Mixed quarterly results for Jumia
Online media have described Jumia’s Q2 2020 results, for the quarter ended 30 June 2020, as mixed and have highlighted that while the platform gained customers, it did experience a drop in the total value of goods sold (Gross Merchandise Volume).
In a statement released by Jumia, the company said annual active consumers reached 6.8 million, a year-over-year increase of 40% while orders reached 6.8 million, a year-over-year increase of 8%, and GMV was €228-million, a year-over-year decrease of 13% compared to the second quarter of 2019.
Moreover, gross profit reached €23.3 million, a year-over-year increase of 38%, and JumiaPay transactions reached 2.4 million, a year-on-year increase of 36%.
“TPV reached an all-time high of €53.6 million, a year-over-year increase of 106%, more than doubling on-platform TPV penetration from 9.9% of GMV in the second quarter of 2019 to 23.5% of GMV in the second quarter of 2020. JumiaPay Transactions reached 2.4 million, a year-over-year increase of 36%, representing 35.6% on-platform penetration in terms of Orders,” reads an excerpt from the statement.
According to Jumia, during Q2 2020 it continued to implement several cost efficiency initiatives including on the logistics and fulfilment front:
• Changed the volume pricing model from a price per successfully delivered package to a price per successful stop which led to a c. 8% reduction in cost per order for a given route. Our third-party logistics partners are now paid per successful stop at customer address, regardless of the number of packages included in the delivery.
• Introduced a network of proximity warehouses (“mother-daughter” warehouse system) dedicated to essential products. This helps bring the assortment closer to customers, thereby reducing delivery time as well as last mile delivery costs.
In April 2020 ITWeb Africa reported on speculation over the future of the company after German investment company Rocket Internet sold its 11% stake in the e-commerce site, reportedly between November 2019 and March 2020.
“This – together with increasing loss in revenue, has fuelled market speculation over the e-commerce company’s ability to sustain operations.”
Cyrine Ben Fadhel, a strategy consultant at Deloitte Francophone Africa who specialises in the African start-up scene, was quoted as saying that Jumia's operating losses increased by 34% reaching US$250-million due to high fulfilment expenses covering warehousing, picking, packing and shipping.
In August 2019 Jumia confirmed that it uncovered evidence of internal fraud within its Nigeria operation, its largest market.
The company believed that members of its network of commissioned agents or 'Jumia Force' were behind erroneous orders that were subsequently cancelled on the platform to inflate order volumes.
These orders are reported to have generated around US$17.5-million in GMV (total value of merchandise sold through the site) between the last quarter of 2018 and the first two quarters of 2019.
The company launched its initial public offering (IPO) on the New York Stock Exchange in April, with top shareholders including MTN and Rocket Internet.
The company’s statement included an update on the situation and read: “As previously disclosed, several putative class action lawsuits were filed in the U.S. District Court for the Southern District of New York and the New York County Supreme Court against us and other defendants, including current and former members of our supervisory and management boards. The cases assert claims under federal securities laws based on alleged misstatements and omissions in connection with, and following, our initial public offering. On August 11, 2020, we reached an agreement to fully resolve all of the actions, subject to standard conditions including court approval. Under this agreement, in which the defendants do not admit any liability or wrongdoing, Jumia will make a settlement payment of $5 million, $1 million of which will be funded by insurance coverage.”
Jumia added that COVID-19 has continued to affect the business and its impact varied greatly from one country to the other:
“In Nigeria and South Africa, we faced significant disruption as a result of movement restriction. This disruption persisted during the early part of the second quarter of 2020, before gradually easing towards the later part of the quarter. Our food delivery business, Jumia Food, which was negatively impacted by restaurant shutdowns starting mid-March, resumed normal operations in late May / early June in most cities where we operate the service. Across the majority of our addressable market, we experienced no meaningful change in consumer behaviour, aside from increased demand for essential and every-day products and reduced appetite for higher ticket size, discretionary purchases.
“The nature of lockdown measures put in place consisted mostly of localised restrictions of movement and partial curfews rather than nationwide lockdowns, with the former leading to less drastic changes in consumer lifestyles and behaviour than all-encompassing, nationwide lockdowns. In selected countries, including in Morocco and Tunisia, where nationwide lockdowns were implemented, we experienced a surge in volumes starting mid-March with sustained momentum throughout the second quarter of 2020.”
Commenting on the Q2 results, Co-CEOs Jeremy Hodara and Sacha Poignonnec stated: “We have made significant progress on our path to profitability in the second quarter of 2020, with operating loss decreasing 44% year-over-year to €37.6 million. This was achieved thanks to an all-time high Gross Profit after Fulfillment expense of €6.0 million and record levels of marketing efficiency with Sales & Advertising expense decreasing by 51% year-over-year. We are navigating these uncertain times of COVID-19 pandemic with strong financial discipline and operational agility which positions us to emerge from this crisis stronger and even more relevant to our consumers, sellers and communities.”