Summary
A Jumia executive responded to the critique of the company’s spending relative to current results.
The overall interview included important information on Jumia’s mission, sustainability push, as well as a quick spotlight on Jumia’s key competitors.
Today’s valuation-sensitive market has pushed Jumia to pricing in more of the immediate risks and less of the good outcomes that await in future years.
Samir Hussein/Getty Images Entertainment When Jumia Technologies (NYSE: JMIA ) fell 19.2% post-earnings, I hoped the lows from November 2020 earnings would hold as price support. Instead, investors continued dumping JMIA. They seemed mainly disappointed by news of a ramp in spending.
Days before earnings, in an interview with Stanford University’s Entrepreneurial Thought Leaders (ETL), Juliet Anammah, the chair of Jumia Nigeria and the Chief Sustainability Officer of Jumia Group, provided a succinct answer to the spending question. Someone in the virtual audience asked when Jumia will find its inflection point given the billions of dollars spent so far and just 7M MAUs (monthly active users) at the time. Anammah coolly responded that she cannot predict the time of inflection. For the foreseeable future, the company is focused on increasing users, assortments, sellers, and brands. Jumia wants to create excitement and offer products with the right pricing. In other words, the company is building and investing, and the inflection point is supposed to follow. (Jumia DID report an inflection point in its GMV (Gross Merchandise Value) growth in the last earnings report). Mission and Sustainability
That inflection question came at the very end of the interview. Most of the time was spent on a variety of key topics important for investors. I summarize the top points as Jumia’s mission to participate in the growth of e-commerce across its 11 operating countries. Anammah described it as a mission to “improve lives through the power of the internet.” Jumia sees sufficient upside in its 11 countries that it is not looking for market expansion. This focus makes sense given the level of spending and investment in Jumia’s current markets. Moreover, Jumia recently downwardly rationalized its markets to control costs and operational complexity.
Anammah briefly described the following focal points for the business: Apply data to logistics issues: where, when, and how to deliver products
Apply data to understand consumer preferences
Educate regulators on how to support e-commerce
Facilitate a broad array of payment options
Use sustainability to reduce inequality (51% of Jumia’s sellers are women)
Last year was Jumia’s first year in its sustainability push. The company is currently using the following metrics to track its progress: the number of sellers classified as SMEs (small and medium enterprises), how many sellers are women, and how many sellers are getting loans to conduct business. I think of these metrics more like describing empowerment. Presumably empowerment will enable businesses to act sustainably. Competition
Anammah pointed out that e-commerce is only about 2-5% of all commerce in Africa right now. The upside is very promising. While Jumia is succeeding, she cited two key competitors: Konga and Takealot.
Konga is a Nigerian e-commerce marketplace founded in 2012 and now owned by the Zinox Group. Konga describes itself as “Nigeria’s largest online mall.” The company’s ambitions span the continent to become “the engine of commerce and trade in Africa.” For now, Konga is a formidable competitor with Nigerian revenues reportedly about half of all Jumia’s revenues.
Takealot is a South African e-commerce platform owned by Naspers since 2015. The company is South Africa’s leading e-tailer and reportedly generated $606M in revenue in the year ended March, 2021 . This revenue dwarfs Jumia’s $160M over the same time frame . With its impressive portfolio of e-commerce businesses and platforms, Naspers as a whole looks like a substantial competitive challenge to Jumia. Naspers generated $16.6B in revenue in the first 6 months of its fiscal year 2022.
Anammah did not reference other competitors like Kilimall in Kenya and Bidorbuy in South Africa. The Valuation Challenge
Jumia has a large opportunity. Yet, the collection of players in the market means the competitive landscape will likely be quite dynamic in coming years. Until Jumia clears its way to sustained profitability, the business model includes important risks; e-commerce consumers in Africa’s biggest markets have alternatives.
Last year’s pricing peak looked like a validation for taking the investment risk . However, the year was dominated by a downtrend that took JMIA back down and toward the bottom of its valuation range in terms of the price-to-sales ratio. Overall, investors became more valuation sensitive and […]
source Jumia Technologies: Spending, Sustainability, Competition And Valuation
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