Jumia Evolves – To Spin off Logistics and Payment

Jumia’s stock has accelerated by over 500% in the last 12 months. Jumia has also strategically cashed out when it unloaded more shares. There is no better party than what Jumia is having when it comes to Africa-operating companies! But rising stock price can cave to gravity if the path to profitability is not assured. So, Jumia is going to deal with that. And to do, it wants to take out the physical part of the business – logistics – and the payment arm. In other words, Jumia wants to spinoff the logistics and payment units.

“We created something that does not really exist in Africa, which is an end-to-end logistics partner on the continent. We have built it from the get-go so that one day we are in the position to carve it out if we want to.”

“The focus is on reducing losses and controlling costs, and deciding where to allocate our resources. No one questions the relevance of e-commerce as a business — and the opportunity in Africa is massive. Seven years ago, people were questioning how we are even going to do this, now the only question remains on profitability.” co-Chief Executive Officer Sacha Poignonnec

The logistics business is a huge pain point for Jumia. It is the part of the business which dominates the distribution cost of its marginal cost. And that makes it unprofitable. By spinning it out, Jumia will become an electronic business with no physical weight. Sure, that can affect Jumia’s execution, if the integration of the spurn out logistics is not well harmonized with the ecommerce unit.

Jumia has opened its African logistics network to third parties, helping to add volumes and negotiate better pricing on shipping and control costs, Poignonnec said. The company has also benefited from a reluctance so far by industry giants Amazon.com Inc. and Alibaba Group Holding Ltd. to expand significantly on the continent, with Naspers Ltd.’s Takealot one of few similar businesses.

In fintech, as I have noted, JumiaPay offers much if Jumia can make it a business of its own. I made a case for spinning it off so that it can better compete as a sole fintech company in Africa, in close partnership with Jumia. That gives it the freedom to serve other companies. It mirrors how Alipay and Alibaba operate.

So, spinning off JumiaPay will be a win for Jumia. It can help it get more value. Think of how PayPal ($125 billion market cap) has become bigger than eBay ($33 billion market cap). I can tell you that JumiaPay will be bigger than Jumia in Africa.

LinkedIn Summary

In Aug 2019, I argued that Jumia should spinoff JumiaPay: “So, spinning off JumiaPay will be a win for Jumia. It can help it get more value. Think of how PayPal ($125 billion market cap) has become bigger than eBay ($33 billion market cap). I can tell you that JumiaPay will be bigger than Jumia in Africa.” Today, Jumia has announced that it would spin off JumiaPay. Expect JumiaPay to challenge Flutterwave, Opay and other paytechs.

Also, in many posts, starting with the seminal one in Harvard, I made it clear that African ecommerce companies could struggle to become profitable if the logistics business is inside them. Why? Logistics is physical and there is nothing electronic in any ecommerce that picks the tab. It has to do with logistics marginal cost which is dominated by the distribution cost. Today, we are learning that Jumia is spinning off the logistics unit.

Jumia’s stock has accelerated by over 500% in the last 12 months. That is a massive value created for American investors.

Spinoff : JumiaPay Is A Better Business Than Jumia

Register for Tekedia Mini-MBA (Feb 10 - May 3, 2025), and join Prof Ndubuisi Ekekwe and our global faculty; click here.