Jumia’s revenue jumps by 6% in Q3 2022 as company seeks to axe operating costs

The third quarter of the year saw Africa’s e-commerce giant Jumia record substantial growth in revenue and gross profit, per the company’s financial earnings report released last week.

According to the latest numbers, the “Amazon of Africa” reported $50.5 million in revenue in Q3 2022, a 6% growth when compared to the $47.6 million recorded in the previous quarter (Q2). The new figure also represents an 18.4% increase from the $42.7 million reported in the same period last year. 

In H1 2022, Jumia’s revenue reached $104.9 million, a 43.3% increase from H1 2021, which was $73.2 million, indicating that the company is taking advantage of its post-pandemic momentum.

Similarly, the company reported a 33% drop in operating losses in Q3 2022, just as the company’s gross profit increased by 29% compared to last year. In Q2, its gross profit reached $30.4 million, up 14% year-over-year, which is said to be the fastest growth rate in the past five quarters.

These interesting numbers came on the heels of an unexpected change in the leadership of the company. Barely two weeks ago, Jumia’s co-founders Jeremy Hodara and Sacha Poignonnec stepped down from their positions as co-CEOs — roles they held since 2012. Francis Dufay, who was until recently the executive vice president for Jumia Africa, overseeing its entire operation on the continent, was appointed CEO.

Read also: Jumia appoints new CEO as co-founders step down.

Major takeaways

The financial report reveals that the retail giant’s gross merchandise value (GMV) declined to $240.7 million from the $252.7 million reported in Q2. Interestingly, the second quarter saw Jumia’s GMV jump by 27% year-over-year from $198.9 million.

GMV refers to the total value of orders for products and services, including shipping fees, value-added tax, and before deductions of any discounts or vouchers, irrespective of cancellations or returns for the relevant period.

In a related development, the company reduced its adjusted EBITDA loss from 57.2% in Q2 to 45.5 in the third quarter. “Adjusted EBITDA” corresponds to the loss for the period, adjusted for income tax expense, finance income, finance costs, depreciation, and amortization.

EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization, is defined as an alternate measure of profitability to net income, according to Investopedia.

Citing “the highly volatile and unpredictable macro environment”, Jumia also said it has decided to suspend its full-year 2022 GMV growth guidance and Gross Profit guidance for the second half of 2022.

Read also: Jumia’s revenue rises by 42.5% in Q2 of 2022 as orders reached 10.3m.

Goodbye to Jumia Prime

One of the major strategies the company believes will help retain its spot on the path of profitability is axing Jumia Prime, a delivery subscription service that shares similarities with Amazon Prime.

Launched in 2019, Prime targeted would-be regular shoppers who chose to pay a renewable subscription fee rather than incur different shipping costs for each order.

Jumia, in the earnings report, however, said it is “too early in the adoption curve to push such a product”, saying it would instead focus “on enhancing the basics of the customer value proposition to drive repurchase rates”.

The company will also suspend logistics-as-a-service “in countries where logistics infrastructure is not yet ready to support third-party volumes.” The service, however, will continue in Nigeria, Morocco, and Côte d’Ivoire.

Read also: Jumia tops as Nigeria dominates the list of 100 most-funded African startups.

More focus on JumiaPay

The company said that going forward, it will be prioritizing its digital payment and fintech platform, JumiaPay by “focusing on a more targeted number of critical products and ventures”. This is hardly surprising because JumiaPay transactions accounted for 32% of total orders in the third quarter of the year.

33% of orders placed on Jumia in the second quarter of 2022 were completed using JumiaPay, compared to 35% in the second quarter of 2021. Recall in Q1 2022, JumiaPay transactions reached 3.4 million, increasing by 25% year-over-year, supported by accelerating volume growth across the business, in the “Food Delivery” category in particular.

Interestingly, food delivery orders grew 38% year-over-year in the third quarter of 2022, accounting for 20% of items sold on the platform during the period under review. Trailing behind fashion, food delivery is Jumia’s second-largest category in terms of volume. However, Jumia faces stiff competition from other players — both local and international — in Africa’s food delivery space.

Jumia is cutting operational costs

For Jumia, profitability is non-negotiable and the e-commerce giant is willing to cut “projects and ventures that do not meet such criteria”. First, the company is discontinuing first-party grocery offerings in selected markets due to poor unit economics.

Jumia also said it will scale back on product categories with inefficient delivery economics (grocery in selected geographies), renegotiate delivery rates with relevant third-party logistics partners, and enhance productivity in warehouses.

The company equally hinted at axing staff costs by streamlining its management structure which would result in a reduction in the size of its Dubai office. Also, the company’s senior leadership and decision centres will be relocated closer to its consumers and sellers in Africa.

“We will bring more focus to the business, directing our efforts and resources to projects and activities that deliver tangible value to our consumers, sellers, and broader ecosystem participants. We are also enforcing tighter cost discipline and driving efficiencies across the full structure while enhancing the fundamentals of our core e-commerce business to drive usage growth,” Francis Dufay, acting CEO of Jumia, said in a statement.