Jumia shares dropped 14% following the New York Stock Exchange (NYSE) news that co-founders, Sacha Poignonnec and Jeremy Hodara, were leaving the company.
The company stock is currently 71% down from its IPO opening price of $14.95, eliminating 75% gains post-IPO. Jumia, which became the first African startup to list on a major global exchange in April 2019, has struggled to enter profitability despite raising over $196 million from the direct listing and major investments from organizations like MasterCard and French drinks maker, Pernod Ricard SA.
Often seen as the Amazon of Africa, Jumia has struggled for more success after launching in Lagos, Nigeria, in 2012 and expanding to 14 African countries by 2018.
Part of their earlier success included generating $234 million in revenue in 2015, a 265% growth from 2014, and becoming the continent’s first unicorn valued at over $1 billion in 2016.
Jumia is however said to be stuck in losses since the IPO. Some of the issues blamed for its struggles include:
- Africa lacking formal addresses
- Africa lacking city mapping
Nevertheless, African users of Jumia have complained of poor quality, specifically a difference in quality between a product as advertised on the Jumia app and the actual purchase.
In the last 10 years, as it expanded geographically, so did it introduce new consumer services venturing into multiple sectors including lending, billing, food delivery, hotel booking, and travel and logistics – all competitive fields, albeit related to Jumia’s core offering.
A list of services launched by Jumia over the years includes:
- Jumia Travel – 2013
- Jumia Food – 2013
- Jumia Deals – 2015
- Jumia One – 2017
- Jumia Lending Program
“We want to bring more focus to the core e-commerce business as part of a more simplified and efficient organization with stronger fundamentals and a clearer path to profitability,” Jumia Chairman Jonathan Klein said in a statement.
Jumia has also been dogged by ethical concerns. Former employees have complained of poor pay, unrealistic targets, and unequal treatment of staff in the lower rungs, specifically the sales team called J-Force:
They just wanted to be the Amazon of Nigeria without putting things in place first. They would set unrealistic targets and expect you to do magic to meet them. People left the company at every opportunity they got. They also fired some people for no reason.”
The company has also been accused of cooking sales numbers by investors in 2019, a few months after its IPO. Jumia would respond that a few J-Force employees faked sales and commission data even though the effect was negligible.
This is not the first time the company is losing co-founders though. Jumia’s original co-founders are
Nigerian tech entrepreneurs, Tunde Kehinde and Raphael Afaedor, who both departed in 2015 to form other startups in fintech and logistics.
In a separate post, BitKE has raised concerns over the viability of e-Commerce highlighting the key reasons why the industry continues to struggle to remain profitable. Several e-Commerce startups in Kenya have collapsed in a span of just a few months as they fail to solve the underlying challenges that make the industry successsful. These startups fail to understand that offering e-Commerce services alone is not enough.
According to one of the failing startups, a lack of an efficient and affordable logistical and delivery system is a key reason why e-Commerce struggles and will continue to struggle on the continent, which was again highlighted as one of the key challenges of Jumia.
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