Jumia Technologies AG (JMIA) 2020 Q4 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to Jumia's Results Conference Call for the Fourth Quarter of 2020. (Operator Instructions)

I would now like to turn the call over to Safae Damir, Head of Investor Relations for Jumia. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us today for our fourth quarter and full year 2020 earnings call. With us today are Sacha Poignonnec; and Jeremy Hodara, Co-founders and co-CEOs of Jumia; as well as Antoine Maillet-Mezeray, CFO. This call is also being webcast on the IR section of our corporate website.

We will start by covering the safe harbor. We would like to remind you that our discussions today will include forward-looking statements. Actual results may differ materially from those indicated in the forward-looking statements. Moreover, these forward-looking statements may speak only to our expectations as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the risk factors that could cause actual results to differ from the forward-looking statements expressed today, please see the risk factor section of our annual report on Form 20-F as amended on July 8, 2020.

In addition, on this call, we will refer to certain financial measures not reported in accordance with IFRS. You can find reconciliations of these non-IFRS financial measures to the corresponding IFRS financial measures in our earnings press release, which is available on our Investor Relations website.

With that, I'll hand over to Sacha.

Thank you, Safae. Thank you very much. Welcome, everyone. Thanks for joining the call. I hope that you're all staying safe and well.

The focus of our strategy has been very clear and remains unchanged; build a sustainable platform to capture this great opportunity of e-commerce in Africa. And what we mean by sustainable is to bring undisputable facts and evidence that our business model positions us well to become profitable. And as you can see in our results, here are the facts for the quarter. #1, we have reduced our adjusted EBITDA loss by 47%. We are now for 5 quarters in a row profitable after fulfillment at group level. The majority of our countries is now breakeven before G&A. We are drawing the usage of Jumia in the categories which we have chosen to focus on. And we do all of the above with lower G&A expenses and lower sales and advertising expenses. So overall, we feel very strong about those results, which clearly bring more evidence of the strength of our business model.

If we look into a few more details on Page 4. On the usage of Jumia, of course, 2020 was marked by the business mix rebalancing towards the higher share of everyday product categories and by a strong focus on efficiency, ensuring that the usage we drive has attractive unit economics. We drove down the share of phones and electronics from 56% to 43% of GMV.

We achieved a 5-point improvement in cancellations, failed deliveries and returns, which went from 30% to 25%, meaning that the usage we drive is more efficient and can be better monetized. GMV and orders post CFDR have been growing by 15% and 19% on all the business outside phones and electronics, which is the business we have deliberately chosen to reduce. On usage, for us, it was a year of choice of growing selectively and efficiently.

JumiaPay. TPV increased by 58%, and the penetration has now reached 35% of orders at group level. We added more than 100 new digital services on the JumiaPay app in order to bring more relevance and convenience to our consumers.

On revenues, marketplace revenue and gross profit increased by 20% and 22%, respectively, and our gross profit margin as a percentage of GMV increased by almost 4 points, now reaching 12%. And last but not least, we generated significant savings across all cost lines. We now have a leaner, more-efficient cost structure. Fulfillment expense went down by 10%, sales and advertising went down by 42% and G&A outside share-based compensation went down by 12%. So if you look at our P&L, we're growing the profitable usage, we're increasing the gross profit after fulfillment, while a decrease in G&A and sales and advertising. So mathematically, we'll reach breakeven if we continue to do that.

On Page 5, in 2019, we set ourselves a clear objective; reduce our loss in absolute terms. And I think it's clear, very clear that we are delivering strongly against that objective. We reduced the adjusted EBITDA loss by 10% in Q1, 26% in Q2, 50% in Q3 and 47% in Q4. And this progress, importantly, was achieved as a result of driving both more profitable usage and lower cost.

On Page 6, you can see how we have transformed our P&L over the last 2 years. In 2019, we were still not making money after logistics and overall, for every order, which was placed on the platform, we were still making a loss. And you can see also our costs were going up. Now you can see how gross profit after fulfillment is continuously increasing, having rebalanced the category mix and leveraging linear cost base. Each order we now generate takes us closer to profitability. And at the same time, the cost structure is clearly becoming more efficient across the board. So once again, a clear evidence about the path to profitability at the P&L level.

