Africa’s leading e-commerce platform, Jumia, recently recorded strong financial growth in the first quarter of 2023. This happened under her new leadership led by Francis Dufay who became full-time CEO in February 2023. Through a restructured approach and strategic cost-cutting measures, Jumia has achieved significant loss reduction, which represents a positive change for future earnings. This article explores the key factors driving Jumia’s performance and presents a strategy for the company’s future growth.
Streamlined Operations and Workforce Optimization
Following a comprehensive evaluation of its operations, Jumia initiated streamlining efforts in the fourth quarter of 2022. This led to a 20% reduction (laid off 900 employees) in its workforce across 11 markets. The impact of these measures became evident in the financial results for Q1 2023. Jumia reported a noteworthy 51% year-over-year decrease in adjusted EBITDA losses, amounting to $27 million. These are the lowest losses Jumia has incurred in four years. They are in line with their goal of keeping annual losses under $120 million in 2023. Similarly, the company’s operating loss fell 54% to $30.9 million.
Continued pursuit of cost reduction
Jumia’s general and administrative expenses declined 32% in the first quarter of 2023, but these figures have yet to fully reflect the full impact of the headcount cuts implemented in the previous quarter. (Most laid-off workers still received severance pay.) Jumia CEO Francis Dupay highlighted the company’s ongoing commitment to optimizing its cost structure. He pointed to the possibility of further personnel adjustments. By the end of the year, Jumia plans to reduce general and administrative (G&A) costs by up to $28 million, enabling more efficient and efficient operations.
Increase Efficiency and Reduce Costs
Jumia’s loss reduction success is due to a concerted effort to improve operational efficiencies and reduce costs. In Q1 2023, implementation spending fell 33%, sales and advertising spending 61%, and technology spending 9%. This is compared to the same period last year. The company achieved these results through strategic negotiations with suppliers, resulting in packaging cost savings, as well as truck route optimization. Furthermore, Jumia significantly curtailed marketing spend, prioritizing a robust foundation for future growth.
Customer Metrics and Overcoming Market Challenges
Jumia saw a decline in quarterly active consumers by 22%, dropping from 3.1 million in Q1 2022 to 2.7 million. With this reduction, both orders and gross merchandise volume (GMV) decreased by 26% and 22% year-over-year, respectively. These declines were primarily attributed to macroeconomic challenges, including high inflation affecting consumer spending power, as well as challenges faced by sellers in sourcing goods. Additionally, the devaluation of currencies used on the Jumia platform further contributed to the decline in customer performance.
Strategic portfolio alignment and focus on core competencies
As part of a strategic effort to align its portfolio of products and services, Jumia has made a prudent decision for Q4 2022. These decisions included the suspension of certain operations, such as in-house product offerings, logistics-as-a-service, and food delivery in certain markets. Jumia has also cut down on advertising for several of JumiaPay’s services. Although these adjustments affected sales, Jumia recognized the importance of creating the right value for its customers and decided to prioritize its core e-commerce categories.
A New Growth Model and Expanding Market Presence
Jumia’s CEO highlighted the company’s shift toward a more sustainable growth model, focusing on three key strategies. Firstly, Jumia aims to improve supply and assortment relevance by attracting high-quality brands and suppliers, with a particular emphasis on core e-commerce categories such as electronics, fashion, and beauty. By curating a selection of sought-after products and partnering with reputable brands, Jumia aims to enhance the overall customer experience and increase customer loyalty.
Secondly, Jumia plans to invest in improving seller management tools and processes. Recognizing the pivotal role of sellers in the platform’s success, Jumia aims to provide them with improved tools and resources to streamline their operations and optimize their performance. By offering robust seller support and fostering a mutually beneficial relationship, Jumia aims to create a thriving ecosystem that attracts more sellers and ensures their long-term success.
Thirdly, Jumia intends to expand its customer base by targeting underserved markets, particularly in inner cities and rural areas where access to traditional retail is limited (Regions in which Copia Global has a key user base). By establishing new logistics routes and pickup stations in smaller cities outside of densely populated areas, Jumia aims to tap into untapped consumer pools. It will offer them convenient access to a wide range of products.
This expansion strategy involves marketing activation campaigns to raise awareness and educate consumers in these regions about online shopping through Jumia. Although key customer metrics declined, Jumia’s revenue remained relatively stable, declining 3% year-over-year to $46.3 million. This positive momentum could be attributed to the fee hike introduced by Jumia in mid-2022 that helped offset the impact of lower customer activity. Additionally, Jumia ended the quarter with a liquid position of $205.4 million. This includes cash and cash equivalents, time deposits and other financial assets. This solid liquidity position makes Jumia a great place for future investments and expansion initiatives.
Looking to the future, Jumia remains committed to its goal of becoming Africa’s leading e-commerce platform. The company’s strategic focus on optimizing its cost structure, improving operational efficiencies and focusing on key categories of e-commerce creates a foundation for sustainable growth. By adapting its business model to the growing needs and preferences of African consumers, Jumia is committed to continuing to innovate in the e-commerce space. It also aims to solidify its position as a trusted platform.