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Jumia Nigeria Grapples with Economic Headwinds Amidst Disappointing Q2 Performance

Cost-Cutting Measures Fail to Offset Deteriorating Macroeconomic Conditions

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Jumia Nigeria, the ambitious e-commerce giant striving to earn the title of the “Amazon of Africa,” finds itself navigating stormy financial waters as it battles the adverse impact of a deteriorating macroeconomic landscape in Nigeria.

Despite implementing extensive cost-cutting measures, the company’s financial reports for the second quarter of 2023 paint a picture of dwindling cash profits, chiefly reflected in its Adjusted EBITDA (Earnings Before Interest, Depreciation, and Amortization).

The root cause of this downturn has been attributed to the ongoing decline in consumer purchasing power, a concern elucidated by Francis Dufay, the Group CEO, during the presentation of the financial report.

Dufay said, “We’re facing right now in emerging markets and especially in Africa the worst macroeconomic situation in a decade or more… It’s heavily impacting the purchasing power of consumers.”

A detailed analysis of the financials uncovers that the exodus of over one million active subscribers has significantly contributed to the lackluster financial performance. This drastic customer attrition has translated into a 28 percent drop in Jumia’s active customer base, plummeting from 3.4 million in Q2 2022 to 2.4 million in Q2 2023.

Consequently, quarterly orders also nosedived by 37 percent, translating to a 3.8 million order reduction compared to the previous year.

This cascade effect of diminished customer engagement has cast shadows over Jumia’s financial metrics. The Gross Merchandise Value (GMV) of goods on its platform registered a stark 27 percent decline, accounting for a loss of $68.8 million, with figures dwindling to $201 million in Q2 2023 compared to $271.1 million during the same period in 2022.

Despite aggressive measures to slash operational expenses by 47.8 percent, gross profit still experienced a significant dip of 3.9 percent.

The company said, “We are going to improve supply and assortment relevance.”

“We are going to tap into large, under penetrated consumer pools beyond primary cities in our geographies.”

“We will enhance simplicity, ease of use of our platform. JumiaPay as an e-commerce enabler and reduce cash friction.”

Tech experts and customers alike have voiced a range of opinions, from cautious optimism about the new CEO’s proactive approach to skepticism regarding Jumia’s “Amazon of Africa” aspirations amidst the prevailing challenges.

A tech expert, Emeka Ajene with more than 4,700 followers on X, twitted, “(with a laughing emoji) There’s always hope. New CEO seems to be acting with sense or urgency & discipline. That said, it’s a challenging environment. And with only 8M customers last year — a decade after the company’s founding — I think its “Amazon of Africa” dream is very much dead.”

Peter of Hovasabi.com said the quality of the products on Jumia’s website needs to be monitored, especially as its competitors continue to gain positive reviews regarding their products.

Peter twitted, “Jumia think-tank should have a rethink about how they can service their customers better not just focus on selling products. Fix poor delivery. Have a high standard on product listed. Offer better addon deals.”

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E-commerce

TikTok Faces Regulatory Storm in Indonesia as Minister Calls for E-commerce Split

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Teten Masduki, the Indonesian Minister of Cooperatives and Small and Medium Enterprises, has emerged as a vocal critic of the Chinese-owned social media giant TikTok.

Masduki’s relentless complaints about TikTok’s dominance in the Indonesian e-commerce market have set the stage for a seismic regulatory shift that could have far-reaching consequences.

Masduki, a former activist who once took on government corruption, has been disrupting official meetings to raise concerns about TikTok’s impact on local players. This groundswell of criticism has culminated in sweeping regulations that force TikTok to split payments from shopping in Indonesia, a move seen as a significant blow to TikTok’s e-commerce aspirations.

Under these new rules, social media companies in Indonesia are barred from handling direct payments for online purchases, effectively requiring TikTok to either create a separate app for payments or risk being shuttered in Indonesia entirely.

The regulations, stricter than anticipated, have already had a chilling effect on the e-commerce market, benefiting local champions like GoTo and Sea.

While TikTok has pushed back, arguing that the separation of social media and e-commerce hampers innovation, the Indonesian government remains firm in its stance, aiming to protect smaller enterprises and voters as elections loom on the horizon.

This clash underscores the challenges TikTok faces in its pursuit of e-commerce dominance and sets a precedent for other countries in the region. As TikTok’s meteoric rise in regional e-commerce continues, governments are increasingly assessing whether the platform benefits or harms domestic merchants.

For TikTok, the challenge lies in finding a solution that appeases authorities while allowing it to continue its growth. The repercussions of this battle in Indonesia could reverberate throughout Southeast Asia and beyond, shaping the future of social media-driven e-commerce.

In a rapidly evolving digital landscape, Teten Masduki’s bold stance against TikTok may just be the opening salvo in a much larger struggle for control of the e-commerce arena.

