen; meticulous execution; relentless innovation; and social consciousness, diversity and inclusion. To demonstrate to our community that we live up to our values, we lead by example:

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customer-first mentality has been a key pillar to our culture and we are committed to continue to be one of the favorite e-commerce brands in Turkey with strong customer satisfaction scoring higher than the industry average;


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entrepreneurial business acumen is critical to our business operations and innovations. Our strong relations with suppliers and merchants, strong track record in industry, deep understanding of local insights, cost-conscious management philosophy, and deep commitment to our vision help us better evaluate the business landscape in making strategic decisions;


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meticulous execution is indispensable to operate in Turkey, where we operate a 1P and 3P hybrid model and as a result recorded a GMV CAGR of 64% (11.8 times) (from TRY 1.4 billion in 2015 to TRY 17.0 billion in 2020), a growth in the number of Active Customers of 4.4 times from 2015 to 2020 and a GMV per Active Customer growth at a CAGR of 32% from 2018 to 2020;


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relentless innovation has been the key driver behind our pioneering achievements including the 1P-3P hybrid model, unified catalogue, customer reviews, new vertical expansions such as on-demand grocery service, last-mile delivery capability, same-day delivery, click & collect, frictionless return pick-up, licensed payment service, and online consumer loans; and


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social consciousness, diversity and inclusion have been our focus at every step that we have taken in building our business. We have been actively supporting local merchants and women entrepreneurs through targeted nationwide programs. As an example of our dedication to encourage women entrepreneurs, we launched Technology Empowerment for Woman Entrepreneurs, a program across Turkey which provides multiple benefits to women entrepreneurs making sales on our platform who elect to participate. Since the launch of this program, we have reached more than 19,000 women entrepreneurs (as of March, 31 2021) from across Turkey over the course of approximately 4 years. In 2020, more than 20% of our Active Merchants were women entrepreneurs. In addition, as of March 2021, women employees represent 49% of our workforce and 33% of our executive roles (excluding HepsiJet).

At Hepsiburada, we bridge Silicon Valley's technical know-how with the local trading culture by merging analytical concepts such as big data analytics, customer segmentation and personalized recommendation with the understanding of local insights, expectations and values. Our globally proven business model, which is based on an e-commerce model that complements a marketplace of third-party sellers with a direct sales online retail business, combined with our local know-how enables us to execute our business strategy seamlessly, as evidenced by our operating and financial results.

The COVID-19 pandemic underscored Hepsiburada's important position in the community and emphasized our critical role in supporting different segments of the society including health workers, small and medium sized enterprises, families in need, and entrepreneurs. As a commitment to our long term vision, we will continue to support our stakeholders and enable Turkey and the broader region to accelerate its digitalization journey.

A Leader of E-Commerce in Turkey with One of the Most Trusted and Popular Digital Platforms for Customers' Everyday Needs As one of the early pioneers of online retail in Turkey, customer service and experience is our priority and we aim to provide a seamless experience on our platform throughout the entire customer journey. We provide an excellent customer experience on our platform by relentlessly focusing on selection, price and delivery. Our mobile "Super App" is at the center of our value proposition and it acts as a one-stop-shop solution for customers by offering a broad range of products and services and creates a differentiated user experience.

Aiming to offer the largest and highest-quality product selection is one of the key pillars of our value proposition to customers. We offer over 44 million SKUs across 32 different categories including home appliances, books & hobbies, fashion & lifestyle, home & garden, groceries and technology products. Our strong alliances and partnerships with local brands and leading international brands, such as Apple, Casper, Oppo, Tefal, Rowenta, Eczacıbası, Spigen, Delta, Dyson, Vestel and Ülker Group help us to expand the variety of products available to our customers as well as partner to offer value-added services, such as trade-in options for, among others, Apple and Samsung products, delivery by appointment for Vestel products and live chat support from live agents from over 40 well-known brands, including Colgate-Palmolive, Apple and L'Oreal.

We seek to provide the best value for our customers by offering products at highly competitive prices. We believe that our large merchant base with approximately 45 thousand Active Merchants in 2020, plays an important role and allows our customers to find the best value for money for products in our platform.

We operate a large, fast and reliable in-house logistics network with scalable and robust last-mile delivery capabilities based on a proprietary technology platform. We are an end-to-end ecosystem with full in-house capabilities across fulfillment, logistics and last-mile delivery in Turkey. We believe that our logistics infrastructure is an important pillar of our success and enables us to improve the customer experience.

Our mobile Super App is at the center of our platform, which acts as a one-stop-shop solution for customers and creates a differentiated user experience and a virtuous demand cycle for our business. Our app is one of the most popular in Turkey with 19 million average monthly app active users on our mobile applications in 2020 and has 37.3 million app downloads since 2018. Our website had more than 250 million monthly visits on average in the three months ended December 31, 2020.

Our distinctive value proposition of a wide selection of products and services at competitive prices with convenient delivery options has resulted in a large, growing and loyal Active Customer base, according to company information, which demonstrated an increase in order frequency and retention on our platform in 2019 and 2020. We had an NPS of 66 for the three months ended March 31, 2021 according to the company's internal reporting records, were elected Turkey's favorite e-commerce brand several times by MediaCats' Lovemark and have won several awards since 2015 for our e-commerce platform. Further, we have reduced the rate at which customers raise customer services inquiries through our ticketing system from 6.4% of orders in 2019, to 5.1% in 2020 and to 2.6% in the first quarter of 2021.

Empowering Merchants to Thrive in a Digital Environment with a Comprehensive Suite of End-to-End Solutions

We have one of the largest merchant bases in Turkey with approximately 45 thousand Active Merchants in 2020, and have become the "one-stop-shop" and one of the most attractive digital platforms for merchants to access consumers across Turkey. Our Active Merchant base has more than doubled in 2020 compared to 2019. In order to ensure high quality standards we have strict policies that allow us to monitor merchants' end-to-end operations and performance on our platform.