Jumia, an ‘Amazon’ for Africa has closed its e-commerce operations in Tanzania, after a similar move in Cameroon, raising questions on the future of the firm known for rapid expansion.
Jumia, which looks to be on a path to pivot from eCommerce portals to classifieds platforms in its weaker markets, said in a statement that based on its review of the path to success, it decided to cease operations in Tanzania yesterday, 27th Nov 2019.
“While Tanzania has strong potential and we’re proud of the growth we’ve collectively seen stemming from Jumia’s adoption, we have to focus our resources on our other markets. This decision isn’t easy but will help put our focus and resources where they can bring the best value and help Jumia thrive.”
The firm added that it would continue to support buyers and vendors through its classifieds portal, previously called Jumia Deals, which will now be the main portal jumia.tz. By turning to classifieds, Jumia is giving up hope after spending millions of investor money in Tanzania and cutting off jobs and revenues to both the employees and the government. However, this move is aimed at helping the e-commerce firm to focus on its core markets such as Nigeria, Egypt, Ghana and Kenya among others.
Recently, Jumia shut down its ecommerce portal and suspended its e-commerce operations in Cameroon on 18th November with the same view of putting its focus and resources on mature markets.
In a statement, Jumia Co-Founders Sacha Poignonnec and Jeremy Hodara said: “Jumia is grateful to its employees in Cameroon for the hard work over the past five years and we know that Cameroon is not short of talent. The team has fought to change the way business is done and with the support of its employees, the company has proven to be the leading eCommerce in the region. This would not be possible without the combined efforts, great contribution and dedication of our Jumia Cameroon team.“
In Cameroon, Jumia also announced it will continue to support buyers and vendors via its classifieds portal, previously called Jumia Deals and which will now be the main portal jumia.cm. Cameroon has a population of some 25m people with over 6m of them using the internet while Tanzania has a population of 61m with 23m internet users. These are not all buying online and therefore Jumia’s addressable market in these countries is tiny. Also, the economic levels and standard of living are not that high in most countries across Africa and therefore being online doesn’t necessarily mean one will be shopping online. Though it makes perfect sense for Jumia to close shop and focus on major markets in Africa, Jumia is generally struggling due to poor uptake of e-commerce in Africa.
Jumia’s gross profit increased by 93.6% from €8.9 million in the second quarter of 2018 to €17.3 million in the second quarter of 2019 while its operating loss increased from €41.9 million in the second quarter of 2018 to €66.7 million in the second quarter of 2019.
The firm has therefore been shifting to JumiaPay, its financial services arm live in Nigeria, Egypt, Ivory Coast, Ghana, Morocco, and Kenya, as its key focus area.
“We have also expanded the scope of JumiaPay beyond our physical goods marketplace. As of December 31, 2018, JumiaPay was only available within our physical goods marketplace. It is now also available within our on-demand services, Jumia Food, and hotel booking portals, Jumia Travel, in selected countries,” said Sacha Poignonnec and Jeremy Hodara, co-CEOs of Jumia.
Apart from its first-mover disadvantage, Jumia is also struggling due to lack of internet access in some regions, poverty, illiteracy, and infrastructural inefficiencies such as logistics, payments among others.
Jumia has also been hardest hit by internal fraud leading it to fire hundreds of its staff in various countries, especially from its JForce teams. Fraud is also a challenge where cash on Delivery is involved. Related to logistics is the lack of a national street address system in most African countries which makes deliveries slow and expensive.