The Wall Street Journal - 22.08.2019

THE WALL STREET JOURNAL. **** Thursday, August 22, 2019 |B3

clined to disclose how many

employees were fired or sus-

pended. Jumia employed

about 5,100 full-time employ-

ees at the end of December,

according to a securities filing.

In connection with its ini-

tial public offering, Jumia dis-

closed in April that it received

information about sales agents

in Nigeria potentially having

engaged in fraudulent prac-

tices. Jumia said Wednesday it

had reviewed sales practices

across all its markets from

2017 through June 30 of this

year in response.

Jumia’s American deposi-

tary receipts fell 17% to $12.27

Wednesday as it also posted a

wider quarterly loss.

Shares in recent weeks have

been trading at their lowest

levels since the company com-

pleted the April IPO. Jumia

ADRs, which trade on the New

York Stock Exchange, priced at

$14.50 each.

Before the IPO, Jumia had

raised about $770 million in

funding from French liquor

maker Pernod Ricard SA,

South Africa’s MTN Group Inc.

and other investors.

Jumia said Wednesday its

second-quarter operating loss

broadened to €66.7 million

from €41.9 million a year ear-

lier. Revenue rose 58% to

€39.2 million. The company

reported 4.8 million active

consumers at the end of June,

up from 3.2 million last year.

Jumia Technologies AG,

the company behind the big-

gest e-commerce business

across Africa, said it has fired

employees and suspended oth-

ers after investigations of im-

proper sales practices.

Jumia said Wednesday it

found instances where inde-

pendent sales agents and sell-

ers worked with employees to

profit from what sellers pay to

use the online platform and

commissions that sales agents

earn. Jumia said it fired sev-

eral employees and sales

agents and removed sellers on

the platform who were in-

volved in the scheme.

The Berlin-based company,

which has operations in coun-

tries including Nigeria, Mo-

rocco and Kenya, also said it

has identified instances where

orders were placed and then

subsequently canceled. It sus-

pended employees involved in

those transactions while a re-

view is continuing.

Co-Chief Executive Sacha

Poignonnec described the is-

sues as isolated on a call

Wednesday with analysts, say-

ing they had little impact on

the company’s merchandise

metrics and financial state-

ments. “We are constantly re-

viewing and improving our

system and controls,” he said.

A Jumia spokesman de-

BYMICAHMAIDENBERG

ANDALEXANDRAWEXLER

Online Retailer Fires,

Suspends Employees

TEL AVIV— Amazon.com
Inc. is seeking new vendors in
Israel to bolster its service in
the country, a move that comes
as the e-commerce company
prepares to launch a local-lan-
guage website to tap the fast-
growing Middle East market.
The company reached out to
Israeli businesses to sell and
directly deliver locally via its
platform, according to a state-
ment on its website Wednes-
day.
For years, most Israeli com-
panies that have sold products
on Amazon first sent their
goods to fulfillment centers in
the U.S. and Europe. This has
made the products more expen-
sive for Israeli buyers. Now
Amazon is working to ensure
that these goods can be sold di-
rectly from inside the country.
Amazon said that its aim is
“to provide our customers in
Israel with even more local
products,” with quicker deliv-
ery speeds. The program will
eventually help Amazon in its
planned launch of a Hebrew-
language website aimed at the
Israeli market, according to
people familiar with the com-

