Jumia, Africa’s top e-tailer, is set to exit South Africa and Tunisia by the end of 2024, marking a significant shift in its business strategy. The decision, announced in today’s press release, is part of a broader cost-cutting and refocusing effort aimed at streamlining operations and driving profitability.
This move, its latest pull-outs since a flurry of exits from Cameroon and Tanzania in 2019, highlights Jumia’s recalibration amid intensifying competition and challenging market conditions in these regions.
The closures signal Jumia’s intention to focus on its nine other African markets, including Egypt, Kenya, Nigeria, and Morocco, where the company sees greater growth potential.
Jumia’s CEO, Francis Dufay, acknowledged the difficult but necessary decision, stating, “The trajectory of the countries did not align with the strategy of the group,” citing macroeconomic complexities, competitive pressures, and low medium-term growth potential in both South Africa and Tunisia.
South Africa: A Crowded Market Faces New Giants
Jumia’s withdrawal from South Africa comes just months after the local e-commerce landscape was shaken by the official launch of Amazon.co.za. The arrival of the global retail giant in May 2024 brought heightened competition to an already competitive market.
Amazon’s entry, with its vast international reach and extensive product categories, adds significant pressure to local players like Takealot, which had recently sold its fashion arm, Superbalist, amid growing competition from global fast-fashion platforms Shein and Temu.
Dufay hinted at this intense competition, noting that in South Africa, “growth potential was definitely more difficult,” particularly in an environment where local and international retailers are fiercely vying for market share.
Jumia’s local fashion platform, Zando, founded in 2012, had become a well-known name in South African e-commerce. However, with Amazon’s entry offering a seamless shopping experience and competitive pricing, Zando’s ability to compete was severely challenged.
Amazon’s Managing Director for Sub-Saharan Africa, Robert Koen, emphasised Amazon’s focus on convenience and variety, with local and international products, extensive delivery options, and customer support infrastructure. “We provide customers with great value, broad selection—including international and local products—and a convenient delivery experience,” Koen said during the launch. This aggressive expansion strategy likely left less room for local players like Jumia’s Zando to grow and compete effectively.
Tunisia: Limited Growth and Challenging Conditions
Tunisia, another market where Jumia has been operating under its own brand for a decade, faced similar issues of low growth potential. Together, South Africa and Tunisia accounted for just 2.7% of Jumia’s total orders and 3% of its gross merchandise value (GMV) in the first half of 2024, making their contribution relatively insignificant to Jumia’s broader business.
Tunisia’s small market size and macroeconomic challenges made it difficult for Jumia to scale profitably in the region. Dufay acknowledged that Jumia’s efforts in these two countries had failed to meet growth expectations.
“Both businesses account for a negligible portion of our overall operations,” he said, adding that competitive and macroeconomic conditions limited the growth potential in both markets.
By shedding these lower-performing operations, Jumia hopes to consolidate resources and improve efficiency across its remaining markets.
A Focus on Core Markets
Jumia’s exit from South Africa and Tunisia is part of a broader strategy to trim non-essential services and optimise resources for stronger markets. In recent times, the company has aggressively cut costs by reducing headcount, exiting everyday grocery items and food delivery, and narrowing its delivery services to focus purely on e-commerce. The company hopes these changes will bring it closer to profitability, a goal that has remained elusive since its 2019 IPO.
For Dufay, the decision is about refocusing Jumia’s energy on the markets where the company sees the greatest potential. “We believe it’s the right decision,” Dufay said. “It enables us to refocus our resources on the other nine markets, where we see more promising trends in terms of scale and profitability.” He added that success in any of these markets would likely compensate for the volumes lost by exiting South Africa and Tunisia.
Jumia’s remaining markets, which include the populous and growing economies of Egypt, Kenya, and Nigeria, offer promising opportunities. These countries have seen rapid e-commerce growth, driven by increasing internet penetration, a young population, and improving logistics infrastructure.
In 2022, for instance, South Africa’s e-commerce market grew by 30% to ZAR 55 B (USD 3 B), according to World Wide Worx. Markets like Nigeria and Egypt, with larger populations and rising consumer demand, offer similar prospects for Jumia as it shifts its focus.
The closures will result in about 110 job losses, though some employees may be relocated to other parts of the business. Both Zando and Jumia Tunisia will hold clearance sales before shutting down by the end of the year as Dufay says there are no plans to sell either operation
Jumia’s efforts to streamline operations come at a time when the African e-commerce market is evolving rapidly, with both local and international players jostling for position.
By cutting losses in less profitable regions and focusing on its strengths, Jumia hopes to continue growing across Africa, where e-commerce is still in its early stages but shows substantial potential.
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Publish date : 2024-10-16 12:39:54
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