Jumia in devastating Sh12.4 bn loss as customers, sales drop

Jumia Kenya managing director Sam Chappatte on April 19, 2017: The firm saw total transactions grow 4.3 pc despite active customers reducing by 100,000 to 1.5 million. PHOTO | SALATON NJAU | NMG
Jumia Kenya managing director Sam Chappatte on April 19, 2017: The firm saw total transactions grow 4.3 pc despite active customers reducing by 100,000 to 1.5 million. PHOTO | SALATON NJAU | NMG  

E-commerce platform Jumia Group has reported a net loss of Sh12.4 billion for the year to December even as the business, which has operations in Kenya, recorded a drop in revenues and customer numbers.

Jumia, which is owned by German-based technology firm Rocket Internet, says its net loss improved from the previous year’s Sh20 billion, even as its sales in 2016 dropped 41.6 per cent to Sh9.4 billion.

The online retailer, which operates nine products across 23 African countries, saw its total transactions grow 4.3 per cent despite active customers reducing by 100,000 to 1.5 million.

“Revenue decreased impacted by the continuing shift from e-commerce towards a marketplace business model, by the slowdown of the Nigerian economy and currency devaluations in June 2016,” Rocket Internet said in a statement.

“Jumia is expected to grow revenues by a low double-digit percentage during the financial year 2017,” it added.

Active customers refers to users who made at least one order within the last year, less actual and provisioned returns and rejections within Jumia’s stipulated grace period.

Jumia opened shop in Kenya in March 2013, having been founded in Nigeria a year earlier.

The Kenyan unit is ranked third in revenue in Africa behind Nigeria and Egypt, underlining the fact that online shopping is gaining currency in the country on the back of high internet penetration.

Jumia’s platforms include Jumia Market, Jumia Food, Jumia Travel, Jumia Deals, Jumia House, Jumia Jobs and Jumia Car.

Rocket Internet, a Berlin-based firm which invests in technology startups, saw its losses nearly quadruple during the year under review, despite some of its units returning a profit.

Jumia's parent firm ended last year with a net loss of Sh83 billion compared to Sh22.2 billion posted the previous year, a result which management described as “clearly disappointing.”

Revenues during the period dropped 60.8 per cent to Sh5.6 billion.

Rocket Internet operates 10 subsidiaries in predominantly four sectors of online and mobile retail -- food & groceries, fashion, general merchandise and home & living.

“In 2016, our selected companies progressed on their path towards profitability, while demonstrating further growth,” Oliver Samwer, Rocket’s chief executive, said in a statement.

Convenience shopping

There has been an increase in e-commerce in Kenya which has seen the entry of new players as well as the expansion by service providers to avail their products online.

Jumia and its main competitors Kilimall and P Promos (formerly Rupu) have partnered with major brands in clothing, electronics, household goods and even hotels and restaurants to offer users the convenience when shopping.

Good customer service and timely delivery of goods by motorcycle riders remains the advantage that the e-commerce platforms seek against each other in gaining market share.

Poor transport infrastructure and traffic congestion continues to be a nightmare for these portals as well as the logistics with companies they have partnered with for deliveries.

The poor quality of road and rail networks forces firms to transport most of their cargo by air ultimately increasing the cost to customers.

“Africa’s online retail sector has started to grow at a fast pace, driven primarily by the increased penetration of smart mobile devices into the continent’s markets,” a 2016 report by property management company Knight Frank noted.

“The cost of moving goods in Africa is, on average, estimated to be two or three times higher than in developed countries and transport costs can represent as much as 50-75 per cent of the retail price of goods.”