On Page 7, if we zoom on the unit economics for the quarter, our average order value is now EUR 29, that's 19% smaller than last year. And every single component of our unit economics has improved. Gross profit per order, plus 15%. Gross profit over GMV, plus almost 4 points. Gross profit after fulfillment, now EUR 1 when it was EUR 0.1 last year. Sales and advertising, minus 33% per order. Tech and G&A, minus 28% per order. So a lot of progress made, both on the revenues and on the cost, and this progress, as we have been talking about has been achieved without a tailwind from COVID. We discussed already last time, and we discussed that COVID did not lead to any drastic changes in consumer behavior on our platform and more meaningful surge of volume at Pan-African level. Rather, it had a net negative effect on the business due to localized supply and logistic disruptions that we have been experiencing throughout the year.

Obviously, the situation is still evolving. We continue to monitor, in particular, the rising cases, the rollout of the vaccine and at what speed that will happen and the overall negative impact on consumer sentiment and spending power. What's important is that all the actions that we took last year and -- in 2019 and '20, whether it's the increased focus on everyday categories or the cost efficiencies that we generated and also the proactive capital raise that we conducted in December, all those actions, they enhance our resilience through volatility -- macro volatility, and they position us very well for the long term.

And I'll conclude by sharing with you on Page 9, a few of the many initiatives we undertook this year. Our key priority has been helping our people, consumers, sellers and communities we serve to stay safe, of course, and as much as possible functioning through the crisis. All those initiatives, we illustrate how important it is for us to drive impact beyond our day-to-day operations. I'm obviously happy to give you more color in our discussions on all this. Our mission and our values drive our actions, and we are immensely grateful to our teams, our frontliners in particular, who have fully embodied these values and acted with an incredible sense of purpose, resourcefulness and dedication. We thank you all very, very much for that.

And with this, I'll hand over to Jeremy.

Thank you, Sacha. Hello, everyone. Our focus in Q4 2020 and, in fact, throughout the whole year, was to drive the usage with, one, high-level of marketing efficiency; and two, in a disciplined and selective manner, favoring the categories that supported the consumer lifetime value and the profitability.

On Slide 11, on the first point, you can see that in Q4 2020 we continued driving usage with very strong marketing efficiency. Having built over the past 9 years, one of the strongest brand in Africa, we are now able to be much more tactical and much more efficient in our sales and advertising spend. As we reduced our sales and advertising spend by 34% year-over-year, the GMV was down 21% year-over-year, reaching EUR 231 million in Q4. Sales and advertising expense per order decreased by 33% and while orders declined by 3%. On the other hand, while the annual sales and advertising expense per annual active consumer decreased by 48% year-over-year, our annual active consumers were up 12% with growth both in new and returning consumers.

It's worth noting that the GMV and the orders accelerated by 23% and 21%, respectively, in Q4 2020 compared to Q3 2020, supported by the Black Friday event that we did in November 2020. And despite a significant reduction in marketing spend in the 2020 edition of the event, we still registered record level of consumer engagement. Page views across our platforms reached 1.5 billion during the event, up 33% compared to last year, and our Black Friday video content registered almost 100 million views, which is 3x higher compared to the 2019 event. And this speaks to the relevance of our platform and the content for our consumers.

One aspect that we monitor very closely when it comes to the usage growth is the cancellation, failed delivery and return ratio and the trend of our usage indicators post CFDR. If you go on Page 12 and you look at the full year 2020 trends, we see meaningful improvement in this ratio, both as a percentage of the GMV and the order. The GMV ratio improved from 30% in 2019 to 25% in 2020, while the order ratio improved from 22% to 16%. This improvement means that our usage is becoming more efficient because a higher proportion of the growth usage can be monetized, and our marketing investment is even more efficient on a net basis. And in fact, we have been growing the profitable usage.

