Jumia’s venture into quick commerce could slow its path to profitability

Q-commerce is known for its tough unit economics and thin margins. Why is Jumia making a play?

Profitability has been an ongoing theme for Jumia since it went public in 2019. Each time the pan-African e-commerce platform releases its quarterly financials, investors and tech stakeholders dwell on its adjusted EBITDA and operating losses.

While the company’s financial results in the last couple of years have detailed slow and steady growth, Jumia’s continuous losses are a recurring cause for concern. A few investors that have spoken to TechCrunch believe the e-commerce giant is light-years from achieving profitability, and it’s not difficult to understand their perspective.

Jumia’s adjusted EBITDA throughout 2019 stood at a loss of €182.7 million (about $204.5 million). In its 2020 financials, the company said it had demonstrated meaningful progress on its path to profitability, improving its adjusted EBITDA deficit to a loss of €119.5 million that year (around a $136.3 million adjusted loss).

Co-CEO Jeremy Hodara reiterated this in an interview with TechCrunch referencing the company’s reduced losses in Q4 2020. “We’ll be trying to do so every quarter. We want to go about it by improving the efficiency of the business and opening new avenues for growth,” Hodara said. But by the end of 2021, Jumia’s adjusted EBITDA losses ended at $196.7 million, a 44% increase from the previous year.

Although the e-commerce company started 2021 on a good footing, reducing losses a bit in the first quarter, it reverted to its old method of executing aggressive advertising, which it had slowed during the pandemic. As the company grew its GMV, orders, quarterly active customers and revenue in the subsequent quarters, its losses compounded, particularly in Q4, when it reached $70 million, a 107% year-over-year increase.

Sacha Poignonnec, the company’s other co-CEO, told TechCrunch in an interview last month that Jumia plans not to exceed $70 million of losses in future quarters.

“We are stabilizing our level of marketing and investments,” he said. “There will be some fluctuations here and there, but we will reduce our losses below this peak we had in Q4.” Jumia anticipates a loss of not more than $220 million this year, which would surpass 2021’s numbers.

Jumia has expanded its results along many e-commerce metrics that matter since going public: orders, revenue, user base and GMV. The company has also improved its monetization outlook with JumiaPay (the fintech recently acquired licenses to process payments for third-party businesses in Egypt and Nigeria) and its logistics arm. Yet its path to achieving profitability remains arduous, perhaps even more so as it enters the quick commerce (q-commerce) space.