In the e-commerce sector, the ability to improve operational efficiency and achieve profitability is the pulse that beats within every organization’s heart. But for most e-commerce startups, including Jumia, it has been a journey marked with highs and lows. However, their Q2 financial report for 2023 reveals an encouraging step towards sustainability as they witnessed a noteworthy decline in losses.
The recently published financial data shows Jumia posting an operating loss of $23.3 million for Q2 2023, marking the lowest in four years. The catalyst behind this improved financial health was a significant cutback in sales and advertising expenses. While in the corresponding quarter of 2022, the company invested $22.2 million on advertising, this number fell to just $5.8 million in 2023.
Meanwhile, other operational areas also followed suit. General and administrative costs witnessed a substantial reduction, resulting from proactive workforce rationalization initiatives earlier in the year. Similarly, technology-related expenses also displayed a noticeable downtrend compared to Q2 2022.
However, Jumia’s quest for sustained profitability has been a rollercoaster ride, driven by Nigeria, one of its primary markets. The harsh macroeconomic climate sent revenues spiraling down from $57.3 million in Q2 2022 to a disappointing $48.5 million in the subsequent quarter.
Simultaneously, the volume of orders took a nosedive, plummeting from 10.3 million in Q2 2022 to 6.5 million in the same quarter of the following year. This downturn reverberated through Jumia’s active customer base, which contracted by a startling 29.4% – a drop of 1 million, leaving it at a reluctant 2.4 million in Q2 2023.
These challenging market conditions, primarily driven by inflation, reduced consumers’ purchasing power and disrupted supply chain efficiency. Jumia recognizes these circumstances within its operational environment as a significant influence on its performance.
Uganda’s Corporate Finance and Capital Markets Luminary, Miriam Ekirapa Musaali, Passes OnHowever, the turbulence in Nigeria is not an isolated story. Other markets, including Ghana and Egypt,weer also hit by inflation, with rates soaring to 43% and 35% respectively. The average inflation rate across all of Jumia’s markets hovers at 14%, compounded by currency depreciation in 90% of its markets. These challenges creates a steep path for Jumia’s profitability ambitions.
In 2021, Jumia demonstrated its adaptability by shifting its focus to delivering everyday grocery items, under the promise of ‘your every day delivered’. The goal was to foster customer loyalty through the delivery of high-demand products. However, as circumstances evolved, Jumia pivoted, retracting its tactics from its initial direction.
Despite the setbacks, Jumia remained steadfast and hopeful, admitting that while 45% of the decline in items sold and a 32% drop in GMV were tied to growth in priority sectors such as appliances, they were buoyed by the increasing product availability.
This strategic shift positively impacted the figures, resulting in an 18% YoY growth in the average order value, peaking at $31. However, the continuous decrease in total orders negated any significant impact on the Gross Merchandise Value that could have potentially stemmed from this promising increase.