GMV and orders post CFDR have been growing by 15% and 19% on all the business outside phone and electronics, which is the business we have deliberately chosen to reduce in the context of the business mix rebalancing that we undertook. If we look at Page 13, at this impact of the business mix rebalancing. One, we reduced our reliance on phones and electronics, which went from contributing 56% of our GMV last year to 43% this year. Two, in parallel, our average order value decreased by 23% from EUR 39 to EUR 30 as these everyday categories such as beauty, FMCG, fashion, which are gaining prominence on our platform and GMV are typically lower ticket sites. And three, while smaller in average value, our orders are also more profitable as gross profit after fulfillment expense per order went from a loss of EUR 0.10 in Q4 2019 to a profit of EUR 0.80 in Q4 2020. So in conclusion, on usage, we grew where we wanted to and very efficiently, we have a better mix of categories today than a year ago and much better unit economics.

Let's now look at JumiaPay on Page 15. The TPV increased by 30% from EUR 46 million in Q4 last year to EUR 59 million in Q4 this year, taking on platform penetration of JumiaPay as a percentage of the GMV from 15.6% to 25.7% in Q4 this year.

On Page 16, JumiaPay transactions increased by 10% from 2.4 million last year to 2.7 million this year with transactions above EUR 10, which include prepaid purchases on the Jumia physical good marketplace and Jumia food platforms, growing by 55% over the same period. Overall, 33.1% of the orders placed on the Jumia platform in Q4 2020 were paid for using JumiaPay compared to 29.5% last year.

Through JumiaPay, we have built a checkout solution that provides our consumer and sellers with a fast payment experience. At checkout, consumers can create a JumiaPay account by linking it to the underlying payment method of their choice. JumiaPay is tailored to the relevant payment methods in Africa and encompass more than 15 different underlying payment methods. It's also underpinned by a tech stack that's recorded 99.9% uptime in 2020, including during the major commercial events such as Black Friday, where the uptime was 100%. The other aspect of JumiaPay that I'd like to spend a bit more time on is the JumiaPay app, which is a great way for us to provide consumers with more payment use case that are relevant to them, and that drive the user engagement and stickiness for them.

I'm now on the Page 17. We are building JumiaPay app with a view to making it a destination for a broad range of lifestyle and financial services, all offered on a prepaid basis and powered by JumiaPay. At the end of 2020, JumiaPay app had approximately 200 services live on the app offered by 33 partners across 5 countries in Africa. Since inception in 2018, the app registered over 4 million downloads and is highly rated by consumers. We are focused on building a diversified category mix on the app with 43% of 2020 GMV coming from airtime, 40% from utilities, TV and Internet payments. We are also developing newer categories where we see meaningful growth potential such as financial services, which already account for 10% of the JumiaPay at GMV; gaming, which accounted for 4%; lifestyle services, 3%; and transportation and travel categories, which are still nascent at this stage.

The development of JumiaPay. Whether it's the checkout solution and the broader business platform, all the consumer-facing super app are key priorities for us. And while we have accomplished a lot since the MVP of JumiaPay 4 years ago, we have barely scratched the surface of the payment and fintech opportunity in Africa. And we believe that we are uniquely positioned to capitalize on this opportunity.

Let's move now on monetization, Page 19. In the context of the 21% year-over-year GMV contraction in Q4, marketplace revenue increased by 7% and gross profit by 12% over the same period.

Taking a closer look at our work-use marketplace revenue streams on Slide 20. The commissions increased by 19% year-over-year due to an increase in the share of higher commission rate categories, including fashion, beauty or FMCG as well as lower promotional intensity. Fulfillment revenues increased by 14% as a result of continued shipping fee adjustment as well as pricing changes within our cross-border logistics. We initiated these changes in Q3 2020 and continue to roll them in Q4. As part of these changes, a portion of the international shipping fees that were previously charged to the sellers are now passed on to the consumers. This change resulted in some of our international logistics revenue to be recorded as fulfillment revenue instead of revenue from value-add services. This is also what drove the 27% decrease in value-add services.

