Jumia has lost $120m so far in 2019, admits it has a fraud problem

Jumia’s new aggressive drive towards profitability over growth has a new casualty: its hotel and flight services vertical Jumia Travel will be offloaded, effective immediately. 

“We have decided to enter into a partnership with our partner, Travelstart. While we will continue to promote the Travel category, Travelstart will be responsible for the operational side of the business,” according to a statement from Jumia to TechCabal.

“This partnership will ensure we remain hyper focused on our growth and path to profitability as we reinvest our resources in our key markets, services and technology to create the best customer experience in Africa and help Jumia thrive.”

Travelstart, the online flight-booking platform, operates mainly in Nigeria and South Africa. Conversations are ongoing with Wakanow and Konga Travel to absorb Jumia Travel employees subject to an interview process, a source present at the meeting told TechCabal.

Partnership or Acquisition?

Jumia Travel’s website will re-direct visitors to Travelstart by close of business Monday. It is unclear whether the “partnership” entails an acquisition as virtually every operational aspect of the business will be out of Jumia’s control going forward.

An email to employees seen by TechCabal says Jumia Travel “will cease to operate our Hotels and Flights websites and apps,” even as they insist the business was not unsuccessful. Everything from revenue management and customer service to corporate sales will now be run by Travelstart.

A post-IPO bug has upset assumptions about the strength of Jumia group’s business. In the last month alone, the company has shut down operations in Cameroon and Tanzania, citing a need to refocus on viable components of its business.

Omolara Adanugodo, Jumia Travel’s managing director, could take over leadership of Jumia Food, Jumia’s food delivery service, while Guy Futi, the Congolese who heads Jumia Food, could be moved to another unit of the company. Also at the Monday meeting was Dele Awolala, Jumia Nigeria’s head of HR, who was said to be surprised at the new development with Jumia Travel.

Employees who don’t want to be absorbed by the food or Jumia mall ventures were told they are free to leave with their severance packages. Founded in 2013 as Jovago and rebranded in 2016, Jumia Travel has a staff of about 70 in Lagos.

Growth bubble bursts

Jumia Travel has burnt through unscalable budgets in product promotion as it prioritized growth, just like the parent company. Until recent structural changes that centralized operational planning between the ventures, Jumia Travel spent as much as €20,000 per month ($22,000) on marketing, offering vouchers to attract consumers and build brand loyalty, according to a source familiar with the company.

The pursuit of growth may have led the company into cutting too many bad deals. At least one company owes as much as N50 million for corporate booking on Jumia Travel, a source disclosed. It’s a trail pointing to questionable management decisions that threaten Jumia’s ability to keep the lights on in the coming months.

A new strategy

A wind of structural changes – some subtle, a few dramatic – has been underway in the company since that April IPO. One example: full-time employees who wish to leave will now provide a two-month notice of resignation.

On November 26th, new contracts were handed out to staff containing the adjusted clause – a one month notice period was previously the norm. Employees who disagreed with the change were told to hand in their resignations, a source with knowledge of the proceedings said.

Life as a publicly-traded, yet-to-be-profitable company is proving challenging, leading the e-commerce one-time unicorn to adopt a host of administrative and strategic tweaks.

From their Q3 2019 earnings report, Jumia group’s biggest growth enabler was its fintech product, Jumia Pay. The product’s growth rate seems encouraging enough for the company to pay more attention to financial services, a sector that has seen aggressive raises in recent months.

The shuttering of Jumia Travel doesn’t seem to be the end of the deluge of change at Jumia group. The New Times of Rwanda reports Jumia Food will close operations in Rwanda in a matter of weeks. “We regret to inform you that Jumia will suspend our on-demand delivery operations in Rwanda on January 9th 2020,” the company is quoted as saying.

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