Daniel Yu and Belal El-Megharbel, the co-founders and CEOs of Wasoko and MaxAB, will jointly lead the merged entity as co-CEOs. They will also serve alongside existing investors, including Silver Lake and Tiger Global, on the company’s board of directors. 

Wasoko and MaxAB contributed nearly equal stakes to the combined entity, Yu told TechCabal on a call, dismissing earlier claims that MaxAB has a controlling interest. 

“MaxAB and Wasoko have a pretty close to 50-50 shareholding,” Yu said. 

The merger, seen as an attempt to create a category king in the contested B2B e-commerce sector, signals investor willingness to see consolidation. Wasoko (last valued at $625 million) and MaxAB had raised over $230 million from investors like Tiger Global, Impact Engine, and the University of Chicago.

TechCabal reported in December 2023 that the deal is structured as an equity consideration, which means existing shareholders will receive shares in the new company. First announced in December 2023, the deal was expected to be finalised in April 2024. Wasoko declined to provide specifics about the delay due to the merger’s “sensitive” nature.

The new entity will capitalise on MaxAB’s position as a leading B2B beverage supplier to a network of small retailers throughout North Africa. 

While Cairo will serve as the headquarters, there are no plans for job cuts since Wasoko made 100 duplicated roles redundant in December 2023. 

The new entity will initially operate in five countries—Kenya, Tanzania, Rwanda, Egypt, and Morocco. Wasoko was in Zambia, Uganda, and Zanzibar but closed shop in those markets in March 2024. The new entity will have 450,000 merchants serving 65 million consumers. 

The integration of Wasoko and MaxAB’s tech and operations was completed in 60 days, the company claimed. Former Wasoko employees told TechCabal in January 2024 that MaxAB’s systems were preferred, as MaxAB had also brought its staff from Egypt for the integration exercise. 

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According to a securities filing seen by TechCabal, the gross proceeds from the sale amounted to $99.6 million. The filing suggests an average share price of around $4.95 per share, slightly above Friday’s trading price of $4.90. On Monday, TechCabal reported that liquor and wine maker Pernod Ricard bought 1.27 million ordinary shares valued at around $6 million.

At least one Wall Street analyst estimates that Jumia will lose $65 million for the full year 2024 and in Q2 2024, its cash position stood at $92.8 million. 

Raising $99 million will significantly improve Jumia’s cash position. 

Jumia did not immediately respond to a request for comments. 

The e-commerce giant will use the funding to finance ongoing efforts to acquire more customers, and expand its supplier base and logistics network. It will also invest in improving the technology that supports its vendors and marketing vertical—a value-added service that it has been extending to its customers since 2021.

Despite missing its revenue targets in Q2 2024, investors remain bullish on Jumia’s ability to crack Africa’s e-commerce market. The company will need all the conviction it can get.

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It is unclear at what price the global spirits seller bought the new shares, but Jumia stocks (JMIA) traded at $4.68 on August 6, the day Pernod Ricard made the purchase, according to an SEC filing by Jumia.  At that price, Pernod Ricard would have paid $6 million.

Pernod Ricard is a long-time Jumia investor and once held an 8.2% stake. The retailer issued more shares between 2020 and 2021, diluting Ricard’s position to 6.4%.

Jumia did not immediately respond to requests for comments.

Pernod Ricard confirmed the investment but did not provide additional details.

The share purchase shows the liquor maker’s faith in the African e-commerce giant whose share price dipped after it missed revenue estimates in Q2 2024. There were also concerns about share dilution from secondary sales. 

In July 2024, Jumia’s share price rose 252%, reaching a market capitalisation of $1.3 billion. Investors cited increased cash efficiency and a rejig of the business as the basis of their optimism.

In February 2023, the retailer laid off 900 employees and cut executive compensation. In December 2023, it shut down Jumia Food, a food delivery business that was burning cash. The company’s 2024 Q2 report shows its efforts are paying off, as losses narrowed to $19 million, half of its Q2 2023 loss.

Its 2024 financials also show that its number of orders has increased to 4.8 million despite cutting advertisement costs. Jumia credits SEO optimisation and customer relationship management for the 6% increase in users of the platform which currently has 2 million active users quarterly—a bankable metric for Pernod Ricard which distributes its drinks on Jumia directly and through third-party sellers who use the platform across Africa.