Marketing and advertising revenue increased by 30% as a result of the strong pickup by advertisers of Jumia Advertising solutions, particularly during the Black Friday, where we ran campaigns on behalf of over 150 different advertisers including high-profile partners such as Reckitt Benckiser, L'Oréal, Huawei, P&G, Intel and many more. We intend to further diversify our revenue mix by monetizing not only a transaction and the usage of our marketplace but also the broader assets of our platform, and we have started to drive revenue from Jumia Logistics.

Let me tell you a bit more about it on Page 29 (sic) [Page 21]. Logistics in Africa are notoriously challenging with multiple hurdles, such as lack of address, a lack of organized and reliable capacity, storage base issues and so on. So the pain point Jumia Logistics is addressing is very big and one that is faced by many businesses and industry in Africa. With that in mind, we conducted a pilot in 2020 to open up Jumia Logistics to third parties, where the sellers on the Jumia marketplace or not, business clients can now leverage the Jumia Logistics platform for their fulfillment needs. As part of this pilot, we shipped almost 0.5 million package on behalf of more than 270 clients across 5 countries.

We have outlined some examples for you on the page. For example, in Nigeria, we worked with Kuda Bank, Nigeria's first mobile-only bank as one of their preferred logistics partner to deliver payment cards to consumers. In Morocco, we working with MediTel, the local entity of Orange, a leading global telco operator, to deliver SIM cards and activation kits to consumers. In Kenya, we worked with Premier Foods, a global food and packaged goods producers to offer logistics solution from their main warehouse in Nairobi to all their distribution centers across Kenya. The results of the pilot are very promising, the traction we have with our first clients reinforce our confidence in the long-term growth potential of this revenue stream.

And now I'll hand over to Antoine.

Thank you, Jeremy. Hello, everyone. Moving on to costs. I'm now on Page 23. We have been driving strong efficiencies across the full cost structure. Fulfillment expense decreased by 18% in Q4 2020 compared to Q4 2019 as a result of operational enhancements across our logistics operations. This included the optimization of our cross-border shipping metrics, staff cost savings in our fulfillment centers and a change in our delivery pricing model from cost per package to cost per stop. In addition, we were able to pass on an increasing proportion of our fulfillment expense to the combination of consumers and sellers via our fulfillment and value-added services revenue streams, respectively. The pass-through of our fulfillment expense measured at the ratio of fulfillment plus value-added services, revenue over fulfillment expense increased from 64% in Q4 '19 to 76% in Q4 '20. As a result, we are pleased to report the fifth consecutive quarter of positive gross profit after fulfillment expense, which reached a record of EUR 8.4 million in Q4 2020.

I'm now on Page 24. Sales and advertising expense decreased by 34% from EUR 15.5 million in Q4 '19 to 10.2% in Q4 '20. All marketing efficiency metrics are showing strong improvement. Sales and advertising expense per order decreased by 33% from EUR 1.9 in Q4 '19, down to EUR 1.03 per order in Q4 '20. Annual sales and advertising expense per annual active consumer decreased by 48% from EUR 9.2 per annual active consumer to EUR 4.8. And sales and advertising as a percentage of G&A decreased by 88 basis points from 5.3% to 4.4%.

These efficiencies are made possible by the strength of our brand. They are also attributable to continued enhancements in 2020 to our performance marketing strategy across search and social media channels, including through a more granular segmentation of our target market with differentiated campaigns and content for each segment. Finally, our third major cost rationalization, technology and G&A, and we are now seeing meaningful improvement here as the rationalization efforts undertaken in '19 and '20 start paying off. G&A expense, excluding SBC, reached EUR 21.8 million, down 36% year-over-year. This was partly a result of staff cost reduction and professional fees savings, largely attributable to the portfolio optimization and cost rationalization initiatives.

