African e-commerce giant Jumia is betting on Nigeria despite the country’s economic challenges, aiming to steer itself toward profitability.
Francis Dufay, CEO of the Nasdaq-listed company, outlined plans to streamline operations in Nigeria by consolidating its three warehouses into a single, expansive 30,000-square-meter facility in Lagos. This move aims to reduce expenses while extending its reach to more cities across the West African nation, he told Bloomberg.
Since going public, Africa’s largest e-commerce platform has focused on profitability and cost-cutting. This strategy has led it to cease operations in some markets and offload challenging verticals, most recently closing its food delivery business. In recent years, the company has also reduced its advertising spend and laid off workers as part of its cost-cutting measures.
Nigeria, with its population of 200 million, presents a significant opportunity for Jumia to reach the critical mass required to break even. However, the company faces challenges such as currency issues and rising living costs, which have led several multinational companies to leave the market.
Despite these obstacles, Dufay remains optimistic, describing Nigeria’s current macroeconomic situation as temporary and predicting a positive turnaround in the medium term. Nonetheless, Jumia’s first-quarter financial results tell a different story, showing an operating loss of USD 8.33 million, even though revenue saw a modest increase of 5.7% to USD 48.9 million.
Acknowledging the importance of scale, Dufay stressed the need for a streamlined operational structure to offer competitive pricing across its services, including delivery, to meet the demands of Nigeria’s price-sensitive consumers.
In Nigeria, Jumia faces the challenges of currency devaluation, erratic electricity supply, and logistical bottlenecks at ports, which together exacerbate the country’s economic difficulties. Despite this, Jumia remains optimistic about Nigeria’s economic recovery, aligning itself with government efforts to control inflation and attract investments.
Dufay reaffirmed Jumia’s commitment to flexible pricing strategies, emphasizing Nigeria’s role as a crucial market for consumer demand, and signaling the company’s steadfast determination to overcome the challenges ahead.
Meanwhile, Jumia is exercising caution by conserving its cash reserves while simultaneously introducing innovative financing options such as buy-now-pay-later to support customers dealing with inflationary pressures.
Source: https://www.techinafrica.com/jumia-bets-big-on-nigeria-despite-economic-challenges-in-bold-restructuring-move/