Jumia, the e-commerce company, recorded a drop in its Sales & Advertising expense by 55% from €13.8 million in the third quarter of 2019 to €6.2 million in the third quarter of 2020, its lowest level in more than 3 years. This was made available in the e-commerce company’s financial statement for the quarter ended September 30, 2020.
This is driving strong marketing efficiency with Sales & Advertising expense per Order decreasing by 53%, from €2.0 per Order in the third quarter of 2019 to €0.9 in the third quarter of 2020.
This development was partly attributable to continued enhancements to our performance marketing strategy across search and social media channels, notably through more granular segmentation of our target market with differentiated campaigns and content for each segment.
While quarterly fluctuations in this metric may occur, we reached during the third quarter of 2020 the milestone of breakeven at a Gross profit after Fulfillment and Sales & Advertising expenses, with the majority of countries reaching breakeven at this level.
Key financial highlights
REVENUE
- First Party revenue decreased by 53% in the third quarter of 2020 compared to the third quarter of 2019. This was in line with our strategy to undertake fewer sales on a first-party basis as we focus on running an asset-light marketplace model where third-party sellers offer consumers an expanding range of products and services. Shifts in the mix between first-party and marketplace activities trigger substantial variations in our Revenue as we record the full sales price net of returns as First Party revenue and only commissions and fees in the case of Marketplace revenue. Accordingly, we steer our operations not on the basis of our total revenue, but rather on the basis of Gross profit, as changes between third-party and first-party sales are largely eliminated at the Gross profit level.
- Marketplace revenue reached €23.4 million in the third quarter of 2020, up 19% compared to the third quarter of 2019. This was mostly driven by an increase in Commissions and Fulfillment revenue, which increased by 43% and 13% year-over-year respectively.
- Commissions grew due to an increase in the share of higher commission rate categories including fashion, beauty or FMCG as well as lower promotional intensity.
- Fulfilment revenue increased by 13% as a result of continued shipping fees adjustments as well as pricing changes within our cross-border logistics, whereby part of the international shipping fees that were previously charged to sellers were instead passed on to consumers. This change resulted in some of our international logistics revenue being recorded as Fulfillment revenue instead of revenue from Value Added Services.
- Value-Added Services increased by 4% as adjustments to our shipping fees led to an increase in shipping contributions from local sellers, which more than offset the effects of the aforementioned pricing changes in our cross-border logistics.
- We manage monetization pressure on our sellers in a very disciplined manner and, during the third quarter of 2020, reduced pressure on the advertising front leading to a decrease of 2% of this revenue stream while placing more focus on fulfilment costs pass-through.
General and Administrative Expense
General & Administrative expense, excluding SBC, reached €19.3 million, down 24% on a year-over-year basis. This was partly a result of staff costs reductions and professional fees savings, largely attributable to the portfolio optimization and cost rationalization initiatives undertaken in late 2019.
Operating loss
Operating loss was €28.0 million in the third quarter of 2020 while Adjusted EBITDA loss was €22.7 million, decreasing by 49% and 50% on a year-over-year basis respectively, demonstrating meaningful progress on our path to profitability.
Jeremy Hodara and Sacha Poignonnec, Co-Chief Executive Officers of jumia.com.ng/ commented:
“We are making significant progress on our path to profitability with Adjusted EBITDA loss in the third quarter of 2020 decreasing by 50% year-over-year”, Having established Jumia as the leading pan-African e-commerce platform, we have focused over the past 12 months on firmly advancing towards breakeven. The significant progress achieved was mostly attributable to the thorough work we have done on the fundamentals of our business, with limited support from external factors such as COVID-19.
The business mix rebalancing initiated late last year has increased our exposure to everyday product categories and, combined with enhanced promotional discipline, supported unit economics. In addition, we made multiple enhancements across our logistics and marketing operations that led to a decrease in fulfilment and marketing expenses for the third quarter of 2020 by 20% and 55% respectively, on a year-over-year basis.
The portfolio optimization completed last year, along with overhead rationalization, contributed to a decrease in G&A costs excluding share-based compensation of 24% year-over-year in the third quarter of 2020.
Lastly, we continued to TPV to over 25% of GMV in the third quarter of 2020, a clear sign of our ability to drive pre-payment adoption on our platform efficiently. We believe the fundamentals of our business have never been stronger, setting a robust foundation for the long term, profitable growth of Jumia.” drive robust growth of JumiaPay by more than doubling the penetration of JumiaPay.