Africa-focused e-commerce retailer Jumia is counting on a turnaround in its operations in Kenya and three other markets to help it recover lost grounds from the closure of its businesses in South Africa and Tunisia.
The New York Exchange-traded company announced Wednesday that is closing down operations in the two markets by the end of this year to allow it to focus resources on its “most promising markets”.
“The strategic decision to close operations in these markets is expected to improve overall operational efficiency across Jumia’s business,” it said in a statement Wednesday.
“Jumia believes that exiting these markets and refocusing resources on its other nine markets will leave the company better positioned to accelerate overall growth and further improve efficiency.”
After exiting South Africa and Tunisia, Jumia’s remaining nine markets include Kenya, Nigeria, Egypt, and Morocco, the four of which will help it recoup from the lost ground in the two markets, according to Francis Dufay, the CEO.
Mr Dufay said in an interview with Reuters that success in any of the four markets will “easily enable us to recover” lost volumes from South Africa and Tunisia, implying that the e-commerce firm is counting on a turn-around in Kenya, where it is also struggling to thrive.
Jumia is exiting the two markets because “the trajectory of the countries did not align with the strategy of the group,” according to Dufay, who cited the difficult macroeconomic and competitive environment and low potential for growth and profitability as some of the reasons for the exit.
“We believe it’s the right decision. It enables us to refocus our resources on the other nine markets, where we see more promising trends in terms of scale and profitability,” said Mr Dufay.
But even in the other nine markets, including in Kenya, Jumia is struggling to turn a profit due to stifled purchasing power and a host of macroeconomic challenges across the countries.
The e-commerce giant, one of the largest on the continent, last made a profit in 2019 and has been making losses for the last four years, largely due to the prevailing economic conditions on the continent.
Last year, the firm closed down its food delivery division Jumia Foods in Kenya and other markets, blaming it on the “unsuitable” operating environment and macroeconomic conditions.
In the quarter to June this year, Jumia made a loss of $20.2 million (Sh2.6 billion), an improvement of 8.3 percent from the $20.2 million (Sh2.8 billion) loss it reported in a similar period last year.
As part of its efforts to return to profitability, Jumia plans to simplify operations and focus on core business, cut marketing spend, reduce overall costs, and expand beyond urban centres.
