By AYOOLA OLAOLUWA
Africa’s e-commerce startup, Jumia, has responded to the prevailing harsh business environment by adopting survival strategies and adjustments, Business Hallmark reports.
The online shopping giant had posted successive losses in the last ten years despite showing initial promise at birth.
It would be recalled that the e-commerce firm had in April 2019, listed its shares on the New York Stock Exchange (NYSE), opening trading at $14.50 under the symbol of JMIA.
The stock price of the firm, which had offered 13,500,000 American Depository Shares, representing 27, 000, 000 Ordinary Shares, had hit its highest peak of $59.96 on January 25, 2021, just 10 months after it was listed on the NYSE.
However, following allegations of irregularities and ‘cooking’ of its books by a media outfit, the firm’s stock prices slumped, pushing the once valued firm to the brink of financial ruins.
At the end of trading on Friday, November 25, 2022, the firm’s share closed at $4.10, about $55.86 short of its peak of $59.96 on January 25, 2021.
For the company generally praised as ‘Africa’s Pride’ in 2019, it has been one trouble to the other. For instance, it had closed shop in three African countries of Gabon, Congo DR and Cameroon.
Apart from its businesses shrinking from 14 African countries to 11, Jumia had continued to declare huge loses year-in year-out. In fact, the firm had never declared a profit since it was founded ten years ago.
According to the company’s financial statements obtained by Business Hallmark, the firm made a loss of $53.4million in 2019 and $28.3million in 2020.
It further declared a staggering loss of $84.7 million in 2021. The firm is yet to come out of the woods despite witnessing so far what seems to be a good 2022. Its operating losses fell by 33% and gross profit rose by 29% in Q3, 2022, compared to Q3, 2021.
However, determined to halt the company’s streak of losses and underperformance, its management has changed tactics by adopting new strategies.
One of such strategies was the unexpected sacking last week of Jumia’s co-founders, Sacha Poignonnec and Jeremy Hodara as co-CEOs by the company’s management, and replacing them with Francis Dufay, Jumia’s former Ivory Coast Managing Director (acting CEO) and Antoine Maillet-Mezeray (executive vice president, finance and operations), just days to the presentation of the troubled firm’s third-quarter 2022 financial report.
Though, the embattled founders were generally reported to have resigned from their positions, an informed source in the company’s Lagos office confided in our correspondent that they were actually axed by the new management which he claimed were unimpressed with their performances.
The co-workers sacking was invariably confirmed by the Chairman, Supervisory Board, Jumia, Jonathan Klein, who explained that the co-founders exit was necessitated by the need to bring more focus to the core e-commerce business of the company as part of a more simplified and efficient organization with stronger fundamentals and a clearer path to profitability.
“We thank Jeremy and Sacha for their leadership over the last decade to envision and build a company that became the leading pan-African e-commerce player.
“As we look ahead to the next chapter of Jumia’s journey, we want to bring more focus to the core e-commerce business as part of a more simplified and efficient organization with stronger fundamentals and a clearer path to profitability.
“We look forward to working closely with Francis, Antoine and the leadership team to execute these objectives and continue our mission of offering a compelling e-commerce platform to consumers, sellers and the broader Jumia ecosystem in Africa.
“These are just the first set of changes at the company. We should expect more senior management shake-ups as the search for a permanent CEO continues”, the Supervisory Board chairman said in a statement.
Also, Jumia’s new acting CEO, Francis Dufay, while speaking at the presentation of the firm’s third-quarter 2022 financial report at the weekend, said the supervisory board, which he is a member, decided to install a new board and management in an effort to get better results.
“Jumia’s approach to turning a profit after half a decade of successive losses on the NYSE requires more deliberate execution and a return to basic e-commerce fundamentals.
“We want to significantly improve our unit economics and create the right fundamentals for long-term growth.
“In the past, we’ve seen a lot of growth as a function of marketing, and promotional events, which then, as a consequence, lead to the alteration of our economics.
“This is not the way we want to see the future. And we believe that we have lots of success cases across our countries that show that we can grow and improve economics simultaneously,” Dufay had explained to the media.
Another area the company is making adjustments is by scalling down on businesses that are not making profit across its eleven African markets.
Some of the firm’s subsidiaries that have failed to bring good returns on investments include Jumia Logistics, the haulage arm of the company which delivers goods door-to-door across the country and Jumia Prime, a loyalty program that entitles customers to free delivery on orders, except items shipped from abroad and other exclusive promotions, rewards, and benefits.
“These are projects we don’t feel are adding the right value to our ecosystem, to our customers and vendors and the platform,” said the new acting CEO.
However, the company intends to continue to operate its logistics business in Nigeria, Ivory Coast and Morocco which sources disclosed are the only divisions making profit.
To further cut cost, the new management has embarked on staff transfer and rationalisation.
According to sources, the company had at the beginning of 2022 suspended the hiring and recruitment of new workers.
Mostly affected by the latest downsizing are workers based at the firm’s Dubai office, where most of the former management team were based, including the former co-CEOs.
It was learnt that while more than 70 per cent of the Dubai workforce was affected, those deemed to be useful and have roles at the company have been given the option of accepting a transfer to largely undermanned African offices.
Speaking on the development, Jumia’s CEO, Dufay, disclosed that it is currently effecting significant changes and will reduce staff size on a case-by-case basis in all its eleven markets by the end of the year.
“We’re trying to be very clear with the fact that we’re also making very deliberate savings across the base.
“We want to build a very lean organization and, especially in this macro environment, we need to be very cautious about the cost that we take.
“So one obvious point for us to work on is our G&A cost structure. We want to have the most relevant team with the right sizing given the market potential and be as efficient as possible across all locations,” he said.