Q-commerce is known for its hard unit economy and thin margins. Why is Jumia making a play?
The profitability is an ongoing theme for Jumia since it went public in 2019. Each time the pan-African e-commerce platform releases its quarterly earnings, investors and technical stakeholders are reflecting on adjusted EBITDA and operating losses.
While the company’s financial results have shown slow and steady growth in recent years, Jumia’s ongoing losses are a recurring cause for concern. A few investors who spoke to Marketingwithanoy believe the ecommerce giant is light years away from achieving profitability, and it’s not hard to understand their perspective.
Jumia’s adjusted EBITDA for 2019 was a loss of €182.7 million (approximately $204.5 million). In its 2020 financials, the company said it had made significant progress on its path to profitability, improving its adjusted EBITDA deficit that year to a loss of $119.5 million (approximately an adjusted loss of $136.3 million). ).
Co-CEO Jeremy Hodara reiterated this in an interview with Marketingwithanoy, referring to the company’s reduced losses in the fourth quarter of 2020. “We will try to do this quarterly. We want to address this by improving the efficiency of the business and opening new avenues for growth,” said Hodara. But by the end of 2021, Jumia’s adjusted EBITDA losses ended at $196.7 million, up 44% from the previous year.
Although the e-commerce company started 2021 on a good footing and saw some losses in the first quarter, it returned to its old method of aggressive advertising, which it had slowed down during the pandemic. As the company grew its GMV, orders, active quarterly customers and revenue in subsequent quarters, its losses increased, especially in the fourth quarter when it reached $70 million, up 107% year-over-year.
Sacha Poignonnec, the company’s other co-CEO, told Marketingwithanoy in an interview last month that Jumia plans not to exceed losses of $70 million in the coming quarters.
“We are stabilizing our level of marketing and investment,” he said. “There will be some swings here and there, but we will cut our losses below this peak that we had in the fourth quarter.” Jumia expects a loss of no more than $220 million this year, which would surpass 2021 figures.
Jumia has expanded its results based on many e-commerce metrics that matter since its IPO: orders, revenue, user base, and GMV. The company has also improved its monetization prospects with JumiaPay (the fintech recently acquired licenses to process payments for outside companies in Egypt and Nigeria) and its logistics arm. Still, its path to achieving profitability remains difficult, perhaps even more so as it enters the fast commerce (q-commerce) space.