E-commerce juggernaut, Jumia Technologies AG, is set to consolidate all three warehouses into a singular 30,000sqm depot in Lagos, as part of its profitability strategy in Nigeria.
Chief Executive Officer, Francis Dufay, said in a recent interview with Bloomberg that the company’s consolidation initiative is primarily driven by a concerted effort to cut costs, a pivotal step in Jumia’s quest for profitability.
This attempt is engulfed in its bets on Nigeria, the continent’s most populous nation, as it says the country’s macroeconomic situation is temporary. Jumia noted that it expects a positive turnaround in Nigeria in the medium term.
As part of this endeavour, the Nasdaq-listed company is streamlining its operational footprint, opting to consolidate its trio of warehouses across Nigeria into a singular, expansive 30,000-square-meter depot situated in Lagos.
Emboldened by Nigeria’s sprawling populace, surpassing the 200 million mark, Jumia is banking on the nation’s sheer scale to pave the path to profitability, an elusive milestone thus far in its financial trajectory.
Dufay, acknowledging the inherent risks amidst Nigeria’s economic backdrop characterized by currency volatility and soaring living expenses, maintained a sanguine outlook, asserting,
What Jumia said
“We want to be sized and organized for significant growth,” Dufay said. “Jumia sees the macro situation in Nigeria as temporary, and expects it to turn positive in the medium term.”
Dufay revealed plans to augment the company’s market presence within Nigeria by extending its services to additional cities across the West African nation.
Despite Jumia’s ambitious aspirations, its financials have continued to point out the challenges besetting its profitability narrative.
What to know
The first quarter of the year saw an operating loss amounting to $8.33 million for the company, juxtaposed with a modest uptick in revenue which rose by 5.7% to reach $48.9 million.
This performance delineates a stark reality, with Jumia shares plummeting by approximately 90% from its zenith during the pandemic-induced surge in e-commerce reliance.
Speaking at the Qatar Economic Forum in Doha recently, Dufay elucidated Jumia’s strategic imperatives, emphasizing the need for scaling operations to cater to price-sensitive consumers.
“We know that customers are heavily price-conscious,” Dufay iterated, elucidating the necessity for a lean operational framework to deliver competitive pricing across all facets of service provision.”
More insights
Amid Nigeria’s economic downturn, Jumia remains undeterred, buoyed by prospects of an economic recovery catalyzed by governmental initiatives aimed at reducing inflationary pressures and attracting foreign investments.
Amidst prevailing challenges such as currency devaluation and infrastructural deficiencies, the company remains steadfast in its commitment to consolidating its market presence.
Strategically conserving its cash reserves, Jumia has also tried to enhance customer accessibility by introducing a buy-now-pay-later financing option.
“We are also very reactive in pricing,” Dufay affirms.
As Jumia doubles down on its commitment to Nigeria, navigating the labyrinthine contours of its economic waters, the company’s strategic calculations embody a delicate balance between risk and opportunity, showing its resolve to chart a trajectory towards sustained profitability in Africa’s largest economy.