Moving on to the balance sheet and cash flow items. Our path to profitability is further supported by our asset-light business model. CapEx in Q4 2020 was EUR 0.7 million as we operate Jumia Logistics as a platform with very limited CapEx requirements. Net change in working capital resulted in an outflow of EUR 1.2 million in the fourth quarter of 2020. And in fact, for the full year 2020, working capital had an inflow effect of EUR 9 million, thanks to improved receivables and payable cycles as well as the lower inventory needs. Cash utilization for the quarter, defined as cash used in operating and investing activities was EUR 27.1 million in Q4. This compares to a cash utilization of EUR 52.9 million in Q4 '19 and represents a 49% decrease year-over-year. Cash and cash equivalents position at the end of December 2020 was EUR 304.9 million. We completed a follow-on offering in December 2020, as part of which we raised EUR 203 million in gross proceeds. This helped us strengthen our balance sheet and increase our operational flexibility as we scale the business towards profitability.

With that, I'll hand over to Sacha for concluding remarks.

Thank you. Thank you, guys. So if we step back, once again, our strategy has been to build a sustainable platform to capture this great opportunity of e-commerce in Africa. And by sustainable we mean to bring those facts, those evidences that the business model positions us well to become profitable. And here, why is that so important to us? Because as we discussed in the past, we operate, that we think is a completely proven business model, very successful everywhere in the world, like (inaudible), Amazon. Two, we have a great macro opportunity. We operate in a huge continent, which we see as untapped with amazing growth prospects. And three, we have proven that we can operationally overcome the major challenges in Africa payments, logistics, consumer building and marketplace. And so the only remaining point, the only remaining point is to make sure that as the business scales, it is profitable. And this is why, for us, we are so engaged in this phase. And the fact that I think we have been bringing over the last few quarters are, I think, very good, and they are very clear.

We have reduced our adjusted EBITDA loss. You have seen it, 47% last quarter. This was a clear objective and we have delivered on it. Two, we are making money, I would say, almost structurally after fulfillment. In 2019, we were not making money after fulfillment. And now for 5 quarters in a row, we are doing that. The more usage of Jumia, the more profit. I think it's pretty clear that the model works. Three, we're still growing, and we are growing the profitable usage where we outside phones and electronics, and we have grown the consumers by 12% this year. We have, in Q4, a majority of our countries are now breakeven or profitable before tech and G&A expense. And as you have seen in the P&L dynamics, we're growing the profitable usage. We are increasing the gross profit after fulfillment, and we are doing this while decreasing G&A and sales advertising. So we are in a very good position to reach breakeven if we continue to do that.

This has been the strategy. This is what we are focusing on, and this is what we intend to continue to do until the job is done on the profitability question. At some point, we expect that we will have enough of those indisputable facts or, call it, profitability milestones to put the profitability question behind us. And at this point, we are going to invest more in order to accelerate the usage growth. And at that point in time, we will be very comfortable doing so. We have a huge opportunity ahead e-commerce, food delivery, payments, logistics in Africa, a continent with more than 1-billion people we have an amazing platform to capture those opportunities. And with those recent results, we feel more confident than ever about the strength of our business. As we are clearly seeing its financial performance coming together.

Thanks for listening in, and we are now ready for questions.

(Operator Instructions). Our first question is from Aaron Kessler with Raymond James.

A couple of questions. Maybe first, just maybe from a macro perspective, what do you think will be kind of the catalyst for maybe an inflection in e-commerce adoption across some of your key markets? We've -- I believe seen smartphone adoption increase meaningfully over the last couple of years, which has been kind of accounts in other kind of markets for more e-commerce adoption. So what do you think will be kind of be the key costs over the next couple of years. And then I think you mentioned kind of leaning back into marketing a little bit. Should we start to see that in early '21, late '21? Or what -- how are you thinking about timing of leaning back into marketing?

Thanks, Aaron. Thanks for the questions. I think on the macro, it's -- in a way, it's -- we can call that the million-dollar question in some way. And what's important here is to share a few points. #1, we have not build the business expecting or hoping an inflection, right? We've built our business so that as we continue to scale, if there is never an inflection, but if we just continue to grow, it works out. It's not like we have geared ourselves, and we must hit that inflection point or that J-curve or that hockey stick or however, we call it. We are geared so that if we continue gradually like this for the years to come, we will be in a very good place, right? So that's one thing which is very important.

