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.”