It seems that Jumia is making some tough decisions in order to focus on its core strengths and improve its overall performance. This includes reducing its headcount by over 20%, which has resulted in a significant reduction in costs. Despite the challenges faced, Jumia appears to be moving forward confidently and looking to meet the needs of its shoppers more closely.
So far, Jumia has replaced multiple senior executives and made some changes to its business practices in an effort to better serve African consumers and sellers. In his first interview following his appointment as acting CEO last fall, Francis Dufay said that the company was already making significant cuts to its staff across 11 markets by the end of 2022. While we wait to see if these changes result in improved customer service and more competitive prices on Jumia’s products, it looks like Francis Dufay is off to a good start!
One possible reason that Jumia may have seen some success recently is due to the organizational changes it made after winning the Presidency in October. In order to save money on monthly staff costs, the company sought to streamline its structure and make cuts where necessary. Although it’s too early to tell how far these changes will affect Jumia’s bottom line, they could lead to more efficiency and cost savings in the future.
Since new management took over in early 2016, the company has made significant reductions to its EBITDA losses, ranging from an expected 50% reduction this year to 2015 levels. This turnaround is a direct result of new strategies and improved execution, as well as a more aggressive cost-cutting plan that is projected to reach $100-120 million by the end of the year.
Jumia announced these business exits in order to focus on areas with attractive investment returns and allocate resources more efficiently. The discontinuing of Jumia Prime, suspending logistics as a service in all markets other than Nigeria, Morocco and Ivory Coast, scaling back first-party groceries in Algeria, Ghana, Senegal and Tunisia as well as food delivery operations in Egypt, Ghana and Senegal represent less than 1% of group GMV and 2% of group Adjusted EBITDA loss. This demonstrates the seriousness with which the e-tailer is taking these decisions to improve its financial performance.
It is likely that Jumia’s fourth quarter financial results were impacted by the sluggish economy in many of its key markets and the company’s decision to focus on promotion of lower margin product categories. Given this environment, it is notable that Jumia still reported quarterly active customers of 3.2 million- a decrease of 15% from Q4 2021, but still comfortably above the 2.7 million reported in Q4 2020. The reduced promotional activity may be why user spending across all product categories was down significantly from prior quarters; even luxury products witnessed a YoY drop in spend. It remains to be seen whether or not these conditions will continue into next year, but for now Jumia appears to remain relatively unscathed by prevailing economic conditions
It can be assumed that the decrease in orders, gross merchandise value, and total payment value was caused by Jumia’s decision last quarter to discontinue its fruit delivery service. This move likely impacted receivables as customers may have had difficulty fully settling their accounts. Consequently, revenue growth slowed down while expenses continued to increase, leading to a net loss of 41%.
Jumia, Africa’s leading ecommerce company, is in financial distress. In 2021, its liquidity has reduced by more than 50%, and its share price has fallen 10%. It is unclear why the company is struggling, but its problems may just be a sign of things to come for other African businesses. Jumia’s troubles could mean less investment in the sector and higher prices for goods on already overpriced markets.
The appointment of Dufay as CEO of Jumia indicates the company’s confidence in his ability to scale the business to profitability, and investors appear to share this sentiment. While there has been some turnover among Jumia’s co-founders in recent months, Francis Dufay is by far the most experienced executive among them and he is already making strides in improving performance.