Q1 2023 signifies the commencement of Jumia’s new management’s implementation of their strategic vision, following the blueprint left by the previous administration in Q4 2022. The outcome? Jumia experienced a substantial reduction in losses, with a 51% year-over-year decline in adjusted EBITDA loss, amounting to $27 million. This achievement puts the company on track to meet its target of $100-120 million in adjusted losses by the end of the year. Additionally, the operating loss decreased by 54% compared to Q1 2022, reaching $30.9 million, as reported in the company’s recently released financials.
The streamlining efforts undertaken in Q4 2022, which involved a 20% reduction in headcount, impacting 900 roles across Jumia’s 11 markets, played a vital role in driving down losses. However, the General and Administrative expenses for Q1 2023, which dropped by 32%, do not yet fully reflect the impact of the headcount cuts from Q4 2022, as the salaries of some departing employees were still included in the first quarter of 2023. Jumia CEO Francis Dufay indicated that further layoffs could be expected, as the e-commerce giant aims to reduce G&A costs by up to $28 million by year-end.
Jumia effectively curtailed expenses in fulfillment, sales and advertising, and technology, achieving decreases of 33%, 61%, and 9%, respectively, compared to Q1 2022 figures. Dufay elaborated on the cost-cutting measures implemented by Jumia, stating, “We’re reevaluating our logistics and supply chain operations through negotiations with suppliers and cost savings in packaging. We have optimized truck routes, which minimally impact customers and vendors but have allowed us to save a substantial amount of money.” He further explained that marketing spend was significantly reduced, which played a significant role in the current quarter, as Jumia believes it can build a solid foundation for growth with less reliance on marketing expenditure in the future. The CEO highlighted that Jumia will continue to “rightsize” its business in these areas, aiming to introduce greater efficiency as part of an ongoing process to establish a leaner cost structure that includes a smaller customer base.
Jumia experienced a decline of 22% in quarterly active consumers, dropping from 3.1 million in Q1 2022 to 2.7 million. Consequently, orders and gross merchandise volume (GMV) also saw reductions of 26% and 22% year-over-year, respectively. Several factors contributed to this decline, including ongoing macro challenges related to high inflation, which affected consumer spending power, as well as difficulties faced by sellers in sourcing goods and devaluation of currencies used on the Jumia platform.
Moreover, Jumia intentionally recalibrated its product and service portfolio in Q4 2023, suspending operations in specific key markets related to first-party grocery offerings, logistics-as-a-service, and food delivery. By significantly reducing promotional intensity across various services on the JumiaPay app, the fintech arm witnessed a 31% drop in total payment volume (TPV) and a 38% decrease in transaction volume, amounting to $48.6 million and 2 million, respectively. Jumia acknowledged in its financial reports that the decline in fintech services accounted for over 25% of the GMV decrease and over 40% of the decline in orders during Q1 2023. Additionally, when combined with the fast-moving consumer goods (FMCG) category, which includes grocery products, JumiaPay was responsible for 55% of the decrease in items sold and 34% of the decline in GMV during the first quarter of 2023.
Dufay explained the deliberate decision to reduce and downsize certain activities within specific categories, which had a significant impact on sales. He stated, “We intentionally scaled back in some areas and categories, which had a considerable effect on sales because we had many customers solely interested in good deals and bargains, particularly on JumiaPay. We were aware of the consequences, but it was the right strategic move for the business as it was not generating the desired customer value.”
The e-commerce giant is now pivoting toward a new growth model, which encompasses three main pillars: enhancing supply and assortment relevance by attracting high-quality brands and suppliers in core e-commerce categories such as phones, electronics, home appliances, fashion, and beauty; improving seller management tools and processes to enhance the seller experience on the Jumia platform; and expanding its customer base by effectively penetrating addressable markets, including underserved areas in inner cities and rural regions where traditional supply and retail coverage are inadequate.
In recent months, Jumia has made notable progress by establishing new logistics routes and pickup stations in smaller cities located outside densely populated areas, including Ivory Coast and Senegal. Dufay expressed optimism about this development, stating, “Many new cities are now part of our network, and we are currently in the stage of marketing activation to promote and educate consumers in these locations.” Dufay believes that replicating this process in Uganda, Kenya, Tunisia, Morocco, Nigeria, and other markets will result in Jumia gaining millions of loyal customers with improved repurchasing rates.
Despite witnessing a decline in key customer metrics, Jumia managed to maintain relatively stable revenues, experiencing only a 3% year-over-year decrease, amounting to $46.3 million. This positive momentum can be attributed to the commission take rate increases implemented by Jumia in mid-2022. At the end of the quarter, Jumia’s liquidity position stood at $205.4 million, which includes $86.9 million in cash and cash equivalents, as well as $118.6 million in term deposits and other financial assets.