X-Raying Jumia’s Road To Africa’s E-Commerce Dominance
No doubt, Jumia has become a household name in Nigeria and indeed Africa. But the e-commerce firm has in recent times come under unwholesome criticism, borne not out of failure to deliver services, but of envy and failure of others to mark up the market. In this analysis, DAVID AUDU takes a look at Nigeria’s e-commerce environment and Jumia’s doggedness to overcome teething problems and forging ahead toward better service delivery.
e-commerce business has grown to become big business in Nigeria and indeed Africa. With e-commerce projected to generate yearly sales of $75bn by 2025, according to McKenzie report, and with over 120 million Nigerians and above having easy access to the internet today have contributed to the growth of the market.
That is not to say the growth of e-commerce does not come with its own challenges. One of such is the threat of cybercrime and fraud, which in the early stages deterred many people from venturing orderings goods online.
Cybercrime expectedly, however, is an international issue that is not exclusive to Nigeria, but through a determined effort on providing security infrastructure by both the state, regulatory agencies, as well as companies, along with improved buyer protection policies, laws, and legislation, have ensured that cybercrime impact on e-commerce is minimised.
Other key challenges faced by e-commerce companies in Nigeria center around the country’s infrastructure, and as the country strives for more transparent and effective public-private partnerships, a more secure and robust platform for e-commerce growth will emerge, ensuring Nigerian entrepreneurs are on an even playing field with countries like Japan, China, India, and the United States.
This is also helped by the fast growing youth populations, expanding consumer power, and increased smartphone penetration.
According to report, the current e-Commerce spending in Nigeria is around $12 billion, and is projected to grow more.
Though Jumia, and perhaps, Konga following at the top of the market, there are more players in the Nigerian space. These include Wakanow, Payporte, Vconnect, Kara, Fashpa, and a host of others. Collectively, they have pushed the frontiers for Internet businesses in the country, getting over 500,000 online orders every 24 hours in Nigeria.
However, one of Africa’s e-commerce platforms, Jumia, before bracing the path to e-market business dominance, no doubt was well aware of the rough road ahead but remain unfazed.
At Jumia’s entry, in 2013, the internet penetrations then was abysmally very low; online payments trust among the people was also in doubt and smart mobile phone usage was just making scattering inroad into most African countries. Though, that was to experience dramatic boost and blossoming in later years.
Today, Africa’s internet penetrations has improved tremendously, while smart phones penetrations, according to recent GSMA, an association of mobile network operators worldwide, is about 747 million SIM connections in sub-Saharan Africa, representing 75 percent of the population, thus, making online retail trade an easy venture.
That Jumia started operations in Nigeria, Africa’s most populous Black Country, was no coincident. The company’s vision of a pan African operation with a global vision was kept in focus despite the turbulent economic and social circumstances that came afterwards.
Jumia boasts of supporting more than 80,000 local African companies who did business on its platform in 2018.
“We are taking the African economies online and enabling our sellers to reach and better serve more consumers”, it boast on it mission statement.
These include harnessing the power of technology to deliver innovative and convenient online goods and services to consumers, while opening up new opportunities and horizons to African talents. “We are creating new jobs and developing new skills on the continent”.
Like most startup companies, the beginning of Jumia was not too different, but somewhat heightened by certain socio-economic and fiscal policies which influenced the pace of growth.
Compared to other startups in similar terrain, one would understand that development strategies and state policies, income level of the vast majority of the population, with the aforementioned, internet penetration drawbacks, and all inherent factors players in this particular economic sector have to contend and surmount.
According to the company’s results released in November last year, Jumia’s revenue rose 19 per cent to 40 million Euros, even though the period also recorded some losses for Jumia, which targets to be profitable by 2022.
For instance, while it took Amazon, which is regarded today’s as e-commerce reference point, almost a decade to make significant inroads into most of America’s retailers budget, Jumia didn’t struggle that long, before it became a household name.
Remember the famed defunct accounting giant, Lehman brothers, of notorious memory, which once described Amazon, as “hemorrhaging cash and might not survive”, noting further in its description of why Amazon might not survive, to say “it struggles with a weak balance sheet, poor working capital management, and massive negative operating cash flow, the financial characteristics that have driven innumerable retailers to disaster throughout history”. That was Lehman Brothers’ analysis of Amazon, in June 2000.
Amazon was nine years old then, and seems not a profitable venture in the USA, a country regarded as the best market for e-commerce in the World. But the story today is different. As noted earlier, Amazon and the Chinese Alibaba are reference points of e-commerce business successes.
Coming back to Jumia, and with due regards to the growing consumer consciousness, who have in recent years embraced e-commerce, in spite of the continent’s economic adversity occasioned by poor leadership, corruption and mismanagement, have reeved up courage to withstand criticism and triumphing.
But, as they say, constructive criticism spurs growth. Why would you want somebody down for the sake of it? Well, the market place is breeding ground for envy and jealousy, especially, envy by those who crashed out of the system by nobody’s making.
As noted elsewhere, some people delight in seeing the negative side of Jumia for reasons not related to business. “They are cheering at the “neocolonizer” retreating and having problems. That is to say in many cases it was disappointment to see people considered reasonable and established entrepreneurs and executives, engaged in spiteful social media rants about Jumia, where the only tangible thing that got disclosed in those rants, was their personally motivated disgrace towards Jumia. It was a kind of pleasures derived by someone from another person’s misfortune.
Today, looking at successful starts ups that have break even, there are only a handful of entities in Sub Saharan Africa that did even remotely as much good for the ecosystem as Jumia. The recent IPO voyage itself validated the market and many fund managers got their investments thanks to that.
Hundreds of Jumia employees went on to become founders and raised money from investors, thanks to Jumia in their CV; and thousands got a better position in a different companies, thanks to their e-commerce background in Jumia.
Hundreds of millions of dollars were pumped into offline marketing through local marketing agencies, printing shops, billboard owners, etc. Market education is the hardest to quantify but probably the most important argument among all of them.
In startups, it is said that the investors decide whether losses are still a “feature”, or already a “bug”. Problem is that, most retail investors don’t understand how high the operating costs are and how painfully slow the Jumia markets grow, according to market analysts.
But this means nothing if your investment horizon is not long enough. It’s honestly not a fair deal to compare the markets between Amazon and Jumia.
One would have to look at the purchasing power, internet adoption, the precision of addresses, online payments trust, merchants’ reliability, logistics services, currency fluctuation and end with having access to running water and 24/7 electricity in your office. In summary, the operating environment for both companies is not the same.
Admittedly, there are so many challenges that need to be addressed for e-commerce in Africa to become hot again and it’s very likely that no one has addressed those challenges yet. No one benefits from Jumia’s problems besides short-term-thinking short-sellers.
Jumia may have served as a punch bag to detractors, but what can’t be denied are its obvious open hands in setting the pace for others to follow.
Also, its contribution to local talent development and mentorship, as evidenced from those who have referenced it for their future aspirations; these can only be denied for the purpose of ego trip by detractors, which often, are been the bane of pioneer firms globally.