Jumia Is A Better Payment Company Than Ecommerce As JumiaPay Skyrockets

Jumia Is A Better Payment Company Than Ecommerce As JumiaPay Skyrockets

In the history of the African commerce, no one has ever succeeded in ecommerce, financially. From Mocality to Kalahari, Konga to Jumia, Efritin to OLX, the end-results have been predictable: massive losses. Unlike in other emerging markets like China, India and Brazil, African ecommerce pioneers did not build double play payment products at inceptions, missing a critical profit engine to fund logistics-related expenses. Alipay powered China’s Alibaba just as PhonePe was helping Flipkart in India.

But that may be changing as Jumia has gone all payments with JumiaPay: “Jumia saw record volume with its payment platform JumiaPay, which reached 2.1 million transactions and 32 million euros in total payment volume, nearly double the year before.”

Looking at the Q3 2019 financials, Jumia is a better payment company than an ecommerce. JumiaPay has better numbers and growing just fine. Indeed, in the real scheme of things, there is nothing like an ecommerce company in Africa when your marginal cost is still all physical with expensive parallel logistics solutions in places with no national postal systems.

Jumia said marketplace revenue on the platform rose 52.1%, to 18.9 million euros, but overall revenue ticked up just 19.1%, to 40.1 million euros, or $44.1 million, as it saw nearly flat growth from its first-party e-commerce business. That was below analyst estimates of $51.9 million.

Jumia saw record volume with its payment platform JumiaPay, which reached 2.1 million transactions and 32 million euros in total payment volume, nearly double the year before. Gross profit in the quarter rose 45%, to 18.1 million euros, but its operating loss continued to expand, widening 34.6%, to 54.6 million euros.

Co-CEOs Sacha Poignonnec and Jeremy Hodara said:

We are making significant progress in the usage and relevance of our platform for consumers and sellers and are firmly positioning Jumia as the digital destination of choice for everyday needs in Africa. In parallel, we continue to make great strides in our payment and fintech business with JumiaPay showing very strong growth momentum on both volume and transaction metrics.

 

But despite the progress on JumiaPay, it is still a long night for Jumia as TC Daily notes:

JumiaPay has released its financial report for the third quarter of 2019 and it’s a bit of a mixed bag. The good – JumiaPay, its financial service is the company’s fastest-growing category. It represented an equivalent of 11.6% ($35.2 million) of Jumia’s entire GMV during Q3 2019. The bad – Jumia is still losing cash. Its operating loss in Q3 2019 stood at $55 million about $10 million higher than Q3 2018.

The full earnings call transcript is available here.

Jumia stock has lost significant value since its IPO
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One thought on “Jumia Is A Better Payment Company Than Ecommerce As JumiaPay Skyrockets

  1. I think the major misconception we have is seeing ecommerce as an app or website thing, no, it’s not; the success or failure is entirely outside the apps and websites. If ride-hailing services is about having fanciful apps, Uber ought to be very profitable by now; there is more to internet/digital native businesses than just apps and websites.

    Of course we couldn’t have expected the early movers on the ecommerce space in Africa to be profitable, because none of them accurately envisaged or captured the amalgam of challenges they would face, before launching. So we can conclude that the failings and losses are part of the R & D investments, since we operate more on assumptions here, rather than verifiable data.

    Now payment arm for ecommerce business is gaining ground, but that won’t be enough to guarantee profitability. The major determinant still remains: what compelling reason could make an average Nigerian/African, with open markets and nearby shops to prefer ecommerce shopping? Until we answer this question convincingly, the effect of ecommerce in the overall scheme of things would remain marginal.

    A whole lot of integration is needed, with special cost considerations, if ecommerce must thrive here.

    Reply

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