Jumia has sparks but the marginal cost paralysis continues to affect the business. It is largely doing most things right now, but weaning itself of that high cost of sales and service remains the challenge which it must overcome. From TechCrunch.
Gross merchandise volume (GMV) at Jumia in the fourth quarter grew 20% year-over-year to $330 million, while revenue grew to $62.0 million, up 26% over the same time frame. Quarterly active users and orders rose 29% and 40% to 3.8 million and 11.3 million year-over-year, respectively.
The metrics improved thanks to Jumia’s Q2 2021 decision to push frequent purchases of fast-moving consumer goods (FCMGs) rather than larger-ticket electronics and appliances, and increased in sales and marketing spend.
Sales and advertising expenses at Jumia grew 159% year-over-year in the final quarter of 2021, a significant slowdown from the previous quarter, which posted a staggering 228% expansion in the expense category.
Yes, you read it well: “Sales and advertising expenses at Jumia grew 159% year-over-year in the final quarter of 2021, a significant slowdown from the previous quarter, which posted a staggering 228% expansion in the expense category.” When your cost of sales is growing in multiple faster than revenue, you have a real issue in that playbook.
Because of that, Jumia lost money in the quarter: “Turning to the bottom line, Jumia’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) loss was $70 million in Q4 2021. That’s a 107% year-over-year increase.” The impact is that the share price continues to struggle.
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From the data which keeps coming out, quarter after quarter, it does seem that focusing on B2B in the retail place may be the holy grail because of the marginal cost issue in Africa. Companies like Alerzo, TradeDepot, TradeLenda, and Farm365 which focus on B2B appear poised to achieve faster profitability than B2B counterparts.
If Jumia pivots to B2B retail and embed JumiaPay on top of it, it will rise. It has the largest merchant community, biggest pocket and can push this business forward. That Flutterwave is now worth 4.4x of Jumia shows Jumia needs a new playbook.
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Comment : This is a case of being realistic in execution: how are you doing compared to other companies. They need a new playbook like you rightly suggested Ndubuisi Ekekwe with the numerous substitutes, low switching costs, low suppliers power, zero to no entry barrier basically makes their business a commodity one where the only differentiation is price.
I concur, they need to transition into the B2B space; Idumota is a signal that there is value in the B2B retail space. From my personal research there is also a problem businesses at Idumota face that would make this a game changer for Jumia.
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Jumia is spending too much on YouTube ads, and it makes little sense. They need to do more of improving their services than making their services know. The former not only retains customers it brings new ones.
Greetings Chief.