Why Jumia is suspending its loyalty subscription offering
African e-commerce company, Jumia has suspended Jumia Prime, a subscription-based delivery service providing customers with free shipping on its marketplace.
In Q3 2022, Jumia's operating loss declined by 33% from $64 million to $43.2 million, while adjusted EBITDA losses were trimmed by 13% from $52.5 million to $45.5 million—the lowest level in the last six quarters.
This report was released a few days after Jumia's co-founders—Jeremy Hodara and Sacha Poignonnec—stepped down from their roles as co-CEOs, as part of the company's efforts to focus on the "path to profitability".
The company has suspended Jumia Prime—a subscription-based delivery service providing customers with free shipping on its marketplace—which was launched in 2019 in three Nigerian cities—Lagos, Abuja and Ibadan at a monthly cost of ₦2,999 ($7). Jumia Prime was later expanded to Egypt, Kenya, Morocco, Côte d’Ivoire, Ghana, Uganda, Tunisia, and Senegal.
"It was too early in the adoption curve to push such a product," Jumia said. "Instead, [we will] focus on enhancing the basics of the customer value proposition to drive repurchase rates."
Although the product was a key user acquisition strategy for the African e-commerce company, its traction did not meet the desired expectations despite having 3.1 million quarterly active customers on the platform in Q3 2022.
In its Q3 2022, United States Security and Exchange Commissions (US-SEC) filings[pdf], Jumia wrote: "Over the past couple of years, we tested the concept of a monthly subscription program offering free delivery to consumers. The results from this experiment, in terms of consumer traction and stickiness, fell short of our targets as the market is probably not yet mature enough, leading us to pause this initiative."
According to filings, the company has also suspended its logistics-as-a-service product in selected undisclosed geography, "We are suspending logistics services to non e-commerce clients in countries where we believe management efforts would be best invested in improving the logistics efficiency for the core e-commerce business."
The logistics offering will still be active in Nigeria, Morocco and Ivory Coast—"where logistics infrastructure is ready to support third-party volume and where proof of concept for this service has already been established," Jumia said.
"The volatility in foreign currencies has a big impact on us. Most importantly, it impacts the supply on the market and makes it harder for all retailers, including Jumia, to get the right supply at the right time to sell to customers," Francis Dufay, Jumia's acting CEO told TechCrunch.
"In several countries, for example, we have seen that governments have taken action to protect their currencies which often involves putting very big constraints on customs [which] inevitably impacts the kind of supply that we manage to bring to the website. But we believe that we are laying out the right plan to mitigate that, one of which is focusing a lot on capturing local supply from distributors and vendors, which is something very critical across all markets. Doing well on that part will help us mitigate the current macroeconomic situation," he added.