New Strategy Shows Jumia Is Well-Positioned For Growth In Nigeria
…strong optimism exists with new focus on cost discipline and return to e-commerce fundamentals
Before e-commerce came to Africa, Nigeria was one of the nations described as a ‘cash-based’ economy. Until recently, most business transactions for goods and services were carried out by face–to–face negotiations in open markets with payments through cash or cheques. The culture adopted by most Nigerians was to inspect goods, negotiate physically, and, if satisfied, pay. The effect of this commerce culture was that most individuals were forced to travel within and outside the country to purchase goods and services carrying physical cash.
Over the years, e-commerce adoption has grown year-on-year, with more Nigerians willing to trust online shopping. Also, in the post-pandemic era, people now rely more on shopping for items online that can easily be easily delivered. This demand has made it even more important for e-commerce companies like Jumia to step in and fill the gap by providing innovative trading opportunities for thousands of sellers to connect with millions of consumers in Africa.
Jumia continues to navigate Africa’s business environment, where a myriad of regulatory, logistic, socio-cultural, and technological challenges exist. Every country where Jumia operates has a unique environment. Notwithstanding, the company has built an innovative multi-purpose platform that empowers small businesses and consumers in the continent.
What Does the Future Hold?
The dust is now settled on the leadership changes in Jumia, which has seen several market watchers predicting a new lease of life in the company. Following the recent announcement from the company, it is important to analyse its third-quarter 2022 financial report and the new strategy from the management team to see what the future holds.
The third quarter of the year saw Jumia record substantial revenue and gross profit growth, according to the company’s financial earnings report. The most recent statistics show that $50.5 million was generated in revenue in Q3 2022, an increase of 6% from the $47.6 million reported in Q2. This also represents an 18.4% increase from the $42.7 million reported in the same period last year.
Interestingly, Jumia’s acting CEO, Francis Dufay, laid out the new business strategy for the company during the Q3 2022 earnings call, stating that the recent focus on cost discipline and return on investment speaks to an ever-increasing need to make the company profitable in the near future. Results for Q3 showed more encouraging signs that the company is on the right path.
He further stated that the company intends to bring more focus to the core business, allocating capital, resources, and teams to main areas and projects with attractive returns on investments and clear ecosystem benefits. Jumia will deemphasise or cease projects and ventures that do not meet such criteria. In line with the above, the company will scale back First Party grocery offerings in geographies where this category remains sub-scale. In addition, Jumia Prime will be paused indefinitely from the 1st of January 2023 as the company looks to focus more resources in other areas of the business.
It is important to note that the company plans to keep logistics open to third parties only in the countries where they have strong assets (Nigeria, Ivory Coast, Morocco). The e-commerce opportunity in Nigeria remains vast with a very young population and growing middle class. Hence, this new focus will further strengthen the company’s hold in its biggest market.
Going forward, the company is looking to continue strengthening its foothold in all the countries where it is currently operational. However, this is likely to come with changes to its operating model. In a statement released by Francis Dufay, Acting CEO of Jumia, “We have a clear focus for the next chapter of our journey and are taking decisive action to support our path to profitability. We will bring more focus to the business, directing our efforts and resources to projects and activities that deliver tangible value to our consumers, sellers, and broader ecosystem participants. We are also enforcing tighter cost discipline and driving efficiencies across the full structure while enhancing the fundamentals of our core e-commerce business to drive user growth.”
The company is showing greater willingness to constantly invest in Nigeria and has stated it would be making some adjustments in its organisational setup in the coming weeks. Allocating more people and resources to its marketplace, tech, and in-house logistics platform are some of the strategies expected to enhance future success.
Clearly, there is strong optimism that this new strategy will continue to deliver value to Jumia’s consumers in Nigeria. The company is on the right path to profitability through growth and optimization.