Jumia, the ecommerce group often dubbed the “Amazon of Africa”, is undergoing a heavy restructuring following the ousting of its co–chief executives and its share price falling 60 per cent over the past year.
The reorganisation is the latest effort by Jumia to reach profitability having listed on the New York Stock Exchange three years ago to become the continent’s first tech “unicorn” — or a company valued at more than $1bn.
Since then, the pan-African group’s share price has fallen more than 70 per cent over doubts about the sustainability of its business model. Earlier this month, founders and co-chief executives Jeremy Hodara and Sacha Poignonnec were removed and a new management board appointed.
“Our growth has correlated with increased spending on marketing and deterioration of economics,” acting chief executive Francis Dufay told the Financial Times. “We want to improve our fundamentals to grow the business and, at the same time, significantly improve our economics and reduce our ebitda losses.”
Dufay, a former McKinsey consultant who has been at Jumia since 2014, said the company would focus on its key ecommerce offerings, discontinue non-performing areas of the business and reduce its marketing efforts. The retrenchment comes after it scaled back on expansion in 2019, exiting its businesses in Cameroon, Rwanda and Tanzania.
The company will shut down Jumia Prime, a subscription programme similar to Amazon’s prime service, introduced three years ago that allowed customers to receive free deliveries.
Jumia Logistics, the company’s in-house logistics service available to clients in all of its markets except South Africa, will be discontinued in seven countries but will remain in key markets such as Nigeria, Morocco and Ivory Coast. Dufay added that it was identifying jobs cut to become a “lean organisation to fulfil our mission”.
Jumia is also eliminating grocery delivery, increasing the minimum basket size for free deliveries and restricting free deliveries to major cities. Price subsidies and marketing blitzes that boost customer numbers will also stop. The company’s third-quarter results show advertising has been slashed by 31.5 per cent year on year.
“This is a change of strategy,” says Dufay. “We’re trying to be much more careful in the way we use customer incentives and marketing. This has some impact on usage but we believe it is the right thing to do.”
Dufay, based in Abidjan, the economic capital of Ivory Coast, said senior company executives would also be expected to relocate to offices on the continent. Jumia’s African origins have been questioned because it was registered in Berlin, the product team is stationed in Porto and company bosses worked out of Dubai.
Jumia, which operates in 11 countries, is hoping to succeed in an industry that remains under-developed in Africa despite recent gains. Less than 1 per cent of retail commerce has moved online in Africa. Low internet penetration, complex logistics, weak infrastructure and a reticence to shop online continue to hold the sector back on the continent.
The depreciation of local currencies against the US dollar in Jumia’s markets, particularly Nigeria, Egypt, Senegal and Ivory Coast, have also negatively impacted growth margins.
“Jumia is trying some of the last hands it has,” said Glory Etim, senior analyst at the Lagos-based SBM consultancy. “But it has become clear to investors that its growth and profitability prospects are fading.”
Despite the challenges of running an ecommerce business in Africa, competition is stiff across key national markets. Jumia’s food delivery in Nigeria faces challenges from international companies such as Glovo and Bolt and local players including Chowdeck and Eden.
Amazon’s controversial $260mn African headquarters in Cape Town recently received court approval, while Jumia also competes with the American tech group in Egypt.
Dufay, who would not be drawn on whether he wants to become Jumia’s chief on a full-time basis, said the company’s third-quarter results were a step in the right direction.
Jumia recorded 3.1mn active customers, a 3.5 per cent growth year on year, while revenue increased 18.4 per cent to $50.5mn. But the company has lost more than $1bn since its inception a decade ago. It narrowed its losses by 32.6 per cent in the third quarter to $43.2mn.
Dufay said the path to profitability required “tough decisions”.
“It’s fully in our hands to make it happen,” he said. “There’s so much trade and retail that could move to ecommerce across the continent. We have proof of concept that is possible to do way more than we’ve done so far.”
‘Amazon of Africa’ Jumia restructures after ousting co-founders Republished from Source https://www.ft.com/content/cb1fcc33-473a-420f-8065-4e3533e54f63 via https://www.ft.com/companies/technology?format=rss