Escalating Inflation Across African Markets Erodes Jumia's Customer Base

Escalating Inflation Across African Markets Erodes Jumia’s Customer Base

E-commerce dynamo faces harrowing customer exodus amidst escalating inflationary forces

6 mins read

Jumia, one of the top e-commerce titans in the African market, has disclosed that it experienced distressing financial performance in the second quarter of 2023, dropping 28.1% in its customer base.

This alarming depreciation has been significantly attributed to the relentless surge of inflationary pressures across its key operational countries, including Nigeria, Ghana, and Egypt.

A Telltale of Eroding Patronage

The financial statement from Jumia has laid bare the disconcerting reality that the number of active consumers dropped by a staggering one million year-on-year, dwindling to a crestfallen count of 2.4 million during the second quarter of 2023, in stark contrast to the robust count of 3.4 million, registered during the corresponding temporal juncture of the previous year.

Moreover, Jumia’s Gross Merchandise Value (GMV), serving as a barometer for the value of commodities transacted within its digital realm, sustained a hefty depletion by 25.1%, plummeting from the commanding threshold of $271.1 million that had been observed during the second quarter of 2022, to the notably subdued stratum of $202.3 million, during the analogous period of 2023.

Staggering Plunge in Product Procurement

The decline was not confined solely to the number of customers, as the ordering of products on Jumia’s platform languished precipitously.  This was revealed in an astonishing decline of 36.5% which is a tangible representation of the contraction from an impressive tally of 10.3 million orders during the second quarter of 2022, to a desolate figure of 6.5 million during the corresponding period in this current year.

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Odyssey Towards Dampening Losses

Despite the challenges besetting Jumia’s fiscal performance the Group’s Chief Executive Officer, Francis Dufay, has steadfastly espoused a vision of taming the losses incurred.

Dufay said: “We persistently adhere to the robust realization of our paramount aim of ameliorating losses, thereby embracing strides towards eventual profitability. Over the course of the second trimester of 2023, both the Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and the Operational Losses have undergone a dramatic erosion, diminishing by a compelling 66% vis-à-vis the preceding year, thereby descending to the nadir of loss levels witnessed over a span exceeding four years.

“Embarking on this trajectory of pronounced advancement, we have elected to recalibrate our projection for the Adjusted EBITDA losses throughout the entirety of the fiscal year 2023, revising the erstwhile spectrum of $100-120 million to a more sanguine range of $90-100 million.

“With an unwavering demeanor, we steer through the maelstrom of the perplexing macroeconomic climate, invoking discipline and precision, whilst magnifying our vigilance towards initiatives predicated upon enhanced efficacy. When juxtaposed with the corresponding quarter of the antecedent year, the outlay entailed within Fulfillment Sales and Advertising witnessed a precipitous declension, comporting themselves at a subdued proportionality of 50% and 74%, sequentially.

“Our diligent exertions have also begun to yield discernible dividends in the precincts of overhead costs, as General and Administrative (G&A) expenses, purged of any contingent tethering to share-based compensation, has undergone a conspicuous contraction, decelerating by a formidable one-third, traversing the course of the annual cycle, thereby culminating in the acquisition of a four-year nadir, commencing its retreat at $17.7 million.”

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Unfavorable Theatre of Operations

Dufay blamed the decline in their operating environment on inflationary challenges in countries like Nigeria, Ghana, and Egypt, which significantly affected the purchasing power of consumers.

He said: “The theater of performance remains inextricably tethered to the challenging exigencies governing our operational landscape, wherein the relentless ascent of inflationary ebbs has exerted a deleterious impact upon the consumption patterns of our esteemed clientele, alongside the concomitant impediments encountered by our vendors in their endeavor to procure merchandise.”

e maintained that in all, they remain steadfastly committed to exploring ways of strategically enhancing their platform to secure a more robust supply chain and equitable pricing dynamics while ensuring a  more degree of convenience for consumers.

“Invariably fortified by the bedrock of resolute optimism, we perpetuate our unwavering faith in the long-term trajectory of growth enveloping our markets, alongside our resplendent capacity to seize upon this prospective panorama in a manner underpinned by tenets of profitability,” he avowed.


Inflation’s Augmented Tenor

Jumia did not neglect to illuminate the relentless march of inflation, an insidious macroeconomic specter that has attained a crescendo within its operational theater. The weighted average inflationary quotient, oscillating ubiquitously throughout Jumia’s dominion, has materialized at an alarming rate of 14.1%  in June 2023, witnessing 42.5% and 35.7% within the frontiers of Ghana and Egypt, respectively.

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Nigeria’s Dismal Ascension

Of concern is the fact that Nigeria, a major market for Jumia has witnessed a rising inflationary rate to a staggering zenith of 22.8%, which is considered the highest in the past 18 years.

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