Before the market opened on Thursday, Jumia was trading at $4.91, resulting in a market capitalisation of $496 million. It will put question marks around the company’s plans to sell 20 million shares as reported by TechCrunch on Tuesday. The company had planned to take advantage of July’s rally to sell new shares. If it sells shares at current market price of $4.91, it could raise $98 million.

Selling secondary shares would have boosted its cash position, as it has $92.8 million in cash and cash equivalents. Jumia raised $386 million in 2021 after its share price unexpectedly jumped to $49. 

“The new funding will be used to expand our supply chain network, particularly by enhancing logistics to reach smaller cities and broadening our overall network,” CEO Dufay told TechCrunch. 

If it eventually raises funding, it will invest in technology and scale “the company faster and break even faster.”

While the company narrowed its losses to $19 million in Q2 cutting advertising spend and using its cash more efficiently, active customers remained flat and currency devaluation in key markets like Nigeria made it difficult to grow revenue. 

Jumia did not immediately respond to a request for comments. 

Editor’s note: A previous version of this article incorrectly stated that Jumia planned to raise $100 million. The company could raise up to this amount if it sells all 20 million shares at the current market price of $4.91.

Mbagwu has over 15 years of experience in the financial services sector. He was previously head of business support at Unified Payments, a prominent payment infrastructure provider, and head of service operations at Access Bank.

According to Jumia’s 2023 filing, PalmPay is one of JumiaPay’s biggest competitors. 

Jumia did not immediately respond to requests for comments

JumiaPay is integrated as a payment method at the checkout of online platforms like Jumia—it processed about 39.5% of Jumia orders in 2023. It also has a standalone app that lets users make bank transfers, bill payments, loans, and merchant payments. One person familiar with the company said JumiaPay’s biggest customer is its parent company. 

JumiaPay processed $192 million in payments for 8.4 million orders in 2023, a figure that pales compared to the $5 billion monthly transactions that Palmpay reported in 2023.

Mbagwu will report to Sunil Natraj,  the CEO of Jumia Nigeria.

Mbagwu’s appointment comes as Jumia intensifies its focus on profitability. The company has laid off staff and shut down its food delivery arm to save costs and increase revenue which stood at $186.4 million at the end of 2023, per its SEC filings. Some of those moves have resonated with investors with its share price rallying to $12.16 at the time of writing this article, nearly four times what it began the year.

While Olaleye had offers from friends to put in money to keep the business going, he turned them down; he was spent. “I have lost faith in the food delivery business,” he shared. Yet he has not lost his entrepreneurial drive and is raising money to fund ShopNowNow, a new grocery delivery business. The new direction will put him in competition with well-funded competitors like GoLemon, PricePally, and Chowdeck.

“The grocery delivery will focus on large orders, with a minimum threshold of ₦25,000,” he said. It’s a different sort of beast from ChopNowNow, where the average order value was ₦1,000. The new grocery business will schedule deliveries in batches and will not be pressed for time like a food delivery service. 

Hard lessons from food delivery

ChopNowNow began as a traditional dark kitchen with one primary location to deliver affordable food quickly in the business districts of Lekki and Victoria Island. A dark kitchen meant it made food and could control inputs and quality. But it later included a dine-in option as it had space to spare.

With free delivery as one of its value propositions, this was the standard low-margin play that needed volume to break even. “The typical margin for restaurants like ours that sell meals at a low price was 30%.”

The promise of free delivery was the charm. “It worked like magic,” Olaleye recalls. ChopNowNow also used influencer marketing to reach its target audience, and at one point, the comedian, Mr Macaroni, was one of its influencers. The company grew from three delivery motorbikes to thirty within three years and expanded its distribution channels to other food delivery platforms that used an aggregation model.

The restaurant was listed on Jumia Foods, a food delivery platform that shuttered in December 2023, citing thin margins worsened by intense competition. ChopNowNow was also listed on OFood—an Opay-operated food delivery service that was once part of a super-app play by the fintech giant—and Glovo where it was a customer favourite. Business was good, and Olaleye who had recouped his initial investment in the bootstrapped business with some profit was optimistic about the future. 

Inflation pulls a fast one on ChopNowNow

The economy was about to pull a fast one on business. Food inflation, which began to rise during the COVID-19 pandemic, had worsened to 19.5% by mid-2022. As consumer purchasing power came under pressure, more people began classifying food delivery as a luxury. 

“Whenever we called customers, many said they had begun cooking at home.” 

The first thing to go was free delivery. ChopNowNow limited free delivery with its in-house fleet to areas within Victoria Island, where it had the most customers. As it withdrew the free delivery it had always promised, customers moved to newer discounted competitors. 

