Jumia And Africa E-commerce (4): Citron, Net Merchandize Value

About one month after Jumia’s IPO, the famous short research Citron published a short report.

Their first major short thesis is based on a Confidential Investor Presentation for investors in October 2018, which presents a discrepancy between Jumia’s IPO filing.

    • The active customers & merchants as of 2017 are 2.1 million and 43 thousand in the Confidential Investor Presentation while in the IPO filing are 2.7 million and 53 thousand.
      • no difference in 2018 numbers
      • they might used different definition for “active”
      • another possibility is consolidation calculation – if a user used multiple Jumia services (online shopping, travel, food, etc.), they could have been double counted. In the October 2018 presentation, they might deduct the duplicated accounts

Cirton also emphasized on omitting a metric in IPO – net merchandize value (NMV).  Since GMV doesn’t take into account returns/cancellations, which is ~41% of the GMV in 2017, this could be material in evaluating the business.

Another lever is failed delivery. Taking all these into account, GMV probably is not a very good indicator at this stage of Africa’s e-commerce. This also explains the hight fulfillment expenses. As the infrastructure in Africa improves over time, it could be better.

In Jumia’s IPO documents, it only mentions “in 2018, orders accounting for 14.4% of our GMV were either failed deliveries or returned by our consumers. ”

In the 2019 20-F, it says “we have also experienced a decrease in the rate of cancellations, failed deliveries and returns as a percentage of our GMV from approximately 35% in 2018 to 32% in 2019.”

So around 20.6% of Jumia’s 2018 GMV is cancelled.

Actually, in Jumia’s 2019 Q2 call with analysts, it says “it has identified instances where orders were placed and then subsequently canceled“.

However, when NMV provides an important information about Jumia’s operation, after all its revenue and expenses won’t change.