Secondly, what are today the barriers for the adoption of e-commerce, when you look at it, we have published some data. And now it's about a year ago, but I think it remains very true. About the barriers to usage for the people who have never used e-commerce. And we took in our largest market, some people who have never shopped online, and we asked them, do you know, Jumia? And back then, the answer was 74% of the people knew Jumia. We asked those people, do you consider trying and 66% said that they were keen to try. So very good awareness, very good consideration. And then when we ask them, why are you not shopping online, the 3 answers, which were coming out the most were because they don't know how to shop, because they don't think products are generic or because they cannot check the quality of the products.

And when we look at those facts, this consumer survey, the good news is that all those barriers or mental barriers. They are not infrastructure. It's not like people say, oh, I don't have Internet or I need something that I don't have today. It's something which is getting used to it becoming comfortable with it, gaining the trust to transact with the platform, understanding that, well, people can actually check the quality of the product with the reviews, they can return the product. And so on and so forth. So it's really about this education. Now having said those 2 things, look, we may hit an inflection point. There may be a point where suddenly a lot of people start buying online. And for example, some people say that the generation, which is digitally born today, the people who are 18 years old, 20 years old -- 20 years old, let's say, they are now born with a mobile phone. And when they will become prime consumer in our consumer target in maybe 4, 5, 6, 7 years, well, they will be comfortable. They will know how to shop. They will know how to check the quality of the product.

So those mental barriers as the new generation sort of enters into the consumer segment market, one can argue that all those young people, they will not have these barriers, right? And by this time, we may find this inflection point. But again, we can hope for that, we can sort of construct it. But for us, we do not, let's say, we do not want to create a company that needs an inflection. No, we need to continue what we're doing. Last 12 months, we had 7-million roughly consumers transacting on Jumia. We operate in 11 markets where there are 600-million people and growing. So there's a lot of consumers that we can go after. And if we have to continue for some time with the same growth, then I think we're in a very good place. If there's an inflection, even better.

In terms of marketing, we manage it very dynamically. and so this is something that it's a bit hard to give. I think the points and where I sense your question is when do you enter this next phase where you feel more comfortable investing more for faster growth and when are you done with the focus on profitability, look, I think it's hard to tell, but certainly, we start to feel good about it. And when we look at the fact I mentioned during the call fifth quarters in a row where we're making money on aster fulfillment, a bunch of countries which are profitable before G&A, we're getting there. So I think a few more quarters, but I think we're getting there.

The next question is from Kirill Panarin with Renaissance Capital.

Two questions from me, please. Firstly, could you comment on your growth outside phone and electronics category? I think it was about 15% after CFDR, which last year, which doesn't look particularly high. Given the stage of market development. So just wondering what prevents a faster growth in your view? And how do you see trends evolving going forward? That's the first one.

And secondly, could you update us on the competitive situation in Egypt? How does your growth there compared to the overall market or your main rival? And generally, given a tougher competitor there versus other countries, do you need to do anything differently in Egypt versus your other markets in terms of marketing investments or logistics or anything else? That's it for me.

I think on the first one, we -- over the quarters and over the years, always wanted to appreciate the growth together with the, I would say, equation of efficiency, both from a marketing efficiency and from a unit economic perspective, right? And I think on this, you are seeing that we have put a lot of emphasis on marketing efficiency, right? We've reduced the sales and advertising by almost 1/3, right, by 34% between the 2 quarters that we are comparing. We've reduced of course, will increase the efficiency with that, right?

So I think one needs to appreciate that. And as well, the growth can be a function together with the marketing efficiency with the, I would say, monetization pressure that you apply, right? You can see that our pass-through of the fulfillment expense to the consumers and the sellers has been continuously increasing. So we are really being very disciplined in terms of preshipping discounts, price subsidies and marketing campaigns and so on and so forth, right? And I think we are definitely happy to see that we're growing 15%, considering the amount of efficiency improvements that we are generating on sales and advertising. As well as the amount of efficiency that we have driven from a gross profit perspective.

And as we think about the future, when we enter the next phase, we think that we can release some of those efficiency constraints, right? And that, of course, the growth will go also faster. So I think it's an equation here. And again, it has to be appreciated together with the over component of the equation.

