Jumia, a pan-African e-commerce platform, is eyeing Nigeria to boost its scaling operations and even post profits after a series of losses. With some big companies exiting Nigeria last year due to challenging economics, Jumia is hopeful of an economic revival that will help improve its profits.
The company recently released its Q1 earnings reporting a 5.7% increase in revenue to $48.9 million. This comes after a period of cost-cutting that saw a 40% reduction in its workforce and reduced marketing costs. The company, however, reported an operating loss of $8.33 million – which is a 71% year-on-year drop.
The company says it’s continuously working to reduce costs and improve its gross margins until it reaches profitability, and Nigeria – its biggest market – will play a big part in this.
This will see the company consolidate its three warehouses in Nigeria to one depot in Lagos to cut costs. Jumia will also expand into more Nigerian cities in the coming months.
Nigeria’s economic environment has been challenging which has seen many multinational companies including GlaxoSmithKline (GSK), Procter & Gamble (P&G), and Sanofi-Aventi pharmaceuticals exit the market. Macroeconomic realities including currency devaluation have made it unconducive for dollar-dominated companies to operate in the West African country.
This poses a risk given that 79% of Jumia’s liquidity is denominated in USD. Jumia has already incurred a $5.9 million cash loss due to currency devaluations in Nigeria and Egypt in Q1.
Other tough macro situations including increased cost of living, high inflation, and increasing levels of employment have affected supply and demand.
Jumia CEO, Francis Dufay, however, believes that these conditions are only temporary adding that the company has built a resilient business model. He further argued that demand is finally matching the population growth on the continent.
“We want to be sized and organized for significant growth,” Dufay said in a recent interview with Bloomberg.
The business is taking on a lean structure that will allow lower prices for services. “We know that consumers are heavily price-conscious, so we need a very lean structure on our end, so we can deliver very low prices on everything, including delivery and all service,” Dufay previously said in an interview at the Qatar Economic Forum in Doha.
In efforts to attract more customers, Jumia Nigeria is partnering with Easybuy to introduce its buy-now-pay-later flexible payment solution. “Nigeria remains a huge market for consumer demand, and our business is not stopping,” Jumia CEO said.
