African e-commerce group Jumia reported a 54% decrease in its operating loss in Q1 2023, resulting in a $31 million deficit.
This was the company’s lowest quarterly loss in over four years. The substantial reduction in losses was attributed to Jumia’s successful cost-reduction initiatives, with all operating costs decreasing sequentially and year-over-year.
To achieve the loss reduction, the cut its marketing and advertising expenses by 70% in the quarter under review. Jumia said this disciplined approach to marketing investments improved marketing efficiency ratios, with sales and advertising expenses per order decreasing by 58% and as a percentage of GMV improving by 451 basis points.
Despite the significant cut in marketing expenditures, Jumia still managed to achieve growth in revenue. While overall revenue experienced a slight decline of 3% year-over-year, it demonstrated a substantial 24% increase on a constant currency basis.
Costs reduction
Highlighting the impact of its cost-reduction strategies Jumia in the Q1 financial statement said:
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“Our focus on cost reduction across various expense categories has yielded positive results. Fulfillment expenses decreased by 34% year-over-year, aligning with the decline in orders, while fulfillment expenses per order showed a notable improvement of 20%.
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“Sales and advertising expenses witnessed a remarkable reduction of 69% year-over-year, indicating a more disciplined approach to marketing investments. Technology and content expenses decreased by 9% year-over-year, showcasing the company’s commitment to enhancing the consumer experience and operational efficiency.
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General and administrative expenses also decreased by 16% year-over-year, reflecting the impact of organisational changes implemented in the fourth quarter of 2022. These cost-reduction efforts contributed to an overall operating loss reduction of 54% year-over-year. With a focus on enhancing the platform’s fundamentals and implementing comprehensive cost-efficiency measures, Jumia remains on track to achieve long-term growth and profitability.”
Expectations for 2023
Speaking on what to expect for the rest of the year, the CEO of Jumia, Francis Dufay, stated that the company is shifting its strategy to pursue a different approach to growth.
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“This involves three key elements: firstly, enhancing the supply and variety of products available by attracting reputable brands and suppliers in important e-commerce sectors like phones, electronics, home appliances, fashion, and beauty.
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“Secondly, improving the tools and processes used to manage vendors on the Jumia platform, thereby enhancing the overall experience for customers. Lastly, the company aims to expand its consumer base by effectively targeting underserved markets in urban centers and rural areas, where traditional supply and retail options are limited, and tapping into the large consumer populations in these areas.”
He further expressed optimism, stating that the first quarter results demonstrate excellent progress towards their goal of achieving profitability. Despite facing challenging macroeconomic conditions and temporary headwinds, Jumia remains focused on driving sustainable long-term growth for the business.
As part of its strategies to reduce its losses and cut costs, Jumia slashed 20% of its workforce earlier this year in a layoff exercise that saw the exit of 900 people from the company. With this, the company said it had streamlined its organizational structure and created leaner, more effective teams that are fully committed to the execution of its strategy.
The re-organization also saw Jumia significantly reduce its presence in Dubai where certain management functions were located.
Source: Nairametrics
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