Jumia partners with France’s Leroy Merlin to serve smaller African cities

Jumia, Africa’s leading e-commerce platform, has partnered with French retail giant Leroy Merlin to expand its presence in smaller African cities. The move marks Jumia’s latest effort to reach untapped markets in Africa, where e-commerce is rapidly growing but still faces many logistical challenges.

This new partnership will see the French company supply products to Jumia’s warehouses in Ivory Coast and Senegal -two nations with the potential for growth when it comes to e-commerce. Jumia will then sell it on its online platform.

According to MoneyWeb, Francis Dufay, the new Chief Executive Officer of Jumia, in a statement said,

More than half of Africa’s 1.4 billion-strong population lives outside big cities or in rural areas where the economies are driven by agriculture. This means there’s strong demand for the kinds of products Leroy Merlin offers in areas that are not well-served by retailers.

Jumia is pushing into these areas, we have the right suppliers, and an assortment of products, and a light logistics model to address those smaller pools of consumers. This would be much harder to do for bigger supermarkets and shops for instance.

The move into smaller African cities is a key part of Jumia’s growth strategy, as the company seeks to capture a larger share of the rapidly growing e-commerce market in Africa. The partnership with Leroy Merlin will likely give Jumia a significant edge over its competitors.

This will also allow the e-commerce company to expand its offerings to these untapped markets while also providing Leroy Merlin with a new sales channel. The partnership may also be a strategic plan to help reduce Jumia’s loss by 50% by the end of the year through effective cost-cutting measures and targeting high-growth rural markets.

According to MoneyWeb, In pilots, almost 40% of the Leroy Merlin goods available on the Jumia website in the two French-speaking countries are sold to customers outside of Ivory Coast’s main city Abidjan. Jumia is reportedly considering taking the model to Kenya, Nigeria, and China next.

Read Also: Africa’s unicorn, Jumia, records narrowed losses in Q4 2022 after enforcing cost-saving strategy

Why is Jumia engaging in cost-cutting measures?

Since its listing in New York in 2019, the company has struggled with persistent losses and pressure on its share price. This followed a report by Citron Research, accusing Jumia of inflating certain financial measures in its April 2019 IPO prospectus and leaving out unfavourable information about the number of orders that were returned, undelivered, or cancelled.

The e-commerce giant, still smarting from its New York Stock Exchange listing, folded up its operations in Cameroon, Tanzania, Gabon, and the Congo Republic. In 2020, it was hit by the economic downturns of the COVID-19 pandemic, and it reported a nearly 18% fall in third-quarter revenue.

It also announced a tweak in its business model to focus more on its third-party marketplace, as its financial statements were not impressive. The African e-commerce company earnings report for Q4 2022 and the full year 2022, showed that the company made a full-year loss of $207 million and a Q4 loss of $49.2 million, and it projects that it will reduce its losses even further in 2023 to a range of $100 -$120 million.

This plummeting loss must have led to the stepping down of the founders and co-Chief Executive Officers of Jumia Technologies, Poignonnec, and Hodara, leading to the appointment of Francis Dufay as the new CEO.

With the new leadership came a cost-cutting strategic plan. Jumia reduced its headcount in Dubai by 60%. This is after it put a number to the staff it laid off last year, sharing that 900 people were sacked within the organization, about 20% of its workforce.

According to the blog post, these headcount reductions would allow the company to save over 30% in monthly staff costs. Implementing these organizational changes resulted in $3.7 million in one-off restructuring costs booked in the fourth quarter of 2022.

Read Also: Jumia appoints new CEO as co-founders step down

Still on their mission to expand

Despite these setbacks, Jumia has continued to expand its reach in Africa, where e-commerce sales are projected to reach $29 billion by 2022, up from just $5.7 billion in 2017.

However, these sales are concentrated in major urban centres, leaving smaller cities and rural areas largely underserved. This latest partnership is not just about expanding Jumia’s reach, however. It also underscores the importance of collaboration in overcoming the many logistical challenges of e-commerce in Africa.

These challenges include poor transportation infrastructure, limited access, and logistics networks which this partnership has helped both companies resolve.