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Home Business

For Jumia, Investors Must Now Keep the Faith

by Joel Nwankwo
November 21, 2023
in Business
0
Jumia
UBA
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In the last quarter of 2022, African e-commerce group Jumia laid out five strategic steps the business will be taking to return to profitability and come out of an accumulated loss of $1.5 billion.

One year later, while the e-commerce giant reported that it cut its operating losses by more than half to $19 million in the third quarter of 2023, it is still a long way away from its glory days.

In its glory days, Jumia was valued at $1.1 billion and went public on the NYSE at $14.50 per share. Four days later, its stock price reached $49.77, bringing its value to a record high for an African company of $3.8 billion. That was yesterday. Today, whilst still described as a giant, Jumia is a struggling giant.

While Jumia’s Q3 loss reduction has been described as a bright spot, it also saw them lose 800,000 active customers. That is a lot of loss.

Although several reports about Jumia’s losses are more recent, the company has struggled since it went public in 2019.

Unforeseen Outcomes

Jumia’s identity problem was the first to knock on its doors. During its first public offering (IPO), there was a dispute about its identity. African industry insiders harshly criticized Jumia for claiming to be African in its S1 filing, even though the firm was founded in Germany, listed in New York, and has its headquarters in Dubai.

Jumia has since struggled to convert leads into paying consumers. Operating losses increased by 34% over the year, although they only increased by 15% to €61.1 million ($66.5 million) in the fourth quarter of 2019.

At the moment, Jumia is under a lot of pressure to break its losses. The economic pressure in Nigeria and across African markets has not made things easy. Throughout this time, there was a persistent impact of inflation on consumers’ purchasing power and sellers’ capacity to import products.

Jumia is actively decreasing its headcount, lowering delivery services unrelated to its e-commerce company, and limiting the range of products supplied, such as groceries, to generate a profit.

Keeping the Faith

Jumia had noted in 2020 that it would turn a profit by 2022. However, even at the time, investors wanted the turn to happen immediately.

Until recently, there has been no indication of a trend toward decreasing losses, although it still reports large quarterly losses in the millions of dollars. Jumia’s 5-step plan to dig out of $1.5 billion in accumulated losses is finally showing signs of life.

The company’s liquidity situation has been secured, according to Francis Dufay, chief executive, allowing it “to work on fundamental, long-term improvements” to strengthen its core business. This is due to the notable decrease in losses and cash use.

Jumia is actively decreasing its headcount, lowering delivery services unrelated to its e-commerce company, and limiting the range of products supplied, such as groceries, to generate a profit.

The continent of Africa is now experiencing several systemic issues that prevent e-commerce from realizing its full potential. Jumia getting back on its feet will boost the sector’s drive in the continent.

 

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Author

  • Joel Nwankwo
    Joel Nwankwo

    Joel Nwankwo is a tech journalist. He is passionate about telling stories as it relates to Africa's social and financial tech advancements. You can reach him at joel.nwankwo@techeconomy.ng

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Joel Nwankwo

Joel Nwankwo

Joel Nwankwo is a tech journalist. He is passionate about telling stories as it relates to Africa's social and financial tech advancements. You can reach him at joel.nwankwo@techeconomy.ng

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