Jumia recently released its financial statements for Q2 and I’m not going to lie. Things are hard for the E-commerce company. The once acclaimed “Amazon of Africa” has lost that status as investors and others aren't sure it can reach that status anymore.
Jumia reported fewer active customers, dropping from 3.4 million in Q2 2022 to 2.4 million in Q3 2023. As expected, this also led to a decline in orders. It should also be worth noting that Jumia has yet to record a profit. Of course, the poor financial performance led to Jumia’s stock falling to around $3 on the New York Stock Exchange (NYSE) this week.
The Long Drive to Profitability
Another company was in the news for its Q2 2023 statements and dare I say people were Uber excited to catch a true glimpse of profitability! (yes, I’m talking about Uber). Uber reported a profit of $394 million. This is incredible as the company had never made a profit before then. Its stock was at $44.69 by the closing bell this Friday.
What is interesting is that these companies share a couple of similarities. For one, their unprofitable run. Also, both are listed on the NYSE. They've both had to switch CEOs and have had investors breathing down their necks to provide profit or else!
But why does it feel like Jumia has caught more flack than Uber for not turning a profit sooner? It’s unfair on all counts:
Jumia was founded in 2012 and has been running for 11 years only, while Uber was founded in 2009.
Jumia became a Unicorn in 2016 (first in Africa). Uber was valued at $51 billion (51 Unicorns!) around the same time, becoming the most valuable startup in the world.
Lastly, they have had the same model and strategy for the longest time. The model is the same: A connecting platform. Uber is for drivers and passengers, while Jumia is for sellers and buyers. They were both all about that growth at the time.
So what is it about Uber that sparks more confidence in investors than Jumia?
Market size: Jumia is meant to be Africa’s Amazon, and Uber was poised to take over the world. For those of us that ran away from geography in school, the world is a lot larger than Africa. So there are definitely more customers for Uber to acquire.
To add to this, Africa is plagued by a lot of economic challenges, so the number of people in Africa that can afford both services is small (and dwindling with the economic situation at play).
Market peculiarities: It must be clear to Jumia’s executives now that a majority of Africans (or at least a majority of those that have money to buy things) still love their brick-and-mortar market. So there’s a lot to contend with in acquiring and retaining customers.
I believe that this tendency to visit the brick-and-mortar market also stems from the lack of trust for goods found on the site and the urgency with which most of us shop.
For example, lord knows that I’m not buying a laptop on Jumia (yet for some reason, I trust Amazon), and if I’m giving you over 200k to buy a laptop, you best believe that I’m going to want it in my hands today. Makes sense right?
I think it’s important to know that many startups (especially Venture-backed startups) run at a loss for a while. Why? Because they are looking to grow and capture as many customers as possible in good time. After all, one of the main characteristics of a startup is that it can scale. This growth-first approach has had varying success (and failure stories), and many startups can go years without bringing profit. This is hard to point out in Africa of course because investors are not as patient here. You make that money or you die.
For you battle not against flesh and blood…
Jumia is fighting for the souls of customers. The good thing is that the executive team has been very proactive about being profitable, experimenting, and changing what doesn’t work. The latest is the attempt to process payments for third-party merchants via Jumiapay. They have already been onboarded (as sources for their goods) so I’m hopeful that something good will come out of it.
Another product that I think should be deployed is an independent escrow service. Basically being the middle man holding the funds between two parties, till both buyer and seller are satisfied with the deal. I believe that as a player in the market already, this wouldn’t be hard to build and push out. And this would go a long way in introducing trust to the system.
I am hopeful for Jumia, mainly for sentimental reasons (you can’t kill your first unicorn, it’s demonic). But also because I believe that some products take time to find their fit, and when they do, it will be explosive!
What have I been up to?
Had a great work week, and ended it by eating some kilishi on Friday!
Just had the worst shawarma ever as I was writing this, needed to wash it down with a lot of Jolly Juice.
Asake kept me waiting for one hour on youtube. Men will disgrace you (It was worth it when he came on stage!)
Currently looking for a book on Ibrahim Babangida’s life. Please let me know if you have one.
Sycamore still remains the best startup out there.
Today’s post is dedicated to my man Bizu! Thanks for introducing me to writing as a medium to convey my (non)sense.
That’s all for today guys! Thanks for reading this far. Till next time.
-Your future unbelievably liquid metal
Thanks Juice👍