Industry - November 22, 2022

Jumia Laysoff Staff, Ends Free Delivery to Leverage Reduced Losses

ebubejulius November 22, 2022

6 min read

Jumia, the largest e-commerce company in Africa has joined the number of top tech companies to lay off some staff. This is in addition to putting an end to its free delivery.

In comparison to Jumia’s previous quarter, the company’s Q3 results demonstrated sustained growth but dips in some areas. Due to these differences, some staff have been laid off and the e-commerce giant has stopped offering free delivery as part of its Prime subscription service.

The company recorded $50.5 million in revenue for the third quarter of this year, an increase of 18.4% over the $42.7 million reported for the same period last year and a 6% rise over the $47.6 million in revenue for Q2.

Jumia Changes Board for Profitability: 3 Big Lessons

Jumia’s increase in cost

Despite being higher than the $238.1 million realised in the prior quarter, gross merchandise value (GMV) decreased to $240.7 million from $252.7 million in the previous quarter.

Compared to the previous year, operating losses decreased by 33% and gross profit increased by 29%.

These outcomes are consistent with the company’s goal of turning a profit. With the establishment of a new management board and the resignation of co-founders Jeremy Hodara and Sacha Poignonnec as co-CEOs earlier this month, the company underwent some restructuring.

The company shared in a statement that it is now concentrating on putting resources to “core areas and projects with attractive returns on investments and clear ecosystem benefits.”

This implies that Jumia will be “de-emphasising or ceasing projects and ventures that do not meet such criteria.”

Jumia plans to boost investment

To begin with, Jumia is reducing its staff by ending its first-party grocery operations in a few areas due to weak unit economics, as well as Jumia Prime, a loyalty programme akin to Amazon Prime that provided limitless free delivery on all orders.

Jumia Prime was introduced in June 2019 with a pilot programme in three Nigerian cities for $7 per month. Later, Ghana, Uganda, Tunisia, Kenya, Morocco, Côte d’Ivoire, and Senegal were added to the list of countries able to use the service. The programme was created for regular buyers who do not want to pay recurring subscription fees over fluctuating shipping costs every order.

Jumia is also raising the threshold for free delivery’s minimum basket size and halting its logistics-as-a-service programme in a few areas where the logistics infrastructure is insufficient to handle third-party volume.

Jumia suspending logistics

The company stated that Nigeria, Morocco, and the Ivory Coast would not be impacted by the suspension of its logistics-as-a-service.

The business intends to save labour expenses by downsizing its Dubai office and moving senior leadership and decision-making facilities closer to its buyers and sellers in Africa.

The company has paused its full-year GMV guidance due to the unpredictability of the macroeconomic situation and the ongoing devaluation of local currencies.

Notably, orders for “Food Delivery” increased 38% year over year in the third quarter of 2022, making it the category with the greatest growth.

The category, which came in second place behind fashion accounted for 20% of Jumia’s volume of all items sold on the platform during the third quarter of 2022.

Amid rising prices and rivals of global firms in Africa’s food delivery market like Bolt and Glovo, as well as numerous local players, Jumia will be eager to look into this bright niche.