Saturday, July 13, 2024

Here are the reasons behind Jumia Kenya $87M losses recently

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E-commerce platform Jumia made a cumulative loss of $87.8 million (Sh11.8 billion) by the close of 2021 in the Kenyan business, nearly nine years into operations since it set up shop in the country in May 2013.

This was a $9 million (Sh1.2 billion) increment from the $78.8 million (Sh10.6 billion) booked in 2020 which in turn was a rise from $72.7 million (Sh9.7 billion) recorded in 2019.

Regulatory filings show that the online marketplace had accumulated a total of $738.9 million (Sh99 billion) in gross losses as of the close of 2021 from all the over 10 markets that it operates in worldwide.

Jumia Kenya, which bets on future growth to break even, plans to use the accumulated losses to offset future tax obligations once it leaps into profitability.

It is an example of tech-enabled startups that have set base in the country and rely on funding from institutional backers as they work to grow scale with an eye on eventual profitability.

The platform, which deals majorly in household food items, appliances, electronics and furniture, does not have its own inventory but instead sells merchandise from third-party retailers and wholesalers.

In 2021, the firm’s e-Commerce Index rated sugar, maize flour, cooking oil as well as make-up products as the most ordered items, with general beauty products accounting for 57 percent of all goods sold on the platform by value, an increase from 44 percent the previous year.

During the year, electronics and phone orders dropped to 43 percent from a high of 56 percent the previous year as the Covid-19 pandemic restricted consumers from purchasing basic needs items.

The rate of adoption of online marketplaces in Kenya still remains low attributed to high delivery costs, highly fragmented markets and lack of clearly named streets and buildings leading to supply chain barriers.

E-commerce penetration is around one per cent in Africa, behind 12 per cent in the USA and 20 per cent in China.

Jumia is banking on the increasing adoption of online shopping, tied to the growth of the digital economy and the number of people using the internet, to expand its footprint and get to profitability.

As of 2021, the firm accounted for over 11,000 sellers countrywide and more than 1,000 pick-up stations.

On Wednesday, Jumia Kenya unveiled Charles Ballard as its new CEO to be charged with leading business development and transformation in the country.

Jumia’s apparent struggle to break even is part of a continuing trend where promising tech companies in Kenya have consistently taken a hit, with at least seven of them have closed down within the last year.

A bulk of them has cited difficult market conditions as well as funding drought, with venture capitalists from developed economies appearing reluctant to push forth investments due to fears of recession and interest hikes.

Source: Business Daily

Samuel Musila
Samuel Musila
Passionate Software Developer and Tech content creator From Nairobi, Kenya

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