Achieving profitability is a recurring theme at pan-African eCommerce giant Jumia, so much so that the goal has been reiterated on numerous occasions by the company’s leadership in recent years. And during the company’s third-quarter earnings presentation on Thursday (Nov. 17), it was no different.
“We are more focused than ever on accelerating our progress towards profitability and have made leadership changes to step up the intensity of execution towards profitability,” Jonathan Klein, chairman of the Jumia Supervisory Board, said in a report released as part of the presentation.
See more: African eCommerce Platform Jumia Shuffles Leadership Team
Part of achieving that goal involves a need for leadership to be actively involved in on-the-ground operations, Francis Dufay — appointed acting CEO following the recent departure of founders and co-CEOs Jeremy Hodara and Sacha Poignonnec — told analysts and journalists tuned in to the call.
In fact, per Dufay, this has meant “significantly reducing” the company’s presence in markets like the United Arab Emirates (UAE) and relocating most of the group’s leadership to markets in its core Africa base.
In addition to the executive reshuffle, Jumia is drastically dialing back on projects that haven’t demonstrated clear viability and will instead double down on proven revenue streams.
“We need much more focus in terms of scope of projects and the activities that we take. We cannot be sharp in our execution if we are spread too thin across too many projects. We need to stop projects that bring limited value to the platform and focus on what matters,” Dufay said.
The first casualty of Jumia’s operational weight loss is its delivery service, Jumia Prime, a monthly subscription program offering free delivery to consumers that the company has tested over the past couple of years.
As Executive Vice President for Finance and Operations Antoine Maillet-Mezera explained to participants, “the results from this experiment, in terms of consumer traction and stickiness, fell short of our targets as the market is probably not yet mature enough, leading us to pause this initiative.”
Maillet-Mezera also announced cuts to Jumia’s free shipping program, while increasing the minimum basket size for free delivery and restricting its geographic scope to focus on primary cities.
The company is also suspending its logistics services to non-eCommerce clients in countries where it believes efforts would be better invested in improving the logistics efficiency for its core eCommerce business.
Related: UPS Partners Africa’s Jumia on eCommerce Distribution Network
Those markets include Nigeria, Morocco and Cote d’Ivoire where the firm’s logistics infrastructure is well developed and where proof of concept for the service has already been established, Maillet-Mezera added.
Food Buoys Business Despite FX Challenges
Overall, Jumia registered an 18% revenue growth in Q3, and in terms of business categories that could ease its path to profitability, food delivery came out on top and will continue to drive development across the largest markets it operates in, particularly Nigeria, said Maillet-Mezera.
Learn more: Jumia Pins Hopes on Diversified Revenue Streams, Cost Savings to Reach Profitability
In fact, food delivery accounted for 20% of items sold on the Jumia platform in the quarter, while emerging the fastest-growing category in order terms with a 38% year-over-year increase in orders in Q3.
On the downside, JumiaPay transactions as a percentage of total orders on the platform have steadily declined since last year and currently sit at 31.9% after peaking at 35.7% in Q3 2021.
Suggesting that the market has become more saturated, growth in JumiaPay’s total payment volume has also flattened out and increased just 3% year over year to $66.6 million, compared to over 30% growth in previous quarters.
With this slowing growth in mind, the Q3 report noted that “JumiaPay remains a core priority for us, and we will work on making it an even more effective enabler of our eCommerce business, focusing on a more targeted number of critical products and ventures.”
That will involve retaining “a disciplined approach to driving on-platform payment penetration, with disciplined marketing and consumer incentives spend,” the report further stated.
Maillet-Mezera also told investors that foreign exchange (FX) has been a significant headwind for Jumia in the quarter as the Nigerian naira, Egyptian pound and West African CFA franc each depreciated by 5%, 14% and 13%, respectively, against the dollar in the nine months to the end of September.
“The combination of food and commodity inflation, a stronger dollar and weaker local currencies is weighing on consumer spend and sentiment,” he added.
As a result of the highly volatile and challenging macroeconomic environment, Jumia has suspended the 2022 GMV growth guidance and Gross Profit guidance it provided earlier in the year.
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