When it comes to Egypt, of course, Egypt is a very big focus for us. It's a market that we have been active for many years. And overall, we've been voluntarily explaining that digital is the second largest market for us close to Nigeria. And definitely, we very much adapt our playbook to the competitive situation in Egypt in the sense that we do not go with the same marketing formula in a country where we have more competition than a country where we have less competition. We don't put the same pressure on unit economics, and we adapt, I would say, to the competitive situation to a large extent.

But most importantly, we adapt our business model, and we try to focus on adapting to the local specificities. And our playbook, the Jumia playbook and how we execute the business with the sellers, with the consumers, with the local stakeholders, with the brands, the assortment is very adapted to the local specificities. And I think for us, Egypt is our second largest market. And it's in our mind every morning and every night and every minute, and I'm not sure for our competitor is the same focus, right? And at the end of the day, we win e-commerce because you win the execution. And you win because you have the right assortment, the right prices, the right brands, the right way to engage with the sellers, with the consumers, with the stakeholders.

In Egypt recently, we also launched Jumia Food, which is our food delivery platform. So we -- this is very new. This is for a couple of weeks now, and we are launching it as we speak. And so the consumers, when they think about Jumia, they think about e-commerce, but they also think about JumiaPay, right? There are a lot of usage to JumiaPay to make payments and utilities and so on. And they also now can use Jumia Food. And so as we bring this relevance to the consumers, this is also for us a differentiating factor for consumers to prefer using Jumia.

The next question comes from Sarah Simon with Berenberg.

I've got a few questions. First one is on marketing spend in Q4. Obviously, it stepped up versus Q3 as you'd kind of expect for the seasonality. But customer growth didn't increase very significantly. So can you talk about what you spent the marketing money on?

Second one is, obviously, gross profit after fulfillment expense is growing very strongly. But even if you keep all of your fixed costs below the gross profit after fulfillment line, flat. You need to basically increase that number by a multiple of 4 to get to breakeven. But you're not growing that fast at the moment. So I'm just wondering how you weigh up the idea of a sort of steady path to breakeven, but maybe slightly further away versus a more aggressive growth push that would lose you more money more quickly, but probably get you there faster because you don't have a balance sheet issue now, now that you've raised the capital.

And then just a question, you obviously highlighted the GDP sensitivity to the post sort of pandemic effect. Would you agree though that because of the focus and the shift in emphasis towards more small and everyday items that you should be sort of less reliant on GDP? So more resistant, let's say, to the economy if you're selling small everyday items than if you're selling big mobile phones, for example?

Thanks, Sarah. And I think if we start with this one, I would agree with you, right. And I think the fact that we are well positioned on the everyday category is definitely positive and helps. At the same time, I mean, you see the share of business from tones and electronics. I mean it's still a 43%, right, in 2020. So there's definitely, for us, an exposure to some high value items. And I think the sentiment among the consumer I mean is what it is right now with all this uncertainty. So we'll see what happens. And I think what we have proven in 2020, very clearly, is that we have relevance for the -- we have a reflection and -- of what the consumers do and spend. And you can see how diversified, we've been showing this in the previous release. We have a lot of exposure to fashion, fast-moving consumer goods, like Jumia Foods, all now with the digital transactions, utility, et cetera, et cetera. So we'll see what happens. I would agree with you, but at the same time, we still have exposure to high-value categories. And if the market goes down in those categories, we'll see what happens, right? So I think generally agree with you, but to take -- those facts to keep in mind.

Now on the marketing spend, your first question and the increase. I think on the consumer growth, we have to be always quite careful if you compare the spend of marketing between Q3 and Q4 and if you look at the last 12-month consumers because you carry, of course, the last 4 quarters. And when you compare the last 4 quarters, at the end of Q3, with the last 4 quarters at the end of Q4, there could be some dynamics from last year that you are carrying on. So in general, this is something that one needs to be just careful because you compare 2 quarters in the case. And in the other case, you compare 2 trailing 12-month periods. So just to keep in mind.

