Business - Companies
Updated: August 14, 2020

Jumia Understates COVID-19 Benefit Despite Benefiting Largely From It

By Olalekan Fakoyejo
August 14, 2020
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E-commerce company, Jumia, has revealed that its online business wasn't necessarily favoured by the COVID-19 pandemic following projections that the e-commerce market was one of the few sectors that wasn't negatively impacted by the pandemic which disrupted operations of many industries.

Jumia, Konga, and other rivals had become the go-to marketplace for many Nigerians following closure of physical stores by the Federal Government after adopting lockdown to curb the spread of the virus. Buyers had migrated online to make purchases of goods for home delivery due to restriction of movements.

Jumia's Shocking Revelation

The migration was projected to result into huge sales for e-commerce platforms in Nigeria, however, Jumia said it didn't record meaningful change in consumer behaviour despite the lockdown and restriction of movements lasting for almost two months before the lockdown was eased on May 4, 2020 - lockdown was announced in March 2020.

In Jumia's words, "Across the majority of our addressable market, we experienced no meaningful change in consumer behavior, aside from increased demand for essential and every-day products and reduced appetite for higher ticket size, discretionary purchases." Jumia said in a statement seen by AllNews.

The Confusion In Jumia's Revelation

E-commerce platforms were considered essential service, and allowed to operate during the lockdown, while most traditional businesses were under lock. But Jumia's revelation in its 2020 second-quarter result downplay the importance of e-commerce businesses, as the COVID-19 era was expected to create a 'new normal' for shoppers and reveal the essence of the online marketplace in people's daily lives.

Jumia stating it didn't experience meaningful change in consumer behaviour is a smart way of downplaying the positives of COVID-19 pandemic on its business growth despite active consumers growing by 40% when compared to the corresponding period in 2019 - this is despite Jumia reducing its consumer incentives on lower consumer lifetime products.

It's normal for consumers to prioritise essential and everyday products above high-end goods amidst pandemic. Purchasing power of consumers had dropped at the period due to downsizing and salary cut by companies. And for individuals not affected, reserving cash for post-COVID-19 era is the only available option as sellers will increase product prices due to lost revenue and austerity measures (tax increases) by Federal and State government.

During the same period, Jumia's orders also grew 8% to reach 6.8 million. This reflects how COVID-19 pandemic has been a catalyst for online platforms' growth. Other online businesses such as the entertainment sector had boast of increased patronage with Netflix, IrokoTv, Sportify, and other streaming platforms becoming the one-stop place for entertainment.

Also, videoconferencing app market had also seen an increase in their number of download and usage, with Zoom gaining the most, and Skype also benefiting from the disruption caused by the COVID-19 pandemic in the private sector.

How COVID-19 Pandemic Financially Benefited Jumia

So Jumia's comment is understating the benefit the e-commerce firm derived from the COVID-19 pandemic. During the second-quarter period, the German company - that focuses on the African market - incurred a loss of €37.6 million (N17.1 billion); this is a 44% decrease year-over-year.

Meanwhile, gross profit reached €23.3 million, a year-over-year increase of 38%, and gross profit after fulfillment reached a record €6 million, compared to a loss of €0.7 million in the second quarter of 2019.

Also, Jumia's payment platform, JumiaPay, continued to benefit largely from the e-commerce firm's online patronage as transactions reached 2.4 million, representing an increase of 36% year-over-year.