Underneath of that, we’re also getting operating leverage as a result of higher basket sizes. And as incremental volume flows through, that’s the 20 basis points that Mario talked about today. And then third, of course, the G&A component that is built in, strong OpEx management strong controls on kind of spending, headcount, travel, relocation, anything basically that you need to run the company in a disciplined manner. The team is all over that. So that as contributing to SG&A. On the freight and logistics initiatives, there are basically three that we’ve talked about. One, our work with inventory and positioning allows us to better position inventory. We’ve gotten inventory in lower zones that allows us to ship lower distances that allows us to essentially be more efficient with our shipping cost.
Number two we are also improving package density that allows us to improve cartonization per order that allows us to extract that benefit. Number three, the middle mile initiative is contributing. Again, it helps us consolidate orders and deeper inject into carrier networks. And then for the work with our routing centers allows us to move inventory more effectively, that hits the inbound freight side, which also rolls up to gross margin. So as a result of these four, you’re seeing us leverage kind of the cost on the freight side, and the previous comments were relative to the SG&A side.
Doug Anmuth: Great. Thank you, both. Appreciate that.
Sumit Singh: Sure.
Operator: Thank you for your question, sir. Our next line of questions comes from the line of Mark Mahaney with Evercore. Sir, the floor is now yours.
Mark Mahaney: Okay, thank you. Let me try two questions. First, the sponsored ad revenue opportunity, have you sized the TAM before? And just talk about the which kind of advertisers you would expect to bring on to the platform? And then in terms of the net active customers, this growth you had this quarter after two quarters of decline. And I know there is a factor here, which is kind of moving beyond the COVID cohort a little bit. Should the interpretation be that you’ve now kind of at the end of that tunnel and that you’re back to kind of more normalized churn levels across the customer base and the gross adds kind of stay high that we should now expect a consistently ongoing growth in net active customers? Thank you.
Sumit Singh: Hey, Mark, I’ll take the first one. Mario will take the second one. So on sponsored ad, since it’s just launched and still in beta, we haven’t fully kind of shared the financial benefits. The way we would think about it is we compare ourselves to other companies that run single category or sponsored ads in single category. So I think that would become a reference. And then we would also consider the power of the Autoship program that allows us to build repeat purchase and loyalty into brands that allows us kind of an ROI, which is just different and more powerful than we’ve seen in the industry. So you put those two together, the type of products that kind of lends itself to consumables, healthcare, all products where you can build loyalty, whether it’s search demand, whether it’s direct index on the website. And we’ve seen basically great response from partners from that standpoint right now. So we’re prioritizing those too.