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Amazon.com Plans to Hire 250,000 Logistics Workers for Holiday Season

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Amazon.com Inc. is gearing up for the holiday shopping season by announcing its intention to bring onboard a whopping 250,000 logistics workers.

This bold move reflects Amazon’s optimistic outlook, countering expectations of a lackluster holiday shopping season.

The recruitment drive will encompass a diverse workforce, including full-time, part-time, and seasonal employees, with hourly wages ranging from $17 to $28, depending on the location. In addition to competitive wages, Amazon also revealed that some new hires will have the opportunity to earn bonuses ranging from $1,000 to $3,000.

Also, the company is committed to elevating the average pay for its logistics personnel to approximately $20.50 per hour as part of its strategy to both attract and retain talent in the face of a challenging labor market.

Amazon, headquartered in Seattle, traditionally intensifies its hiring efforts in the autumn to ensure it has a robust workforce in place for the critical holiday shopping season. Last year, Amazon announced its plans to bring in 150,000 workers, while in 2019, the company pledged to hire 200,000 seasonal employees.

What sets Amazon’s announcement apart is the current landscape of holiday hiring, which is expected to hit its lowest point since 2008, according to estimates by Challenger, Gray & Christmas. Retail employers are projected to add only 410,000 jobs in the fourth quarter.

This decline is in part due to Amazon’s continuous success in capturing the online market. US e-commerce sales are forecasted to surge by 9.3% this year to reach $1.14 trillion, outpacing overall retail spending growth, as reported by Insider Intelligence.

In contrast to Amazon’s ambitious plans, other retail giants have revealed more conservative hiring strategies. Target Corp. recently disclosed plans to bring on nearly 100,000 seasonal workers, a number similar to the previous year.

Meanwhile, Macy’s Inc. is aiming to recruit 38,000 seasonal employees, a reduction of 3,000 compared to 2022. The United States Postal Service also announced its intentions to hire 10,000 seasonal workers, a significant decrease from the 28,000 hired the previous year, attributed to an increase in full-time staff.

It’s worth noting that Amazon holds the position of the second-largest private employer in the US, second only to Walmart Inc. As of June, the company boasted a global workforce of 1.46 million individuals, the majority of whom are employed within its expansive logistics division, primarily working in the vast network of warehouses dedicated to storing and packaging various items.

In recent years, Amazon has faced labor unrest. The company is currently challenging the results of an election in which over 8,000 workers at a Staten Island, New York, warehouse voted in favor of union representation.

While similar efforts at other Amazon warehouses have not succeeded, ongoing organizing initiatives continue to be a point of contention.

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Alibaba’s E-Commerce Arm Bolsters Hiring Efforts with 2,000 Graduate Positions Amidst Eased Regulatory Pressure

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Amid a backdrop of heightened concerns over record youth unemployment and evolving regulatory dynamics within the technology sector, Alibaba Group Holding’s e-commerce division in China, Taotian Group, is taking a proactive approach by announcing the recruitment of over 2,000 graduates.

This move comes in response to an increased demand for talent in various domains, including design, product development, and data analytics, as indicated in an official announcement on the unit’s recruitment WeChat account on Thursday.

The newly created positions are set to be dispersed across multiple major Chinese cities, including Hangzhou and Shanghai, reflecting the Group’s commitment to nurturing local talent and stimulating economic growth.

The decision to bolster its workforce with fresh graduates aligns strategically with China’s ongoing efforts to address escalating youth unemployment concerns. Although official unemployment figures have been temporarily suspended for assessment, the youth unemployment rate has surged throughout the year, culminating in an unprecedented 21.3% in June.

Notably, this rate typically spikes during the summer season when a substantial number of graduates enter the job market. As the Ministry of Education anticipates an estimated 12 million students graduating from universities and colleges in 2023, the significance of Alibaba’s hiring initiative gains prominence in aiding the country’s employment landscape.

Coinciding with this initiative, the Chinese government has taken steps to ameliorate the regulatory environment for prominent technology companies. High-profile investigations into giants such as Alibaba and Tencent Holdings concluded in July, resulting in substantial fines.

In a move to foster positive relations and support the technology industry’s growth trajectory, Premier Li Qiang has engaged with senior executives from Alibaba and other key internet players, including Bytedance Ltd. and JD.com Inc.

He has emphasized the importance of a balanced environment that nurtures fairness and minimizes compliance challenges, signaling the government’s commitment to ensuring a prosperous and dynamic tech landscape.

Alibaba’s commitment to graduate hiring not only addresses pressing employment concerns but also underscores the conglomerate’s dedication to nurturing a vibrant and skilled workforce. This strategy, set against a backdrop of evolving regulatory dynamics, reaffirms the company’s resilience and adaptability in an ever-changing business landscape.

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