“There’s no loyalty in this market. You expect that after spending years acquiring users, the customers would stick around.” 

“They always run to the food delivery platform that can outspend others [in discounts and food delivery.]”

Like many restaurants that compete on price, ChopNowNow struggled to adapt to rising input costs. No matter how sharply the cost of ingredients rose, the restaurant was reluctant to pass on those costs to price-sensitive customers. Cost-cutting was the company’s only option.

Olaleye believes the circumstances would have been different if he had started targeting high-end customers or had a warehouse to store produce and absorb the shock of price fluctuations.

The arrival of food delivery apps intensified competition, with more restaurants coming online. The company remained at its current location and began selling off assets.

Today, Olaleye rejects the unique proposition that once helped him attract thousands of customers. He tells anyone willing to listen that free delivery is not the way to find loyal customers.

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Four people familiar with the matter said the new company, which has been registered in Kenya, will deliver household items in Nairobi and the surrounding suburbs. Turner is also speaking with investors and has three investors lined up to provide funding, said one analyst at a VC firm with knowledge of the talks.

Tracey’s cofounder and former Copia CEO Tim Steel will join the new team, but it is unclear in what capacity, two people with knowledge of the matter said. Steel was Copia’s chief executive from March 2017 until May 2024, when the company entered administration.

On May 24, 2024, Copia entered administration after admitting it would struggle to make payroll. Under the administrators, Makenzi Muthusi and Julius Ngonga of KPMG, it laid off 1,060 staff and hoped to raise new funding. Ultimately, fundraising attempts failed, and the company began winding down after eleven years of operation. 

“Tim is a visionary. He was let down by his team. There was no hunger to get results as you would expect in most startups,” said one person with knowledge of Copia’s business.

Tracey Turner and Tim Steel did not immediately respond to separate requests for comments. 

Kenya’s e-commerce sector has been hit by a series of high-profile closures this year including iProcure, a B2B farm input platform, and Rejareja, a B2B that allowed retailers to restock their shops.

“If things go as planned, operations will resume in September or October at the latest,” the same person said.

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The rally represents a significant change in fortune for the Pan-African retailer which has endured a mixed fortunes as a publicly traded company ever since it listed on the New York Stock Exchange in April 2019. Although its share price soared to a record $62.4 in February 2021 during the wild days of the meme stock rally, Jumia has lost over 70% of its market value since then as its board and management team race to make a turnaround.

After a string of poor performances and an inability to cut costs, the board fired Jumia’s long-time co-CEOs, Jeremy Hodara and Sacha Poignonnec, in late 2022. Francis Dufay, a former management consultant who served as CEO of Jumia Ivory Coast, was promoted to run the company.

Under Dufay’s leadership, Jumia has made drastic restructuring to its business over the last 18 months. The company has laid off 43% of its employees, scaled back its presence in underperforming markets, and shuttered its food delivery business. The new boss has also shrunk Jumia’s management team based in the United Arab Emirates and forced several of them to return to work from its offices on the continent.

These changes are starting to make an impact. At the end of Q1 2024, the company, which has never turned a profit, reduced its operating losses by 71%. Also, its revenue grew by 18.5% despite rapid currency devaluation and macroeconomic problems in its key markets, especially Nigeria, which represents more than a third of its annual sales. Meanwhile, its salary and administrative expenses have dropped by 37% compared to the first three months of last year. Wall Street analysts have taken notice, with a few of them recommending Jumia shares to their investors.

Jumia’s share price is up 252.3% since the start of the year as the business repositions itself for growth, particularly in North Africa. Jumia is also making less direct sales from its own inventory, with third-party merchants responsible for over 52% of sales on the platform in the first quarter.

This shift to third-party sellers, which started a few years ago, is helping to reduce costs while increasing alternative platform revenue. Jumia earned $17.3 million in commissions for merchants for the three months of 2024, a 78% jump from the $9.7 million it earned for the same period last year.

But as Jumia rejigs its operation, it will have to contend with new competition from social selling platforms, including Instagram and TikTok which are also doubling down on e-commerce tools. One of the world’s biggest retailers, Amazon is also expanding its footprints in Jumia’s key markets, like Egypt. At the same time, Prosus-backed Takealot is looking to consolidate its hold on South Africa, a major economy where Jumia is still trying to catch up with the incumbents.

