Jumia Fired 900 Workers Last Quarter As It Looks for Profits

Running a B2C ecommerce in Africa remains a challenging aspiration. Jumia is telling us how hard that mission remains. The ecommerce company fired 900 people last quarter. Investors pushed the stock down by more than 11% today. Nonetheless, I still maintain that Jumia can rise. It has refused to open its JumiaPay. There is no reason why that should not become a Payment API for merchants in Africa, souped with millions of Jumia customers. Yes, anywhere there is a “market”, JumiaPay will process the transactions.

“Chief executive Francis Dufay said in light of the encouraging signs that Jumia’s cost cutting initiatives were starting to bear fruit, it expects a sharp reduction in 2023’s annual adjusted EBITDA loss to $100-120 million from $207 million in 2022. The group cut more than 900 jobs in the fourth quarter and also significantly reduced its presence in Dubai, relocating most of its remaining staff to its African offices.” Yes, an EBITDA loss of $100 million in a year would be seen as progress! Not many will buy that for an Africa-operating company. Investors took the company down by more than 11%.

More so, JumiaPay remains tethered to Jumia and the numbers are not great: “iaPay TPV and transactions are closely linked to the underlying usage of our platform. So in the context of declining GMV and with the reduction of marketing incentives to drive prepayment penetration, JumiaPay TPV posted a decline of 18% year on year in Q4 ’22”. Why can’t JumiaPay be unleashed to become a payment system for merchants, within and outside Jumia? That will deliver a double pay strategy within the ecommerce’s one oasis strategy.

JumiaPay TPV and transactions are closely linked to the underlying usage of our platform. So in the context of declining GMV and with the reduction of marketing incentives to drive prepayment penetration, JumiaPay TPV posted a decline of 18% year on year in Q4 ’22. On a constant currency basis, TPV was flat year on year. FX was a significant headwind to TPV performance, particularly the 23% depreciation on the Egyptian Pound versus the U.S. dollar in ’22. On-platform penetration of JumiaPay as a percentage of GMV remained relatively stable at 26% in Q4 ’22 compared to 27% in Q4 ’21. JumiaPay transactions reached $2.9 million in Q4 ’22, down 26% year on year. This was a result of the decline in orders during the quarter, particularly, sorry, on the JumiaPay app, where we meaningfully scaled back promotional intensity to support unit economics.

Overall, 29% of orders placed on Jumia in Q4 ’22 were completed using JumiaPay compared to 35% in Q4 ’21. This is mostly a result of the transactions decline on the JumiaPay app. As JumiaPay app penetration is almost 100% on the JumiaPay app. So JumiaPay penetration is 100% on JumiaPay app.

The reduced share of JumiaPay app in the transaction mix led to a decline in the overall JumiaPay transactions penetration as a percentage of orders. JumiaPay continues to be a strategic priority for Jumia, and we’re working on product and UX to make it an even more effective enabler for e-commerce business. That said, we do not intend to subsidize prepayment penetration on the platform, and our priority is very much on supporting our margins. Last but not least, we remain focused on expanding our payment processing activities in Nigeria and Egypt, where we have previously obtained the relevant licenses to do so.

Report from Reuters

 African e-commerce firm Jumia Technologies said on Thursday that cost savings had helped it reduce fourth quarter losses by 30% from a year earlier, with a further sharp drop expected this year.

Jumia is on an aggressive cost cutting journey that involves head count reductions, scaling back offerings such as groceries and reducing delivery services not related to its e-commerce business in order to turn profitable.

The group cut more than 900 jobs in the fourth quarter and also significantly reduced its presence in Dubai, relocating most of its remaining staff to its African offices.

“We expect these headcount reductions to allow us to save over 30% in monthly staff costs starting from March 2023,” Jumia said.

It also significantly reduced its sales and advertising expenditure, by 41% year on year and scaled back its grocery offering in Algeria, Ghana, Senegal and Tunisia to reduce business complexities.

While group revenue rose by 7.1% to $66.5 million in the quarter, its marketplace active consumers fell by 15% to 3.2 million as rising inflation squeezed consumer spending while affecting sellers’ ability to secure supply.

Dufay told Reuters that the group would also look to grow the business by expanding into smaller towns in existing geographies where there is under penetration of online shopping.

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