After a brief period of dominance, African enterprises that specialise in eCommerce, Jumia have recently dealt a severe blow due to the general economic climate in the nations they service.
Initially, business-to-consumer companies such as Jumia and Konga were the ones to enter the fray. However, as consumers’ ability to spend decreased, business-to-business companies entered the fray in the hopes of capitalising on the informal nature of enterprises on the continent.
However, even this appears to have been hampered by the same difficulties that B2C enterprises had, and a new paper shows how these companies have battled to sustain good unit economics.
One of the industry’s pioneers, Jumia, is one of the companies that has been making efforts to cut its losses by implementing personnel changes in 2022 and discontinuing various areas of its company. According to the report for the first quarter of 2023, such adjustments indeed look to be producing the desired results.
The eCommerce company’s operating losses decreased by 54% year on year to $31 million, despite the fact that gross profits increased to $28.6 million, representing a 5% increase over the previous year.
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The Reduction in Jumia’s Losses
Although it has seen a reduction in its operating losses, the number of active customers, orders, and total payment volume for the first quarter of 2023 has all decreased year-over-year. The number of quarterly active customers decreased from 3.1 million in the first quarter of 2022 to 2.4 million in the first quarter of 2023. Additionally, the number of orders placed decreased from 9.3 million to 6.9 million, and the total payment value decreased by 31% during the same time period, going from 70.7 million to 48.6 million.
In addition, the number of transactions processed through JumiaPay dropped by 38% year-over-year to 2 million, and the percentage of orders that were finalised using the JumiaPay app dropped from 34% to 29% over the same time period.
Jumia’s executives have been enthusiastic about the possibilities of JumiaPay ever since the service was introduced in 2017. In 2019, the company’s former Chief Executive Officer, Sacha Poignonnec, revealed that the organisation intended to accelerate the adoption of JumiaPay through its eCommerce platform.
This has, for the most part, been successful, as evidenced by the fact that the number of transactions has continuously climbed from 7.6 million in 2019 to 12.5 million in 2022. The value of trades has also increased, moving from $133.8 million in 2019 to $285.3 million in 2022 after having previously been at $133.8 million in 2019.
As a consequence of this, the company announced that it aims to increase its investment in it and make it a more efficient enabler of its eCommerce business by minimising the difficulties that are connected with cash-on-delivery transactions.
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Remarks from the CEO of Jumia
Francis Dufay, who became the CEO of the company in 2022, reaffirmed the organization’s dedication to reaching profitable levels.
“We are committed to taking the business to profitability, and the first quarter of 2023 results demonstrate very good progress towards this goal. Our cost reduction initiatives are clearly bearing fruit, with all operating costs decreasing in the first quarter of 2023, both sequentially and on a year-over-year basis.”