In an interview with TechCabal last year, Jumia’s Dufay said he wants to stabilize the business before chasing new growth across key markets.

While the model is straightforward, the razor-thin margins of restaurant businesses mean the commissions eat into profits. 

It’s a delicate dance but restaurant owners are now familiar with the steps: pay the commission—which typically ranges from 10-30% per order—and reduce already meager profits or pass on all or part of the commission to customers who order online. 

“If I charge ₦6,000 for a plate of Abacha, I only get about ₦4,200,” said Kennedy Elobuike, a restaurant owner whose business is listed on Glovo and Chowdeck. 

Glovo and Chowdeck did not respond to a request for comments. 

“Giving away nearly one-third of the value of your food can have serious cost implications, and the potential impact has only increased with food inflation.” While Elobuike claims he doesn’t mark up his prices on the platforms, he doesn’t frown at the practice.

These markups are a key part of the delivery process, even for big restaurant chains that negotiate lower commission fees—some restaurant chains pay as little as 10%—because of their size and scale.

A pot of 8-piece chicken which costs ₦12,800 at a Chicken Republic outlet in Lagos is sold for ₦13,300 on one food app while a ‘maxi’ pot of chicken that’s available for ₦20,900 in-store is listed on another delivery app for ₦22,100.

Since restaurant customers don’t want to pay prices that reflect how expensive deliveries are, these markups are a workaround for everyone in the value chain. It’s similar to retailers adding part of the delivery fee to the cost of the item so that customers aren’t discouraged by high service fees. However, this strategy has its critics. 

“I watched my orders from Jumia Food [dwindle] from over 100 to nothing in 2021 when Glovo came in offering free delivery and later ₦250 [half of what Jumia charged at the time],” said Olamide Olaleye, the founder of ChopNowNow, a restaurant that offered free delivery for five years before it paused operations.

“Most of the users this strategy attracts are price sensitive and disloyal, Adjusting the subsidised prices to reflect the true cost of delivery will send many of them shopping where delivery is cheaper.”

Some restaurant owners stay off delivery apps despite the promise of more customers. 

“The cost of goat meat has gone so high that sometimes I sell on a ₦20,000 loss,” said one restaurant owner in Lagos who once considered onboarding on one of the delivery apps. 

“I still have to pay staff and pay rent from my sales. The commission is too expensive for me.” 

Yet it’s not all gloom. Startups like Mano that charge a flat fee of ₦1,400 have shown that there are customers who are open to paying true prices. 

“The convenience of delivery is worth it as long as the price difference between delivery and walking in is not excessive,” Pascal* who earns around ₦1 million ($600) monthly told TechCabal.

“I think that the days of marking up to offset delivery costs are behind us,” said a ghost kitchen operator who no longer marks up prices. “People who use these platforms are the exact kind of customers we are looking for, and we know we can win them over [to our food delivery platforms] with quality food.”

Ultimately, commission fees and restaurants’ margins are a universal concern. While some restaurants treat the commission as marketing costs, others prefer to pass it on to customers. Bolder delivery players will simply charge customers more and keep the clients happy. While it’s a balancing act for everyone in the value chain, the customer wants their food now or ten minutes ago when they placed the order on the app. 

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Despite reinstating the employees, they failed to show up for work, Wasoko’s lawyers argued. One of the claimants was still employed by Wasoko at the time of the order and participated in redundancy negotiations. The court agreed with Wasoko’s argument that keeping them on payroll would amount to “unjust enrichment.” 

“Before me are claimants who have since obtaining the orders declined to present themselves to work and in the case of one, taken steps to accede to the issue that brought them to court,” the court held in its June 11, 2024 decision.

The employees disagreed with the ruling, and one person with direct knowledge of the matter claimed Wasoko allowed them to work from home occasionally. The same person added that they had limited access to work tools, and claimed a hostile work environment after they sued made working from the office untenable.

As a result of the ruling, the parties to the lawsuit will now prepare for a pre-trial hearing on the wrongful termination suit brought by the nine ex-employees.

Wasoko maintains it followed due process in the layoffs, and that the initial redundancy notices from December 2023 were valid. It also issued a new notice after the February interim order. 

In April 2024, the ex-employees received and kept their redundancy payments. However, the ex-employees claimed that Wasoko erroneously released the payments while the case was ongoing.

While the case continues, Wasoko’s celebrated merger with Egypt’s MaxAB, expected to be concluded by April 2024 remains uncompleted, with TechCrunch citing “extended due diligence” as the cause of delay.