African e-commerce giant Jumia has announced plans to shutter its South African fashion retailer, Zando, and wind down operations in Tunisia by the end of the year. This move is part of a broader strategic shift aimed at refocusing the company’s resources on its more profitable markets, including Nigeria, as the company seeks to streamline operations and enhance profitability.
Strategic Realignment: The End of an Era for Zando and Tunisia
Founded in 2012, Zando.co.za has become one of South Africa’s most well-known online fashion retailers. However, as macroeconomic pressures mount and competitive challenges intensify, Jumia’s leadership has determined that the business trajectory in these regions no longer aligns with the company’s group strategy. The closure of the Tunisian arm, which has been running under the Jumia brand for over a decade, follows a similar rationale.
According to Francis Dufay, Jumia’s CEO, the closures are part of an aggressive cost-cutting campaign designed to sharpen the company’s focus on its core markets. “The trajectory of these countries did not align with our group strategy. We believe this is the right decision, as it allows us to concentrate on markets with stronger growth potential,” Dufay explained during the announcement.
The withdrawal will result in 110 job losses, although some employees may be relocated within other divisions of Jumia. Both Zando and the Tunisian operations will hold clearance sales ahead of their closure, with Dufay confirming that there are no immediate plans to sell either operation.
Focusing on Profitability in Core Markets
Jumia’s decision to exit these markets comes as part of a wider restructuring effort. The company is aggressively trimming its operations to focus on more promising markets such as Nigeria, Egypt, Kenya, and Morocco. In addition to scaling back operations, the company is also cutting back on services like everyday grocery and food delivery, which are not central to its e-commerce business.
While both Zando and Tunisia represented only 2.7% of total orders and 3% of Gross Merchandise Value (GMV) in the first half of 2024, the closures highlight the company’s commitment to tightening its financial performance and reducing operating losses. Dufay noted that the company’s refocus on core e-commerce activities is vital to long-term profitability.
Jumia’s Q2 2024 Financial Performance
The shutdown announcement coincides with the release of Jumia’s second-quarter financial results for 2024, which reveal a 17% decline in reported revenue to $36.5 million. The company attributed this drop to regional currency devaluations, which negatively impacted both Gross Merchandise Value (GMV) and Total Payment Volume (TPV).
However, when adjusted for currency fluctuations, Jumia saw a 15% revenue increase on a constant currency basis, indicating robust performance masked by economic headwinds. Despite the revenue decline, GMV grew by 35% in constant currency, reflecting strong underlying demand and customer engagement.
The company’s commitment to cost discipline has also yielded positive results. Operating losses decreased by 8% year-over-year, while Adjusted EBITDA losses improved by 10%, signaling the effectiveness of Jumia’s ongoing cost-cutting measures. More importantly, the company’s cash burn was slashed by over 50%, falling to $8.7 million, reflecting a more efficient use of resources.
Cost Management and Strategic Shifts: Path to Profitability
Jumia’s leadership has highlighted the importance of enhancing cash efficiency and refining the company’s customer value proposition. With Jumia pulling out of less profitable verticals such as food delivery and redirecting focus to its core e-commerce strengths, the company is positioning itself for sustainable growth in key markets.
Part of this strategy has been a 19% reduction in marketing expenses, focusing more on high-return channels such as CRM, SEO, and targeted offline initiatives. The company is doubling down on optimizing product offerings, improving logistics, and leveraging strategic partnerships to better serve its core customer base.
Dufay has consistently emphasized that these moves are part of a long-term plan to stabilize the business. “We are committed to building a leaner, more focused Jumia that delivers sustainable growth in our key markets. We’ve seen significant operational improvements, and the path to profitability is clearer,” he said.
Looking ahead, Jumia’s strategy revolves around consolidating its operations in its nine remaining markets, with Nigeria taking center stage. The company will continue to focus on expanding its presence in Africa’s largest economies, while keeping an eye on emerging opportunities in markets with high growth potential.
Jumia’s ability to navigate Africa’s complex economic landscape and adapt its operations is critical to its future success. With a commitment to efficiency and a laser focus on core business strengths, Jumia aims to remain the go-to platform for millions of African consumers.
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