In the first quarter of 2023, Jumia, the African e-commerce giant, reported its lowest losses in four years. The company’s adjusted EBITDA and operating losses experienced a significant decrease, reaching $27 million and $30.9 million, respectively.
These figures represented a 55% and 57% decline year-over-year, putting Jumia on track to meet its end-of-year target of $100 million to $120 million in adjusted losses.
Surprisingly, Jumia’s Q2 2023 financials revealed even better performance compared to the previous quarter.
The company’s adjusted EBITDA and operating losses plummeted by 66% to $19.3 million and $23.3 million, respectively.
As a result, Jumia revised its projected adjusted loss for the entire year, anticipating a loss between $90 million and $100 million.
Jumia CEO Francis Dufay attributed these improvements to the company’s disciplined approach and increased efficiency.
He highlighted the significant reduction in fulfillment, sales, and advertising expenses, which were down by 50% and 74%, respectively, compared to the second quarter of 2022.
Moreover, Jumia’s overhead costs saw a substantial decline, with general and administrative expenses (excluding share-based compensation) decreasing by a third year-over-year, reaching a four-year low at $17.7 million.
These cost-saving measures included a streamlining effort in Q4 2022 that resulted in a 20% reduction in headcount across 11 markets.
Jumia also implemented strategic changes to its product and service portfolio, suspending certain offerings like first-party grocery services, logistics-as-a-service, and food delivery operations in markets where they were not economically sustainable.
Additionally, promotional intensity for several services on the JumiaPay app was reduced.
These adjustments led to a decline in quarterly active customers, orders, and gross merchandise value (GMV) in Q2 2023, with year-over-year decreases of 28%, 37%, and 25%, respectively. Consequently, Jumia’s total revenue dropped by 15% to $48.5 million.
The decline in these metrics can be attributed to various macroeconomic factors, including high inflation, reduced purchasing power, import restrictions, and currency devaluations.
Despite these challenges, Dufay expressed confidence in Jumia’s strategic direction. The company has focused on building supply and expanding into markets where electronics and big-ticket items, with higher average order values, are in demand. Jumia has also ventured into buy now, pay later (BNPL) services in Egypt through JumiaPay, partnering with banks and fintech players to scale this effort.
JumiaPay itself experienced a decline in transactions and total payment volume (TPV) in Q2 2023. To address this, JumiaPay is expanding the range of payment methods available to users and deploying “JumiaPay on delivery” in multiple countries.
The platform is also developing a white-label checkout solution for third-party merchants, allowing them to accept payments under their own brand names.
Despite the challenges posed by macroeconomic conditions, Jumia remains optimistic about its growth prospects.
Positive signs have emerged in markets like Senegal and Ghana, where the electronics and phones categories experienced the highest growth in GMV. As Jumia continues to reduce losses, the company aims to capitalize on untapped growth areas and reach inflection points in volumes and sales across many countries.
At the end of Q2 2023, Jumia had a liquidity position of $166.3 million, comprising cash, cash equivalents, term deposits, and other financial assets. These resources provide a solid foundation for Jumia as it navigates the evolving e-commerce landscape in Africa.
Source: Techcrunch
