Since its creation back in 2012, Jumia became THE e-commerce platform of the African continent. Present in 11 countries, the company claims one buy or lead every two seconds. The "African Amazon," as people call it, knew a quick ascent. An installation in Nigeria followed by more than ten African countries before becoming the first company to be listed in the New York stock exchange in April 2019. However, the adjective African creates debate since two French has founded the startup in Berlin, and its engineers' team is in Portugal.
But after that, accusations of fraud and the departure of numerous countries and promising markets (Rwanda, Cameroon, and Tanzania) discredit the group. Those departures were forced by a lack of profitability. Amazon needed six years to be cost-effective, while Jumia hopes it will be by 2022. Two historical investors even leave during 2020: South African MTN and German Rocket Internet, which held 18,9 and 9,2% of the company.
A complicated and expensive logistic
"Afrimarket was growing, Rania BELKAHIA, founder of the last competitor of Jumia, explained while closing down in September 2019. But it needed more capital injections to reach a critical size allowing us to maintain our activity." A critical size to overcome the inherent problems of e-commerce in Africa. We can talk about, among others, a complicated and expensive logistic due to the lack of addressing and facilities, a lack of trust of users in online shopping, or the low margins.
Today Jumia spends more money to ship its products than it earns money by selling them. To decrease its expenses, Jumia develops partnerships to propose pick-up locations, with gas stations, for example. A change in the delivery payment method saved 1 million euros since April. Finally, the group announced opening its logistic network to third parties, which couldn't access them without being on the platform. And Jumia becomes one of the biggest companies in the sector with its 300 partner courier companies and 110 000 square meters of warehouse. Between September 2019 and September 2020, the company managed to decrease its execution expenses by 20%. Add to that a decrease in advertising expenditures, and Jumia decreased its losses before interest, taxes, depreciation, amortization by 50% between September 2019 and September 2020.
"The pandemic did not lead to any (...) acceleration in consumer adoption of e-commerce at a pan-African level"
Because concerning the sales, numbers are not very good with an 18% fall of the revenues over the year, due to "a change of strategy" the company explained. It was logical to assume that the Covid-19 crisis could have helped the company out, as numerous local officials announced, but figures issued from the 3rd quarter results don't confirm this tendency. The number of consumers increased by 22,8% between September 2019 and September 2020, but the number of orders decreased by 5% to reach 6,6 million. The firm explains that the Covid-19 "negatively impacted consumer sentiment in our countries of operation," which could be linked to a lack of income for consumers.
For Jumia rulers, "the pandemic did not lead to any drastic changes in consumer behavior on our platform nor meaningful acceleration in consumer adoption of e-commerce at a pan-African level." A hard blow that Jumia is trying to compensate with significant events like the Jumia Brands Festival organized with 200 international brands and low prices. In Egypt, sales rose by 70% during the period. The platform looks to generalize those events, with the World Food Day in October or the Black Friday that lasted three weeks in November and was announced with a lot of advertisement. Also, a way to retain its consumers.
To compensate for its losses, Jumia diversifies mainly with mobile banking and JumiaPay, one big hope of the direction for some months. A transaction volume growth by 50% to reach 48 million euros may be noted. A gaming system on smartphones with a monthly subscription has also been launched a month ago. A proof that e-commerce will probably not be the fastest way to be profitable... At least for now.