On February 25, the African e-commerce platform Jumia announced its fourth quarter 2019 financial report. Data show that during the period, revenue was 49.28 million euros, an increase of 14% year-on-year; losses increased by 34% to 227.9 million euros, and negative EBITDA rose 5% to 51.2 million euros.
Affected by the financial report, as of now, Jumia's share price has fallen by more than 27% and is now reported at $ 3.99.
Of course, as the largest e-commerce platform in Africa, Jumia also has its own highlight moment. After landing in the capital market in April 2019, it became the first African company to be listed on a large global exchange. On the first day of listing, the stock price rose by more than 75%, with a market value close to $ 2 billion. However, the good times are not long. After being targeted by short-selling institutions, the stock price has also become weak. The current share price of $ 3.99 is much lower than the issue price of $ 14.50.
In addition to the setback in the capital market, there are also challenges in the business. Although African local e-commerce platforms of equal size have not yet appeared, they are facing competition from e-commerce giant Amazon and a growing number of local small businesses that offer online shopping, such as Kilimall and Mall for Africa. Judging from the core data of this financial report, the development of Jumia with the title of "African Amazon" is not smooth, and it has been questioned by many people. Today, GMV has fallen and losses have been further expanded. Will it be able to achieve breakeven or turn losses into profits in the near future? Through this financial report, we may find some value points worth exploring.
Revenue increased by 14% year-on-year, while losses increased by 34% to 227.9 million euros.
Data shows that Q4 revenue in 2019 increased by 14% year-on-year to 49.28 million euros , compared with 43.28 million euros in the same period last year. Regarding revenue growth, Jumia said that in the fourth quarter of 2019, it rebalanced its business portfolio, shifting it to a higher consumer lifetime value business, reducing the promotional intensity of certain product categories, while driving lower prices, The growth of more frequently purchased products. This supports the growth of consumer purchases and usage. Data shows that active consumers reached a record 6.1 million in Q4 2019, an increase of 54%, and orders increased by 49% to 8.3 million from the fourth quarter of 2018.
However, it is precisely because of the rebalancing of the business portfolio that has led to a reduction in promotion expenses, and the company's mobile phone and electronic product sales have also shrunk, which has affected GMV and slowed the growth of GMV. During the quarter, Jumia's GMV fell by 3% to 301 million euros.
During the quarter, the gross profit reached 24.8 million euros, an increase of 64% over the same period of the previous year. The gross profit after fulfilling the expenses was 1 million euros, while the loss in the fourth quarter of 2018 was 2.1 million euros. Gross profit increased by 64% year-on-year in the fourth quarter of 2019, and increased by 72% for the entire year of 2019.
From a loss perspective, Jumia's loss for the quarter expanded by 34% to 227.9 million euros, compared with 169.7 million euros in the same period in 2019. Negative EBITDA increased by 5% in the fourth quarter, from 58.6 million euros in the same period in 2018 to 51.2 million euros.
It is worth noting that Jumia launched anAxa money market fund product in Nigeria in 2019, and launched some promotion projects on the Mastercard network. The data shows that JumiaPay transactions increased by 110% year-on-year in the fourth quarter of 2019, and increased by 278% in 2019. The total payment volume increased by 57% year-on-year to 45.6 million euros, and JumiaPay was used to pay 29% of Jumia e-commerce orders.
In summary, Jumia's fourth quarter 2019 financial report is not necessarily very beautiful. Although revenue has maintained a growth of 13.85%, GMV, which has been placed in a prominent position before, has declined in this quarter. The loss also increased by 34%. With the negative impact of the new coronavirus in 2020, Jumia said it is likely to affect its growth in the next few quarters, which means that it is facing new challenges and is likely to affect its revenue in the next quarter. The hidden worries behind this financial report also add a bit of uncertainty to Jumia's future.
The e-commerce market in Africa is too fragmented and the advertising costs are too high. The profit space is squeezed.
Jumia is currently operating in 14 countries in Africa, with a total population of about 700 million people, accounting for 72% of Africa's GDP and 77% of African Internet users. It can be said that Jumia's position in the e-commerce market in Africa is not to be underestimated. In fact, based on the current demographic dividend and potential market opportunities in the African market, Jumia is also constantly expanding its product portfolio in an attempt to increase its growth rate.
But the current situation in the African e-commerce market also proves that it is not so easy to start e-commerce business in Africa. The African market itself is relatively fragmented, and logistics is not well-developed, and mobile payment has not been popularized. These hardware facilities are all a flaw. Statistics show that in 2016, African mobile payment registered users reached 227 million, exceeding the total number of bank accounts at that time. However, only over 1 million of these accounts have been certified as active accounts. In other words, most registered users cannot become effective users.
At the same time, African consumer concepts and logistics are not conducive to Jumia's e-commerce development. On the one hand, since a large number of people in Africa still have concerns about online shopping, Jumia generally adopts the cash on delivery method. Compared with online payment, this payment method has a higher probability of returning or canceling the order. A lot. On the other hand, many regions do not have a unified address system, resulting in inefficient delivery. Moreover, a large amount of goods on the African e-commerce platform come from overseas, and Jumia is not excluded. In the case of returns, the goods can only be hoarded in the local warehouse. In other words, the cash on delivery method greatly increases the cost of the e-commerce platform. In addition, many countries or regions have high import tariffs, and their ability to purchase products locally is limited, resulting in increased product costs.
