But this means that there is no incremental inventory risk. So we’re tapping on inventory which is part of the brand’s ecosystem, if you want. And this allows us to scale up very, very fast as the demand ramps back up again. So the fact that the supply is there, means that we have ample supply without taking any inventory risk or burdening our brand partners with inventory risk. We’re able as a marketplace to adjust very quickly and boost our revenue and GMV once the macro environment becomes more favorable in some of our key geographies.
Stephen Ju: Thank you.
Operator: Our next question is from Oliver Chen at Cowen. Please unmute and ask your question.
Oliver Chen: Hi. Thanks a lot. And Elliot, it’s has been great working with you. Regarding the brand platform, what’s ahead with inventory management and inventory relative to sales and how should we think about merchandise margins and promotions there, given less than expected revenues there? And on the digital platform order contribution margins, how are you thinking about demand generation and also the headwinds as we model that going forward? Thank you.
Elliot Jordan: Hey, Oliver. Thanks very much. It’s been a pleasure to work with all the analysts as well. Just diving into your questions. So on the brand platform, there’s a couple of things happening here. Obviously, the delayed shipments from Q2 going into the second half has had an impact on revenue, a flow-through down to profitability and, of course, on our inventory balance at the end of June, which is higher than that would have been had we shipped those orders. So once those orders clear through across Q3, we would expect that balance to come down plus also as we ramp up our sales for Reebok, the initial inventory that we brought in as part of the handover from the previous operators of Reebok, we will start to sell through that inventory and push through shipments of that inventory, bringing down the balance.
Also, that’s on hand at the end of June is that position starts to build. On top of that, we are having to do a little bit of additional provisioning and clearance. And you can see that in the adjusted guidance with the gross margins for the brand platform having now come down. We are expecting those — that position now to be that sort of 46% to 48% gross margin versus the 49% we delivered last year. So that is already factored in our forecast in terms of the profitability of the brand platform. The expectation is that, that balance of inventory will be significantly reduced as we trade into the end of the year, which obviously helps drive some of the working capital benefit that you see in the forecast for the second half as well. So all sort of points to much tighter inventory going into next year.
Obviously, with the reduction in expected orders for the brand platform, we are also producing less and getting factories to produce less as we start to fulfill those orders going into next year. So that again helps bring our inventory position down by December. In terms of the digital platform, still very pleased with the overall position of order contribution margins there, just down 50 basis points year-on-year. And for the full year expectations, we are maintaining guidance there of 33% to 35% order contribution margin, which will be a step up from 32% last year. And that is down to savings within demand generation. We’re becoming significantly more efficient within our demand generation engine. We have pulled back, of course, as you would expect, in the two markets that we’re seeing broader macro challenges.
