In two weeks, Jumia Group has suspended its e-commerce operations across two nations. A week ago, the e-commerce firm shut its business in Cameroon, a development that dismayed its customers in the Central African state.
The customers and clients of the African brand in Tanzania were also shocked when they found that the company has suspended operation in the East African nation too.
What it means: Jumia has shut down operations in five African countries. They are Gabon, Congo, Rwanda, Tanzania, and Cameroon.
Jumia reportedly suspended operations in Tanzania and the other African countries to focus resources on locations where revenue potential is higher. The company is now concerned with the markets that offer better value rather than merely expanding its operations in countries where purchasing power is low.
Was shutdown expected?
The shutdown in Tanzania didn’t come as a surprise to some, especially Nairametrics, which listed the East African country as the next possible target.
The surprising thing is that the news broke sooner than expected. Also, the manner it happened in the two countries could be attributed to the fact that the company’s workers in both countries were allegedly sacked.
Last week, Jumia, in a statement released after it shut down in Cameroon, said its model of operation wasn’t suitable for the Central African state.
Why Jumia exited Tanzania
In a statement issued on its shutdown in Tanzania, Jumia said it wanted to focus on markets that help it to thrive. One of such markets is Nigeria, which was Jumia first stop in Africa.
In a statement issued and reported by Reuters, stated, “We have to focus our resources on our other markets. It is more important now than ever to put our focus and resources where they can bring the best value and help us thrive.”
But while the e-commerce operation will cease to exist in Tanzania, the company will continue to offer merchants (sellers) and buyers a platform, classified portal, for offline transactions.
Where next for Jumia’s hammer
The question now is, where next?
It is believed that Nigeria, Egypt and South Africa are key revenue drivers of the e-commerce firm but countries like Uganda and Senegal are considered as some of the smaller markets in Jumia’s portfolio. Consequently, as previously reported, the workers in these smaller markets will remain jittery until their market picks.
What this means
In its early days, Jumia took the path of growth, neglecting profit. But this review of resources shows the company is retracing its steps to profitability while sacrificing growth rate or expansion of services across Africa.
The shutdown is an attempt to cut down on its operational cost and losses as it plans to meet its profitability projection by 2022. Jumia’s operating loss increased by 34.6% from €40.6 million in the third quarter of 2018 to €54.6 million in the third quarter of 2019; since entering the e-commerce business in 2012, the company has lost about N362.3 billion ($1 billion).
How does this play for investors?
The continuous shutdown supports the argument that Jumia grew too fast beyond its capabilities. However, this growth has been the unique selling point which investors have found appealing in Jumia.