Jumia continues the redesign. The Africa’s ecommerce giant raised tons of money from private investors with the message of scale and geographical footprint across Africa, in core verticals like travel, ecommerce, etc. In the age of blitzscaling, investors bought and became believers. Yes, blitzscaling is the new normal – it does help American entrepreneurs in raising huge money very fast.
But as I have written here – Africa is a heterogeneous market where economies of scale do not always improve marginal cost, because even within a nation, what works in Lagos state may not work in Zamfara state (both are states in Nigeria) because their economies are evidently different. By the time you take it continental, a playbook for Ghana may fail in Ethiopia. This deviates from the United States which is like a continent of 50 countries all entwined on a homogeneous market format and structure. With that, if you get it right in Baltimore, Boston would be ready to welcome you with the same playbook.
So, as a public company, Jumia will have to pursue a message of profitability and sustainability before public investors who do not really focus on scale blindly without asking if this company is making enough money to stay here for long. For Jumia to answer that question, it needs to make profit! It is trading below $6 now, months after hitting close to $40. To change that trajectory, Jumia must grow, profitably.
The company has started the redesign by closing units in Cameroon and Tanzania. Now, it will close Jumia Food in Rwanda just as Jumia Travel departs to Travelstart. This is how TC Daily explains it.
And like in previous weeks, it’s about another purge. The company confirmed to TechCabal that it has passed off Jumia Travel, its six-year old hotel and flight booking business to Travelstart, an online booking platform. They are terming it a “partnership” instead of an acquisition, as Jumia’s hopes to “remain hyper focused on our growth and path to profitability.”. We have a pretty detailed account of how this change played out yesterday, so here’s your plug on the latest travail at Jumia. Extra: Jumia Food will shutter in Rwanda by January 2020.
My only suggestion to Jumia is this: whether you sell or exit via partnership, make sure your clause has that the recipient company works with Jumia Pay for at least two years, post-agreement. The future of Jumia includes Jumia Pay and it is strategic you consider the feeder-system as you make decisions. Without the food delivery, travels, etc, even the promising Jumia fintech unit will struggle. So, do not exit without making decisions that would help Jumia fintech unit which includes your lending, paytech, etc. Jumia Pay is coming a little late and there are tough competitors already. But with your other verticals, the paytech can command a solid presence in the region. Do not think you can sell everything and still thrive in fintech. That would not happen – the reason Jumia Pay has seen great growth is because it is starting with millions of customers other Jumia businesses are providing to it.
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