Jumia, Africa’s e-commerce giant, has recently released its Q2 2023 report, shedding light on the challenges it faced due to Nigeria’s economic conditions and its strategic efforts to adapt and thrive. The report reveals a significant decline in key metrics, such as income, order volume, and active customers, reflecting the broader impact of economic realities. Amidst these challenges, Jumia is changing its approach to prioritise profitability and sustainable growth.
Economic Turbulence Takes a Toll
As with many businesses operating in Nigeria, Jumia felt the impact of the country’s harsh economic conditions. The company’s income plummeted from $57.3 million in Q2 2022 to $48.5 million in Q2 2023. The volume of orders also experienced a notable decline, dropping from 10.3 million in Q2 2022 to 6.5 million in Q2 2023. The value of goods sold on the Jumia platform also contracted, reaching $202 million.
Nigeria’s persistent inflation, hovering above 20% throughout the year, played a significant role in this downturn. The removal of fuel subsidies and other complex economic reforms further strained consumers’ purchasing power. As a result, Jumia saw a reduction of 1 million active customers, with 2.4 million remaining in Q2 2023.
Strategic Response and Evolution
Despite these challenges, Jumia’s Q2 report reveals notable progress in curbing losses. The company’s operating losses decreased to $23.3 million, a substantial improvement from previous years. Jumia’s shift toward cost reduction is a central element of its strategy for 2023.
One area of cost reduction was advertising, where spending dropped from $22.2 million in Q2 2022 to $5.8 million in Q2 2023. Additionally, general and administrative expenses were trimmed due to workforce adjustments earlier in the year. Even the company’s technology expenses witnessed a reduction compared to the same period in 2022.
Strategic Realignment and Focus
Jumia’s response to these challenges includes a strategic realignment of its offerings. Previous attempts to prioritise “everyday” items like cosmetics and food delivery yielded limited success. Consequently, Jumia’s leadership, under CEO Francis Dufay, is reverting to a strategy centered around high-value items, which offer an average yield of $42 each.
This shift involves moving away from unprofitable categories with limited consumer lifetime value. The change in direction acknowledges the need for sustainable growth and profitability. Jumia’s emphasis on high-value items aligns with its historical strengths and positions the company to weather economic fluctuations more effectively.
This strategic change has, however, been reversed. The company reported that a combination of JumiaPay app services and the Fast-Moving Consumer Goods (FMCG) category, which includes groceries, contributed to a 45% decline in items sold and a 32% decrease in Gross Merchandise Value (GMV) during the quarter. On a positive note, growth signals have emerged in certain priority categories like Appliances, thanks to successful supply rebuilding efforts.
