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Jumia bows out of Cameroon after hitting tough times

By Omer Mbadi and Théau Monnet
Posted on Wednesday, 20 November 2019 15:49

The Jumia marketplace site is now operational in 13 countries on the continent, including Côte d'Ivoire (pictured here) © Jumia

The continent's leading e-merchant has suspended its online sales site in Cameroon for an indefinite period of time. At least 200 employees find themselves without work, while the group's losses are accumulating, despite rising sales. 

The unicorn of e-commerce in Africa is showing increasing signs of running out of steam. Jumia has just suspended without notice its main marketplace activity in Cameroon.

This announcement comes at a time when its share price are at their lowest since its remarkable listing on the New York Stock Exchange last April.

  • Introduced at $14.50, its shares had initially soared in three weeks to almost $47.
  • Its fall was then almost continuous, reaching its lowest level on Tuesday at midday (about $5 at the time of writing).

“Special context”

Jumia says its Cameroonian suspension is due to the lack of customers, but, according to management, that’s not the only reason.. “Our portal, as it operates today, is not adapted to the current context in Cameroon,” the company says.

A lack of market maturity and a middle class that is still numerically too small, management says, are among the pitfalls facing the company in the country. It also mentions “purchasing power” and “infrastructure” among the constituent elements of what it describes as the “particular context of Cameroon”.

Faced with continuous losses over the past few months, Jumia decided to leave Cameroon. “Since we want to be profitable for Jumia to succeed, we have to make decisions,” according to Jumia’s communication department.

This is a measure that the group had already mentioned halfway in its last quarterly report, referring to an “optimization of its portfolio”, conducted “according to multiple criteria, including financial performance, the business environment and the ease and cost of doing business”.

  • “A number of initiatives are underway,” Jumia announced on November 12. “We expect these initiatives collectively to represent less than 10% of our gross merchandise volume, gross profit and operating loss for the first nine months of 2019”.

Once announced, however, the suspension of Cameroonian activity did not give rise to any quantified details on the part of the company. In Cameroon, the communication service simply indicates that the 200 employees signed “separation protocols” a few days before the suspension of activity. Those responsible have not responded to our questions on this point.

Reclaiming investor confidence

The group’s objective will be to regain investor confidence, while cumulative losses for the first three quarters of 2019 are accelerating compared to the same period in 2018 ($163.5 million this year, compared to $117.3 million last year).

Neither the increase in the number of users (5.5 million in the third quarter of 2019, compared with 3.5 million in the previous year) nor the increase in the gross margin ($51 million, up 45% compared with 2019) has stopped this trend.

  • “At the moment no further announcements are planned,” says the group. Its strategy is to focus on the long term and “not on the first few months,” says Co-CEO of Jumia, Sacha Poignonnec.

Between the fall of its share price, accusations of fraud and increasing losses, Jumia’s first few months on the New York stock market proved to be tough.

The bottom line: Jumia has made huge strides in growing its user base and increasing gross margins, but the online retail giant will need to find new markets to boost its profits and win back investor confidence.

 

This article first appeared in Jeune Afrique.

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