Rocket Internet’s Jumia is not yet in the safe zone. For the first nine months of the year, the company’s gross revenue crashed to EUR54 million.
It is a staggering fall of 49% compared to EUR107 million in the year before. The macro-economic challenges and structural changes that the company has gone through are evidently taking a huge toll on its business.
These data were released shortly by Rocket Internet, the parent company of Jumia. While the actual loss suffered in the nine months period has not been disclosed, Rocket Internet disclosed that additional losses were booked on newer ventures “EBITDA for the first nine months 2016 is negatively affected by additional losses related to other marketplace and classifieds businesses contributed by AIG in the merger with AEH. This is particularly attributable to the early stage of the contributed businesses.
It would be recalled that Jumia suffered a net loss of EUR35.4 million for the first six months of the year, this latest disclosure is sure to be a profit warning for Rocket Internet.
The group has already disclosed that it will be reporting a net loss of EUR642. Although the loss was cut down by 60% when compared to its 2015 nine months record, losses have also fallen by 979% on percentage difference.
The company’s war chest to keep defending and funding loss making ventures such as Jumia as is also fast depleting. Cash and cash equivalents at the end of the period fell to EUR1.5 billion compared to EUR1.8 billion in the year before. This represents a 17% fall year on year.
However, the new direction and/or structure will continue to be problematic. The fact that Jumia moved to a merchant system and the depth and focus of its product offerings are the same will not change anything quickly or in the nearest quarters to come.
Since Nigeria’s recession came into full swing, there are significant lifestyle and behavioural changes that are taking shape. Jumia and other eCommerce companies have only gone on the defensive. No product innovation has been carried out to ensure these eCommerce companies address these changes.
Online shoppers who are still offline people have reduced their appetite for gadgets, electronics and fashionable items to basic needs, groceries, food stuff and major consumables. The unavailability of these things online have pushed them to offline retail stores. Until Jumia and its ilks change their strategy and business model, analysts agreed that they might bleed to death, a development that will cast a shadow on whether Africa is ready for eCommerce.