pany’s plans.
Amazon was planning a ma-
jor drive to reach out to Israeli
buyers before the Jewish holi-
day season in October, but a
surprise second national elec-
tion this year—in September—
may force the company to push
off the campaign, they said.
A spokesman for Amazon
declined to comment on the
company’s plan for a local-lan-
guage website.
Amazon’s move in Israel
marks its second big effort in
the Middle East this year. In
May it opened its first-ever
Amazon-branded Arabic-lan-
guage website in the United
Arab Emirates.
While it is a relatively small
country of about nine million
people, Israel has a strong re-
cord of online shopping. Last
year, the Israeli postal service
said it handled 65 million pack-
ages from abroad. China’s Ali
Express, owned by Alibaba
Group Holding Ltd., led the Is-
raeli market with 50% of the
orders, followed by eBay Inc.
and Amazon, the Israeli postal
service said. Malls still remain
a pillar of Israeli shopping cul-
ture, but e-commerce is ex-
panding. Analysts estimate the
current Israeli e-commerce
market at about $4.8 billion in
sales, 70% of which goes to
companies outside Israel.
Nir Zigdon, chief executive
of eCommunity, an e-commerce
company helping large Israeli
and foreign companies open
Amazon shops, said the largely
traditional retail market in Is-
rael has been rushing to pre-
pare. “The market has been
boiling since May,” he said.
Amazon first approached the
Israeli market in May by send-
ing a letter in Hebrew to poten-
tial sellers.
Amazon faces potentially
difficult decisions about mar-
keting goods that are produced
in Israeli settlements as being
made in Israel. Some Palestin-
ians have called on companies
to make sure they aren’t profit-
ing from Israel’s contested
presence in the West Bank and
demand any Israeli products
made there be labeled as made
in the settlements.
A spokesman for Amazon
declined to comment on the is-
sue.
“Any relationship whatso-
ever with the settlements will
make them a target for the BDS
movement and maybe the Pal-
estinian government,” said Sam
Bahour, a Palestinian-American
business consultant living in
Ramallah. He was referring to
the international movement to
end Israel’s occupation of the
Palestinian territories through
boycotts, divestment and sanc-
tions.
Gil Dattner, of Bank Leumi,
said Amazon would have a hard
time not providing service to
all Israelis, including those in
West Bank settlements.

BYDOVLIEBER

Amazon

Looks for

Local Edge

In Israel

$4.8B

Theestimatedsizeofthe
Israelie-commercemarket

BUSINESS NEWS

know that when this adminis-

tration’s alternative is no lon-

ger available, California will

squeeze them to a point of

business ruin,” Mr. Trump

said. Volkswagen AG, Honda

Motor Co. and BMW AG

joined Ford on the California

agreement.

In a statement responding

to the tweets, Ford said: “We

have consistently supported

one 50-state solution for regu-

lating fuel economy standards,

and this agreement with Cali-

fornia provides regulatory sta-

bility while reducing CO2

more than complying with two

different standards.” A spokes-

man for California Gov. Gavin

Newsom didn’t respond to a

request for comment.

For decades, California has

had the legal authority to set

its own requirements. Thirteen

states follow California’s rules,

a number that has grown over

time.

The four car companies rea-

soned that even if the White

House prevails in freezing the

targets, they could still be

stuck with paying the added

cost of building cars to meet

California’s stricter standards,

say people familiar with their

thinking. California has sued

the Trump administration, try-

ing to block its efforts.

But other auto makers have

been reluctant to join the Cali-

fornia pact, preferring instead

to wait for a final rule, which

is expected to be made public

later this year. Some foreign-

based car manufacturers are

also worried a public stance

against the rollback would

only embolden Mr. Trump to

carry out his threat to impose

tariffs on imported cars, ac-

cording to a person close to

the fuel-economy discussions.

General Motors Co., mean-

while, doesn’t think the Cali-

fornia proposal gives enough

credit for sales of fully electric

vehicles, people familiar with

GM’s thinking say. The Detroit

auto maker is pushing for

rules to require car companies

to sell battery-powered cars

across all 50 states.

Such a divergence is un-

usual for the auto industry,

which has been mostly aligned

on fuel economy in the past,

say industry executives, for-

mer regulators and analysts.

“We tend to think of the in-

dustry as monolithic,” said

Brett Smith, a director at the

Ann Arbor, Mich.-based Center

for Automotive Research. “But

it is increasingly very different

companies with very different

goals.”

The administration views

the regulatory rollback as a

way to help car makers lower

costs and adjust to demand for

bigger vehicles. It also wants

to revoke California’s federal

waiver to set its own emis-

sions standards.

