Jumia Technologies AG (NYSE:JMIA) Q3 2023 Earnings Call Transcript

While we had historically struggled with volatile or insufficient supply across our core categories in Senegal, our team based in Dakar, managed to build a much better assortment, leading to robust year-over-year growth in both GMV and orders in Q3 ‘23. For example, in the home and living categories, we have built stronger relationships with local suppliers and agree on yearly supply plans with a view to securing consistent assortment across the whole year. We have also worked to grow specific categories with several Pan-African and European brands willing to enter this market, such as Leroy Merlin, a leader in the home improvement category in Europe, which stands exclusively on Jumia in Senegal. What you see here is just the beginning of a very broad transformation.

We are happy to see this early impact, but there is still a lot to be done, and a high unmet demand to be served. The priorities set for 2023 on supply on core categories will remain at the top of the agenda for 2024 as well. Progress on supply in our core categories is a critical part of our strategy and enables us to change the way we drive growth. In the past, we invested a lot of money and management attention in stimulating demand. We spent heavily on expensive online marketing channels, as well as customer incentives such as free shipping, vouchers and other customer discounts paid by Jumia. These often generated unprofitable volumes. We are now building on what we believe to be much healthier fundamentals. First, we believe that improved assortment and price points will enable us to drive more free traffic from being a top-of-mind destination for consumers, as well as improved repurchase rates.

We are pleased to see early impact on our cohort’s behavior, as the 30 days repurchase rate of our Q3 ‘23 cohorts of new customers acquires from our core categories has already increased by 2 percentage points compared to the same period last year. Second, we have been expanding our logistics reach and marketing actions outside of the capital cities. There, we seek to penetrate markets historically underserved by both physical retail and e-commerce. In the cities, we run very efficient market activities resulting to mostly offline actions and leveraging our large JForce network of commissioned agents. And third, our marketing teams have focused their efforts on growing free channels, such as customer relationship management, CRM, and search engine optimization, SEO, and improving the efficiency of the other channels such as paid online marketing.

For example, the share of CRM in total visits to physical goods on our platform in Q3 ‘23 increased by 25% year-over-year, thanks to beta customization of push notifications sent to our app users. Similarly, the share of SEO increased by 36% year-over-year. This strategy enables us to secure significant efficiencies in marketing. At Group level, sales and advertising expenses decrease by 74% year-over-year and 67% on a constant currency basis, as we are particularly scaled down on online marketing channels. On physical goods, we also significantly scale down the vouchers campaigns, free shipping and other discounts funded by Jumia, leading to a decline in the share of orders benefiting from such consumer incentives from 44% to 27% year-over-year.

Let’s look at how this strategy is working out in another country, Uganda, where we made progress on all three dimensions this year. Looking at supply improvements, we have recorded strong year-over-year growth in beauty, home and living, and electronics, thanks to our efforts aimed at building more consistent supply and price leadership. Increased sales from these categories more than offset the decline in the FMCG segments. We also started a major plan to expand our distribution footprint across Uganda at the end of 2022. And we are now reaping the first benefits, with a greater share of new customers and orders coming from cities outside of the capital. For instance, our team achieved great results in the northern regions in cities like Gulu and Lira, thanks to faster delivery and very relevant offline marketing campaigns in those cities.

Looking at marketing channels, we focused on improving our CRM routines, sending more customized offers to various segments of app users and thus driving more visits to our platform. All-in-all, strong execution of the group strategy in Uganda led to robust year-over-year variable growth in Q3 ‘23 on both GMV and orders, while sharply reducing marketing costs and improving our economics. We see similar stories across countries on physical goods, already enabling five countries to report positive year-over-year GMV growth in Q3. We see this as very positive evolution, which we believe confirms that our strategy enables us to build long-term growth while preserving our cash. Let’s now look at recent developments on JumiaPay. As explained previously, we have decided to focus primarily on making JumiaPay an effective enabler of e-commerce.

We are working towards this objective in several ways. First, we are integrating more relevant payment methods for customers to complete their orders on Jumia platforms. Although, we already have a broad range of payment methods such as credit cards and mobile money wallets, we keep on adding new solutions based on the needs of customers in each and every country. Second, we are rolling out JumiaPay on delivery. This feature allows customers to pay digitally upon delivery of their order, thus reducing the need for cash and simplifying our operations. In Kenya, 80% of physical goods transactions in Q3 ‘23 were completed using JumiaPay compared to 28% in Q4 ‘22, driven by the introduction of JumiaPay on delivery. Third, we are developing Buy Now Pay Later solutions in partnership with third-party credit providers to support purchases on our platform.

Through JumiaPay, our customers can access consumer finance options offered by third-party partners, who are responsible for credit underwriting and loan disbursements. As a result, we see constant progress in the share of transactions paid through JumiaPay, from 17.8% in Q3 ‘22, sorry — to 27.1% in Q3 ‘23 for physical goods, and from 23.9% to 34.2% for food delivery. Total JumiaPay transactions increased by 8% year-over-year in Q3 ‘23, driven by an increase in orders on the JumiaPay app, thanks to promotional activities. JumiaPay TPV is down by 28% year-over-year, reflecting foreign exchange variations in Nigeria and Egypt and up by 3% on a constant currency basis. Looking at off-platform opportunities, we believe that JumiaPay has strong development potential to process payments on behalf of third-party merchants.