Jumia saw a marginal increase in deliveries in 24 hours, and that says a lot about the supposed trajectory of the African Amazon.
Between April and June (pdf) 2022, around 60% of its physical goods deliveries were made in one day, according to Jumia’s latest quarterly report released yesterday (August 10). In the first three months of this fiscal year, this figure was 57%.
Although this is only a slight improvement, it bodes well. After all, Jumia’s path to profitability in the 11 African countries in which it operates may largely depend on standardizing overnight deliveries.
Inflation tested Jumia in Q2 2022
Jumia delivered 10.3 million orders in the second quarter (April-June) 2022, 35% more than the same period last year. Along with the first quarter figure, up to five million more deliveries were made in the first half of this year compared to the same period of 2021.
And that can be commendable.
International trade in 2022 has been influenced by Russia’s war in Ukraine since February, which has stifled the flow of raw materials and finished goods. Inflation also rose, leaving some African countries like Ghana so badly hit that they resorted to an IMF bailout.
For Sacha Poignonnec, co-CEO of Jumia, the recording of double-digit year-on-year growth in the gross value of goods and orders in this “volatile macro context” validates the company’s decision to “focus on relevant everyday products, competitive prices and living consumer products.”
From April to June, Jumia recorded its fastest growth rates in terms of revenue and gross profit in the market over the last seven and five quarters, respectively. This suggests the company has been building on its post-pandemic momentum, generated in key markets like Nigeria and Egypt.
And this despite the challenge of currency devaluations in Africa against the dollar this year.
“We saw 10 of our 11 local currencies depreciate against the dollar in the first half of 2022,” Jumia’s other co-CEO Jeremy Hodara said on the conference call. “In particular, the Egyptian pound and the West African CFA franc depreciated by 10% against the dollar, while the Nigerian naira depreciated by 7%.”
Jumia wants to cut its ad spend
Whatever progress Jumia makes in terms of order volume and active customers will be measured by what it spends to acquire customers. It paid $41 million in sales and advertising this year, more than the $26 million in the first half of 2021.
A push towards profitability means these costs may need to come down, but without affecting the upward trajectory of orders and customers.
The company plans to cut $55 million in sales and advertising expenses from July to December 2021 by at least 18%. It expects gross profit of $75 million to $85 million in the second half of This year. This would be at least 27% more than the same period last year.
That said, Jumia will still navigate a few loss-making quarters. The company expects an Adjusted EBITDA loss of up to $220 million for 2022. The good news is that it expects the loss to start declining year-over-year from fiscal 2023, and that the $70 million adjusted EBITDA loss it posted in the last three months of 2021 is a peak it may not return to anytime soon.