E-commerce platform, Jumia in its listing prospectus has highlighted some of the risk factors facing its operations on the continent.
According to Jumia, the e-commerce business model is new in the markets hence competition for market share may intensify as the company notes that competitive pressures from current or future competitors are a clog in the wheels for the company.
“We also compete with a large and fragmented group of offline retailers, such as traditional brick-and-mortar retailers and market traders, in each of the markets in which we operate,” the report noted.
The report acknowledges that new competitors may emerge, or global e-commerce companies, such as Amazon or Alibaba may choose to enter into, or expand across our markets, and such competitors may have greater access to financial, technological and marketing resources than we do.
“We also face competition from transactions taking place through other platforms, including via social media sites such as Facebook group,” the report noted.
Jumia said it also faces challenges with failed deliveries, excessive returns, late collections, unrecoverable receivables and voucher abuse by customers and as of December 2018, the platform has accumulated losses of 862.0 million Euros.
Jumia’s listing on the NYSE will make it the first African-based technology company to list on the exchange. It further noted that the success of its business on the continent depends largely on consumer spending especially in Nigeria and Egypt where it generates a larger portion of its Gross Merchandise Volume GMV. GMV is the total volume in dollars of sales over a given time period on an e-commerce site.
“Currency volatility and high inflation in any of the countries in which we operate could increase the cost of goods to our third-party sellers while decreasing the purchasing power of our consumers. If sellers are unable to pass along price increases to consumers, we could lose sellers from our marketplace. Similarly, if consumers are unwilling to pay higher prices, we could lose consumers,” Jumia said.
The e-commerce which platform started operation in 2012 said the future of e-commerce platform on the continent is dependent on the growing internet penetration.
“If internet penetration does not increase in our markets of operation, it could have a material adverse effect on our business, financial condition, results of operations and prospects,” Jumia said.
OLUFIKAYO OWOEYE
