By Prince Osuagwu, Hi-Tech Editor
The Nigerian e-commerce sector can be termed prosperous at current worth of over $17bn. It becomes all the more, merrier, with a projection of $75bn by 2025, according to popular industry forecasters, McKinsey.
This is buoyed by a growing cashless economy which began in Lagos in 2012 and has seen digital payment and electronic banking implemented in phases across 27 states of the federation. “However, despite the positive projections and huge potential in Nigeria’s emerging e-commerce landscape, the sector is replete with challenges.
Many players are either falling out or struggling to remain afloat. In little less than two years, a number of promising e-commerce ventures have either quietly exited the Nigerian market or declared their decision to make a shift away from a decidedly difficult terrain, even with the enviable population and all other right mix of ingredients to replicate the feats of world renowned players like Amazon and Alibaba.
The likes of Gloo.ng, OLX, DealDey and Efritin, are among many notable outfits that have experienced the difficulty of standing firm and afloat in the Nigerian e-commerce market.
Gloo.ng was hit by the 2016 recession which impacted heavily on businesses. The company also added a negligible Nigerian middle-class market and huge logistics challenges as reasons for the exit of the e-commerce firm which operated for almost seven years. The story was not much different for Efritin, an online marketplace for used goods which officially pulled the plug on its Nigerian operations on January 9th 2017, barely 16 months after its official launch.
Dealdey, Nigeria’s only daily deals website, shut down its Nigerian operations almost a year after suffering severe financial challenges which led to a mass staff layoff. The company had been struggling for a while to keep its head above water despite being the subject of a well-publicised acquisition in 2016 by Ringier and Africa Deals Group, RADG.
But the tide appears to be fast changing with e-commerce outfit like Jumia listing in New York stock exchange and subsequently posting strong results in its second quarter, 2019 report.
E-commerce experts have said that Jumia’s second quarter results, proves that with some resilience, no e-commerce company will ever go under, in Nigeria.
Lagos based e-commerce analyst, Jonathan Edukpaye said: “I am shocked and impressed at the same time, the way Jumia transforms from a struggling ecommerce outfit to now becoming the torchbearer. The first miracle was listing in the New York stock market. And, now, when I look at its quarter 2 report, I see hope for every ecommerce platform hoping to operate in Nigeria. It shows that all it takes is a little resilience. I can confirm that quite a few months ago, Jumia was struggling, but today, it has given hope to any investor wanting to invest in the Nigeria e-commerce sector” he added.
Jumia has just recently released its financial results for the second quarter of 2019.
The report showed a topline growth to 4.8 million users while gross profit increases by 94 percent.
However, it recorded EBITDA loss of – €44.2m, or 15.7 percent of GMV. Experts said that despite the Solid top line, efficiency gains disappointed and could raise implications where investors are likely to be encouraged by the top line trend, but increase focus on the timing and scale of a further capital raise, due to the lack of greater progress on expense efficiencies.
Meanwhile, CEOs of Jumia Sacha Poignonnec and Jeremy Hodara are not afraid of the perceived implications. They see a company moving in the right direction. “During the second quarter of 2019, our Gross Merchandise Volume, GMV, increased by 69 percent year-on-year and our Gross profit grew by 94 percent. Our Adjusted EBITDA loss as a percentage of GMV decreased by 5.62 percentage and our Operating loss, amounting to Euro 66.7 million, decreased as a percentage of GMV by 1.48 percentage.
“These results reflect our continued focus on offering a relevant and engaging online shopping and lifestyle destination for consumers, while providing our sellers with an attractive value proposition and a platform to grow their businesses. We remain focused on all aspects of our growth strategy, particularly JumiaPay, as we continue to drive its usage in our markets.
“We continue to deliver on our financial strategy of generating strong growth of our topline drivers, while accelerating monetization, driving cost efficiencies and developing JumiaPay” they contended.
Presenting the report to the media, in Lagos, Jumia Nigeria CEO, Juliet Anammah explained that: “GMV increased this quarter by 69 percent compared to the second quarter of 2018, due to a variety of factors, including strong marketplace growth and robust consumer acquisition and re-engagement momentum.
“The number of Active Consumers as at June 30, 2019 was 4.8 million, up from 3.2 million a year ago and 4.3 million at the end of the first quarter of 2019.
These increases are a result of our continued focus on selection, price and convenience, as we strive to be the preferred online shopping destination for consumers in Africa for all their daily needs. During the second quarter of 2019, we continued to increase the assortment available on our platform and to engage with consumers through relevant local commercial campaigns such as our Mobile Week and Ramadan campaigns”.
She also said that in parallel with the strong increase in GMV and Active Consumers, Marketplace revenue increased by 90 percent compared to the second quarter of 2018 because of continued monetisation drive from diversified streams including Commissions, Fulfilment, Value Added Services, Marketing and advertising services.
The company also grew Gross profit which increased by 94percent compared to the second quarter of 2018. She said this was as a result of the increased monetisation rate.
“We continued to drive monetization in a gradual manner, introducing attractive services to our sellers aimed at supporting the growth of their businesses.
On cost efficiency, a proud Anammah stoutly claimed: “We continued to balance strong growth with cost discipline. While delivering strong growth of our topline drivers GMV and Active Consumers, our Sales & Advertising expense as a percentage of GMV decreased by 76 basis points (bps), from 6.2 percent of GMV in the second quarter of 2018 to 5.4 percent in the second quarter of 2019, reflecting the strong Jumia brand awareness and attractiveness of our platform to consumers.
Adjusted EBITDA loss as a percentage of GMV improved from negative 21.4 percent in the second quarter of 2018 to negative 15.8 percent in the second quarter of 2019.
Development of JumiaPay
She noted that JumiaPay remained a key focus area to the company even as it is now offered in six countries – Nigeria, Egypt, Ivory Coast, Ghana, Morocco and Kenya.
She said that collectively, these six countries represented a combined population of almost 440 million people in 2018, according to data from the United Nations Population Division