According to the analysis of the World Bank, the cost of freight transportation in Africa is about 2-3 times that of developed countries. In its 2014 report, the African Development Bank stated that 53% of Africa ’s roads are unpaved and vehicles are difficult to pass. Formally considering the cost issue, neither the Chinese e-commerce platforms Kilimall and KIKUU, which are developing in Africa, support cash on delivery.
Although Jumia is still the largest e-commerce platform in Africa, local products of the same size have not yet appeared. But it needs to face competition from e-commerce giant Amazon entering the African market and more and more local small businesses that offer online shopping, such as Kilimall. Even though the main coverage area of Kilimall is currently limited to Kenya and Uganda, and has just entered Nigeria and other regions in West Africa, it cannot be ruled out that the increasingly perfect system will impact Jumia in the future. Well, the necessary marketing and advertising are essential. The financial report shows that in the fourth quarter of 2019, Jumia ’s
Selling and advertising expenses were 15.5 million euros, an increase of 14% over the previous year. With the continuous improvement of the market and the intensification of competition in the future, coupled with the general low awareness of Internet shopping in Africa, this fee may continue to rise in the future.
More importantly, Amazon can deliver goods faster and at a lower cost, and Jumia's disadvantage is obvious in this regard. Amazon is focused on building infrastructure, which will make Amazon dominate in the long run. Jumia is taking an asset-light approach and outsourcing services as much as possible. Although the capital requirement is reduced, it will lead to rising costs and reduced competitiveness. It is conceivable that if Jumia cannot change this way of operation, it is destined that it will still face the pressure of marketing advertising and logistics costs for a long time in the future, and it is difficult to achieve profitability in the short term.
Active consumers are growing but per capita consumption income is declining and it is difficult to maintain a stable growth rate. The
latest financial report shows that as of the fourth quarter of December 31, 2019, the number of active consumers of Jumia increased by 54% from 4 million in the same period last year to 6.1 million , Orders also increased by 49% year-on-year. Generally speaking, the rise of active consumers is naturally conducive to the growth of Jumia's performance. However, Q4 Jumia's GMV fell by 3%. However, the Q3 financial report showed that the annual number of active consumers during the period was 5.5 million, an increase of 56% over the third quarter of the previous year, and GMV achieved a year-on-year increase of 39%. It can be seen that the growth of the number of active consumers is not directly proportional to the growth of GMV, there is a certain fluctuation, and the growth rate is not stable.
However, according to data from Hugo.com, even though the number of consumers in Jumia has increased and these new users have placed more orders, the revenue received by each consumer is declining. Even if Jumia can extend the time that consumers stay on the platform and increase their spending, but if the value of consumers continues to decline, Jumia will have difficulty maintaining the growth rate.
Jumia may be difficult to change in this state in the short term. After all, today's cheap commodities have become the main commodities that contribute to sales. Cheap commodities have low profits. In addition, excessive freight costs make it more difficult to maintain their stable growth rate. However, Jumia is also trying to find a series of goods and services other than e-commerce. Will this be a breakthrough for Jumia?
Increasing reliance on fulfillment and advertising revenue but achieving high profitability is not easy. The
financial report shows that during the quarter, Jumia ’s marketing and advertising revenue increased by 120%, which is a rapid growth. 125% is a business segment with particularly good performance; in addition, as early as Q3, the revenue from fulfilling orders has become the largest source of its revenue. It can be seen that Jumia has no longer relied too much on its first-party revenues to increase the importance of its platform business, and its dependence on fulfillment and advertising business is clearly visible. Advertising is a high-profit business. As the number of Jumia users continues to grow, advertising has become an important contributor to Jumia's profitability.
But at the same time, the expenses of the two are also increasing. Fulfillment expenses for Q2 in 2019 were approximately 17.6 million euros, a year-on-year increase of 69.8%, and sales and advertising expenses increased 483% year-on-year to 15.3 million euros. The Q4 data shows that sales and advertising spending increased by 14% year-on-year to 15.5 million euros. This undoubtedly further tested Jumia's management capabilities. Moreover, it should be noted that Jumia outsources it because of the low value-added performance, so it is difficult for Jumia to profit from it, or it is impossible to profit from it. This confirms this.
Conclusion:
Overall, the performance of Jumia ’s Q4 financial report for 2019 is not optimistic. Although revenue has maintained growth, the loss situation has not been reversed. This means that Jumia, which has been established for more than seven years The phenomenon of achieving breakeven and the stock price falling by more than 27% also shows once again that investor confidence has been hit.
However, the e-commerce market in Africa still has great potential, which may bring more imagination for Jumia. On the one hand, the demographic dividend in the African market stimulates the nerves of entrepreneurs and investors from all sides. At present, the population of the African continent is about 1.2 billion. According to the prediction of the United Nations Population Division, this data will reach 2.4 billion in 2050. On the other hand, the penetration rate of smartphones and Internet penetration in Africa are also gradually increasing. According to Global Mobile Communications Systems Association data, as of 2018, in sub-Saharan Africa, smartphones accounted for 39% of all mobile devices, and this number is expected to rise to 66% by 2025. This means that, as the largest e-commerce platform in Africa, behind the market potential, Jumia still has room to increase.
But after all, it is still necessary to speak in terms of profitability. At present, the loss situation is still not enough to retain the hearts of investors. If you want to regain the trust of the capital market, then, how to resume GMV growth to prove its profitability The essential.
Source of this article: US Stock Research Institute-designed to help Chinese investors understand the world, focus on US technology stocks and Chinese stocks, and friends who are interested in US stocks quickly follow us
