Africa-focused e-commerce retailer Jumia is counting on a turnaround in its operations in Kenya and three other markets to help it regain lost ground from the closure of its businesses in South Africa and Tunisia.
The New York Stock Exchange-traded company announced Wednesday that it will close its operations in the two markets by the end of this year to allow it to focus resources on the “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 on 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, and the four markets will help it make up for lost ground in the two markets, according to Francis Dufay, CEO.
Success in any of the four markets would “easily enable us to recover” the volumes lost from South Africa and Tunisia, Dufay said in an interview with Reuters, meaning the e-commerce company is counting on a turnaround in Kenya, where it has also been struggling to thrive.
Jumia is exiting both markets because “the countries’ path was not in line with the group’s strategy,” according to Dufay, who cited difficult macroeconomic and competitive environment and low growth potential and profitability as some of the reasons for Jumia’s exit from the two markets. exit.
“We believe this is the right decision. It enables us to refocus our resources on the other nine markets, where we see more promising trends in terms of volume and profitability,” Mr. Dufay said.
But even in the other nine markets, including Kenya, Jumia is struggling to turn a profit due to stifling purchasing power and a host of macroeconomic challenges across the countries.
The e-commerce giant, one of the continent’s largest, was last profitable in 2019 and has posted losses over the past four years, largely due to the prevailing economic conditions on the continent.
Last year, the company shut down its food delivery division, Jumia Foods, in Kenya and other markets, blaming it on an “inadequate” operating environment and macroeconomic conditions.
In the quarter ended June this year, Jumia posted a loss of $20.2 million (Sh2.6 billion), an 8.3 per cent improvement on the $20.2 million (Sh2.8 billion) loss it recorded in a similar period last year.
As part of its efforts to return to profitability, Jumia plans to streamline operations and focus on core businesses, reduce marketing spending, reduce overall costs, and expand beyond urban centers.