Jumia: Q4 2023 earnings highlight sustainable growth
The decision to go leaner has not only impacted on Jumia Technologies sustainable growth but has also crashed the e-commerce giant overhead costs.
According to report, this much was reflected in the Q4 2023 earnings of the e-commerce company.
The report stated that, in the year 2023 Jumia Technologies took some very decisive steps towards reducing its losses and setting the company on a path of sustained growth and profitability.
Though, while some of these steps have caused quite a stir across different ranks and concern about the company’s future, Jumia’s earnings report for the fourth quarter of 2023 proved that the decisions were timely and yielded positive results.
Trimming Expenditure
In Q4 2023, the company opted to trim its sales and advertising expenditure to $6.2 million, scaling back investments in consumer incentives like vouchers and free shipping. This marked a substantial 62.8% decrease in advertising spending compared to Q4 2023. Moreover, its general and administrative expenses, excluding share-based compensation, were reduced to $12.3 million. This strict adherence to its cost discipline strategy appears to be paying off.
Cutting Losses and Bolstering Sales
Lower losses were not the only highlight of the Jumia Q4 2023 earnings report. All indications show that the company’s decision to pivot from fast-moving consumer goods (FMCG) to focus on priority categories: Phones, Electronics, Home & Living and Fashion and Beauty. Cumulatively, on all five categories, the company recorded 88% on items sold and 95% GMV in Q4 2023 as opposed to the 80% on items sold and 93% GMV recorded in Q4 2022. The spike in these categories came on the heels of the company identifying and leveraging new sourcing routes.
Recall that in the second quarter of the year 2023, Jumia CEO, Francis Dufay, highlighted the company’s focus on building supply in the markets it served across Africa. According to him, “Building supply is the right thing to do, especially in a tough market and macroeconomic context. People want cheaper products and better deals. And that’s what we’re building on our platform.” The company’s strong performance in its priority categories in Q4 2023 coupled with the rise in Average Order Value (46% as opposed to the 13% recorded in the fourth quarter of 2022) shows that the company’s leadership is on to something.
Increased Value Proposition and Strategic Marketing Tactics
Combining a focus on priority general merchandise categories and more cost-efficient supply routes has led to a stronger value proposition, as evidenced by increasing repurchase rates. In the fourth quarter of 2023, Jumia recorded a 1% increase in 30 days repurchase rate by new customers, across all categories — this is when compared to the repurchase rate of new customers in the same period in 2022. The company also recorded a 3% increase in 90 days repurchase rate, across all categories, for new customers in Q3 2023 cohorts versus the same cohort of new customers in 2022.
Evidently, Jumia’s results are not mere happenstances. In 2022, Jumia made significant changes across board, following the change in leadership. Of these changes, the two prominent ones — targeted at cost discipline and return on investment — were based on the overriding need to move the company towards sustained profitability in the not-too-distant future. In line with this, Jumia has over time modified its priority marketing channels, shifting focus from paid online advertising to more relevant and efficient channels. The first being CRM and SEO channels that have so far engendered significant increases in the share of visits on Jumia’s physical goods platform. The second, and perhaps the most prominent, is on-the-ground activation campaigns and the J-Force.
This second tactic has been highly instrumental in increasing the e-commerce giant’s market share, particularly in smaller cities where physical presence drives trust and adoption. Amplifying its efforts with this tactic, in 2023 alone, Jumia delivered an impressive amount of orders to rural areas and secondary cities. With its strategies for 2024, it is expected that the company’s impact with these tactics, not just with increasing Jumia’s market share but with bridging the digital divide for rural communities as well, will significantly increase.
Bright Predictions for JumiaPay
Jumia’s Q4 2023 financial earnings report revealed that 2023 was a good year for the digital payment platform, in terms of adoption. Under the JumiaPay umbrella, Jumia recorded a 41% increase — from Q4 2022 — in transactions conducted on the platform. Of this, 27.7% were purchases for physical goods.
Uncoincidentally, this increase can be linked to the company integrating more relevant options — including pay on delivery and Buy Now, Pay Later (BNPL) — on the JumiaPay platform. It is predicted that with the encouraging figures recorded under this platform in 2023, coupled with Jumia’s efforts at simplifying payments through the payment channel, a considerable increase will be recorded in the coming quarters.
Reflecting on Jumia’s performance so far, under its new management and particularly within the 2023 financial year, one would say it is safe to echo Jumia CEO, Francis Dufay’s sentiment, “Jumia has never been in a better position to capture the unique e-commerce opportunities in Africa.”
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