And where we spend the marketing is very much a mix of data-driven, very programmatic-type driven online marketing, which we use to drive both new users, new app users who are downloading the app and then we add the spend to take them back to the platform until they can convert. And then we use also that technique to bring back some old users, and we call that retargeting specific users to bring them back to Jumia, so that they can discover new products and new categories and so on. And then we have a lot of local marketing and local engagement. And here, of course, we have our JForce program, which is very successful in many countries where we have the sales consultants and dozens of thousands of consultants for educating consumers in Jumia and helping them discover and how to use it.

We also have large networks of local, and you call that -- you can call that influencers, I guess, the local key opinion leaders who are posting videos about Jumia and explaining to their users, how to use it and how to check the quality of the products and all those things I mentioned to Aaron about education. And then every once in a while for Black Friday, we have also some typical offline spend, billboards and video campaigns on YouTube or on TV and things like that. So it's how we do it. And usually, there's a spike of marketing towards the Q4, as you pointed out.

And then how do we get to profitability with the various aggregates? Yes, of course, there's any way we can get there, as you pointed out. And when you look at the rate of growth of the gross profit after fulfillment versus the amount of cost, of course, you have to put the amount of cost in a dynamic way. And you can see how those costs have been going down, right? So there is a possibility that those costs can go down, of course.

And there's a possibility to go there with a faster growth of gross profit after procurement. And this faster growth of the gross profit after fulfillment can come from, of course, more usage, right, more orders, more consumers, more GMV, that also can come from more monetization of our platform assets, right? And typically, Jumia Advertising, typically, Jumia Logistics, the revenues that we drive from those. Of course, when we bring revenue, and they bring a strong increase of the gross profit of the fulfillment, even if it's not relating to Jumia consumer, right?

So I think we're very well -- we're very confident that we can accelerate the growth of the gross profit after fulfillment, either through more usage and/or more revenue streams, which are not related to the usage because we've been launching those. And 2, we feel confident that we can either keep our costs stable or even if we have to, we can still take them down, right? So I think we have lots of ways to get there. And I think also the point that we were trying to make is we are really focused on bringing the fact and the evidences of the past in profitability, right? And that's what matters more to us than actually reaching profitability at group level, right? We want to be very comfortable to defer that. Look, the model completely works and those evidence and facts are very clear. And rather than saying we must absolutely breakeven for one full year at group level, right, it's more about continuing to bring those milestones, continuing to bring those evidences so that there's not really any doubt.

That's really helpful. Can I ask one follow-up question, which, I am sorry, I forgot to ask initially. There's been quite a lot of chat about higher shipping costs coming out of China, higher freight costs, is that impacting the business at all? And if it is, how are you passing it on to the consumer?

Yes. Very good question. And yes, there's been -- and our cross-border business from China, well, it double-chain or 10% to 15% of the items sold, right? So that's how much we are talking about for Jumia, this cross-border business, and it's been working very well. And those increase in freight costs, of course, they are a problem, obviously, and they're not helping, right? But at the same time, look, we are -- that's why I say we are so diversified, and this is just one area of the business. So it's not been helping, definitely. And then we use a lot of data science to define the optimal pass-through of those freight costs both to the consumers and to the sellers, right?

And there's, of course, a relationship between how much you pass to each and the conversion rate of the items sold. And the perception also. And so this has been something that I would say is a constant optimization. When you have a certain amount of freight cost, you may decide to "hide that" into the price of the product? Or you sometimes want to put it as very identified freight costs. Sometimes, you want to give a bit more to the seller and to the consumer. So it's not so short. It's a dynamic equation, which is very data driven. But something that, of course, is not helping and impacting. But again, like we are diversified. So it's something that we did not think was worth like commenting at least proactively, but we are volunteering, of course, the -- as an answer.

This concludes our question-and-answer session. I would like to turn the conference back over to Sacha for any closing remarks.

Well, thank you very much, as always, for your support for attending, and we're very committed also to explain what we do and talk more. So we appreciate -- we're still a young company and now 2 years listed. So always please do reach out, and we will be happy to discuss and explain and talk more about what we do. Thank you very much. And please take care. Bye-bye.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.