Less than a year after Rocket Internet’s Africa Internet Group, AIG was collapsed into Jumia, the company has shut down Jumia Market, its merchant based marketplace formerly called Kaymu.
Sources close to Jumia said over 70 staff on the Jumia Market team were laid off with just about 15 people left in the team.
Jumia has not commented on the matter. However, the company is not likely to comment on the matter as it is major controlled from Berlin by Rocket Internet, its holding company which owns about 24% stake in the company.
The company has in the last two years witnessed massive impairments to its bottom line. The crash in global oil prices which plunged Nigeria’s economy into a recession and a subsequent devaluation of the Naira (NGN) was a major blow to Jumia, Konga and many other Internet start-ups who opened shops in 2012 at the height of oil prices surging to all time highs.
In its first quarter result, Rocket Internet disclosed that Jumia Africa (with Nigeria responsible for over 60% of revenue) recorded a net loss of EUR23.7 million. While the result was a slow down in net losses on a year on year basis. The loss reduction was a small shave when compared to its net loss for first quarter of 2016 when the company reported that it suffered EUR24.9 million net loss.
The result raises doubts as to how Jumia will steer its way into profitability by 2019 as predicted by the company’s chief executive in 2016.
On a year on year basis, Jumia saw a decline in net revenue to EUR19.2 million compared to EUR23 million in the previous year. Jumia also saw a dip in its lifetime customer base within the period to 1.6 million from 1.7 million posted last year.
Jumia has not released its result for the second quarter. Analysts polled by PageOne.ng actually concluded that the shut down of Jumia Market was a step towards reporting its second quarter result which is due to be reported on the 28th of September, 2017. It is still a long time, it expected that the early shutdown would allow Rocket Internet to take stock of the impairments in order to further cut its costs.
However, other analysts argued that Jumia should have since consolidated all other units including Jumia Food, Jumia Travel and Jumia House into the Jumia platform instead of only scrapping the Africa Internet Group but the sub units were still be run as semi-autonomous companies.
Some also of the view that given the companies current loss positions, it would need to shut down more units which further see a deep cut down in its staff strengths.
Is the grass greener on the other side?
Jumia is competing head-on with Konga, a Naspers and Kinnevik AB startup. Konga has also had its fair share of massive impairments to its bottom line.
In its interim results, Naspers, a 50.09% stake owner in Konga said it booked a USD53.0 impairment losses for the full year 2016 on its joint investment with Kinnevik. As a reality check, Kinnevik also did a major write down of its investment in Konga down by USD13.8 million.
The last time Naspers and Kinnevik invested in Konga was in 2015. At that time, Naspers disclosed that it invested about USD41 million alongside Kinnevik. Konga has not raised further cash which further begs the question if more write downs will not be on the way.
To further cut down expenditure and retain more cash in its books, both Jumia and Konga have cut down their marketing and capital expenditure. Konga reportedly laid off about hundreds of people last July. Jumia did continue to cut down its workforce across units and because its scale is doubled that of Konga, it is expected to further trim its size.
As at the 2016 year end, Kinnevik said Konga’s active customers (total number of people who have shopped on the site over six months) was 184,000 while Jumia Nigeria’s customer base was estimated at 400,000. The continuous underperformance of two of Nigeria’s largest eCommerce companies is a sign of worry for many analysts and investors in general.