The decision to go leaner has not only impacted on Jumia Technologies sustainable growth but has also crashed the e-commerce giant overhead costs.
According to report, this much was reflected in the Q4 2023earnings of the e-commerce company.
The report stated that, in the year 2023 Jumia Technologies took some very decisive steps towards reducing its losses and setting the company on a path of sustained growth and profitability.
Though, while some of these steps have caused quite a stir across different ranks and concern about the company’s future, Jumia’s earnings report for the fourth quarter of 2023 proved that the decisions were timely and yielded positive results.
Trimming Expenditure
In Q4 2023, the company opted to trim its sales and advertising expenditure to $6.2 million, scaling back investments in consumer incentives like vouchers and free shipping. This marked a substantial 62.8% decrease in advertising spending compared to Q4 2023. Moreover, its general and administrative expenses, excluding share-based compensation, were reduced to $12.3 million. This strict adherence to its cost discipline strategy appears to be paying off.
Cutting Losses and Bolstering Sales
Lower losses were not the only highlight of the Jumia Q4 2023 earnings report. All indications show that the company’s decision to pivot from fast-moving consumer goods (FMCG) to focus on priority categories: Phones, Electronics, Home & Living and Fashion and Beauty. Cumulatively, on all five categories, the company recorded 88% on items sold and 95% GMV in Q4 2023 as opposed to the 80% on items sold and 93% GMV recorded in Q4 2022. The spike in these categories came on the heels of the company identifying and leveraging new sourcing routes.
Recall that in the second quarter of the year 2023, Jumia CEO, Francis Dufay, highlighted the company’s focus on building supply in the markets it served across Africa. According to him, “Building supply is the right thing to do, especially in a tough market and macroeconomic context. People want cheaper products and better deals. And that’s what we’re building on our platform.” The company’s strong performance in its priority categories in Q4 2023 coupled with the rise in Average Order Value (46% as opposed to the 13% recorded in the fourth quarter of 2022) shows that the company’s leadership is on to something.
Increased Value Proposition and Strategic Marketing Tactics
Combining a focus on priority general merchandise categories and more cost-efficient supply routes has led to a stronger value proposition, as evidenced by increasing repurchase rates. In the fourth quarter of 2023, Jumia recorded a 1% increase in 30 days repurchase rate by new customers, across all categories — this is when compared to the repurchase rate of new customers in the same period in 2022. The company also recorded a 3% increase in 90 days repurchase rate, across all categories, for new customers in Q3 2023 cohorts versus the same cohort of new customers in 2022.