—Tim Puko

contributed to this article.

Major car makers are

caught in the crossfire be-

tween the Trump administra-

tion and California over U.S.

tailpipe-emissions rules, lead-

ing them down different paths

in how to respond to the

standoff.

The White House last year

proposed easing the Obama-

era fuel-economy standards,

freezing them at 2020 levels,

or roughly 37 miles a gallon,

through 2026. The move came

after car companies had

pressed for years for more

flexibility on the existing

rules, which were agreed to in

2012 and call for increases in

fuel economy annually through

mid-decade to an average of

about 50 miles a gallon.

Car-industry executives

have argued the current fuel-

economy requirements are too

strict and don’t take into ac-

count the shift in consumer

preference to larger, less-fuel-

efficient trucks and sport-util-

ity vehicles. When President

Trump came into office, they

raised the issue in a White

House meeting the week after

his inauguration.

But the rollback being

pushed by the administration

is so extensive that car compa-

nies are worried it will set off

a legal battle with California—

the nation’s biggest auto mar-

ket—and ultimately conclude

with manufacturers having to

meet two different sets of re-

quirements for selling cars in

the U.S. Auto makers have

warned the tussle could ham-

per planning. In a tweet

Wednesday, Mr. Trump de-

fended his plan, saying it

would cut the average price of

a car by $3,000 and have little

impact on the environment.

He also criticized Ford Mo-

tor Co. for a side deal the auto

maker struck last month with

California regulators to meet

new fuel-economy standards

that are tougher than his ad-

ministration’s proposal but

less stringent than the Obama-

era ones.

“Car companies should

BYBENFOLDY

ANDMIKECOLIAS

Emission Rules Split Car Makers

Ford, Volkswagen, Honda and BMW struck a side deal on emissions with California this summer.

JOHN G. MABANGLO/EPA/SHUTTERSTOCK

Electric Vehicles

Divide Industry

The fuel-economy rift be-

tween California and the

Trump administration has left

auto makers in the middle

but with differing agendas.

Some car companies have

already made large invest-

ments in electric vehicles,

putting them in a better posi-

tion to comply with the exist-

ing standards, while others

are more dependent on

trucks and sport-utility vehi-

cles for the bulk of their

sales, making those targets

harder to reach. “No two car

companies are totally

aligned,” said Mandy Gu-

nasekara, a former Environ-

mental Protection Agency of-

ficial who had worked on the

proposed rollback and left the

administration this year.

Ford Motor Co., Honda

Motor Co., BMW AG and

Volkswagen AG had hoped

for a truce between the ad-

ministration and California.

This spring, the companies

and 13 other auto makers

signed a letter urging Mr.

Trump to personally find a

compromise with California.

That letter was “summar-

ily dismissed” by the adminis-

tration, said an executive for

an auto maker. The four car

companies—representing

about 30% of all U.S. vehicle

sales—then forged their own

deal with California, willing to

risk political backlash from

the White House, say people

involved with the effort. The

voluntary pact with California

was signed in July.

“In this case, deregulation

doesn’t produce lower costs.

It produces higher costs,” this

executive said.

Since then, no other car

company has publicly re-

vealed plans to join the Cali-

fornia deal. Auto makers such

as Fiat Chrysler Automobiles

NV and Kia Motors Corp. say

they want one set of federal

standards on fuel economy.

The

future of

energy

is low- to

no-carbon

For over 100 years, we’ve

been answering the questions

of today to meet the energy

needs of tomorrow. From

fuel cells and microgrids to

natural gas, wind, solar, and

nuclear—we’re on a mission

to provide energy solutions

that are low- to no-carbon

by 2050. The future of energy

we’re building is clean, efficient,

smart, and resilient.

southerncompany.com/future

Africa-focused Jumia took action after investigating sales tactics.

ISSOUF SANOGO/AGENCE FRANCE-PRESSE/GETTY IMAGES