Jumia’s rise exposes challenges of online shopping in Africa
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Nanda Aye’s customer called him three times in the half-hour it took him to creep a few blocks through a notorious Lagos go-slow toward the Lekki Bridge tollway.
“I’ll be there this morning, madame,” he said, his three-wheel truck idling. “This morning. Yes, this morning.” Asked for a specific arrival time, or at least a window of a few hours, Mr Aye demurred.
The courier he works for, Metro Africa Xpress, trained him to be vague, in case customers are disappointed with its client, Jumia, the pan-African ecommerce site that listed on the New York Stock Exchange last month at a valuation of $1.1bn.
Mr Aye’s delivery run shows some of the biggest challenges facing Jumia, and the investors who have sent its shares up by more than 200 per cent, as it tries to expand an African ecommerce business: traffic, logistics, and perhaps most importantly, customers wary of shopping online.
Like its rivals in many developing countries, Jumia offers payment on delivery “as a marketing tactic” since customers are worried about being scammed and are uncomfortable sharing their information online, said Juliet Anammah, chief executive of Jumia Nigeria, which accounts for about a quarter of the business by sales, sellers and customers.
“If you have those kinds of mental barriers, one way to break them is to say you’re not sure, fine, use cash on delivery — and when the things come to you, you decide if you want it,” she said.
But cash on delivery has a much higher return rate, and carries risk. Jumia revamped its system to make sure drivers never carry too much money after a third-party deliveryman in Nigeria was killed two years ago.
Mr Aye delivered to five addresses scattered around Banana Island — probably the most affluent neighbourhood in Nigeria. But Jumia insists it is not limited to a small market of wealthy buyers and that its potential market is far larger.
Sub-Saharan Africa is projected to have 690m smartphone users by 2025, up from 250m at the end of 2017, according to GSMA, the trade body for mobile carriers.
Sacha Poignonnec, Jumia co-founder and co-chief executive, said this scale was a key advantage. Roughly 700m people live in the 14 countries Jumia operates in, many with among the fastest population growth rates in the world.
“Already there are 400m internet users in our market, and last year we had 4m consumers,” he said.
“So the question of how big is the middle class, or how many of the 700m can spend money with us — we just know that we have $1.5tn in consumer expenditure [in Africa] that we want to contribute to shift from offline to online and we have dozens of millions of consumers to go after . . . Today we’re very far from hitting any type of ceiling.”
But to become Jumia buyers, those smartphone users will also need data connections, disposable income and either bank accounts or mobile payments wallets. Nigeria alone is home to the most people living in extreme poverty in the world, 87m.
So ecommerce is unlikely to grow in step with rising mobile data penetration, according to Uzoma Dozie, who prioritised expanding mobile banking as chief executive of Nigeria’s Diamond Bank.
“As you put those conditions in, your market size drops and when you add the issue of trust and payments, you now have a very, very small market,” said Mr Dozie. “It’s very difficult to achieve scale.”
In order to attract as many customers as possible, Jumia also has a travel website, a food delivery service, an events and movie ticket business, and a payments system that gives users access to microloans.
Jumia has spent a lot of money in its aggressive drive to gain market share, logging roughly $1bn in losses, including $195.2m on revenue of $149.6m last year.
Mr Poignonnec said Jumia was focused on driving down costs while gaining users, but that the hundreds of millions of dollars it has invested over the past seven years has given it the scale to be the only pan-African ecommerce player — even as rivals have withered.
Last year, Jumia’s Nigerian rival Konga, which is backed by Naspers, was sold to Zinox, a data centre and computer firm, after cutting roughly 60 per cent of its staff. A number of other ecommerce sites have downsized, shut down or pivoted into other businesses.
“Given what it takes to actually build and deliver a proper ecommerce offering in any market, it makes better sense that investment is amortised over multiple countries instead of one country — all of the ones that have flamed out have been mono-country,” said Ms Anammah.
Being pan-African has also helped Jumia sign partnerships with companies like Pernod Ricard, Mastercard and Xioami, the Chinese mobile phone maker, which would prefer to sign one big deal rather than individual country-level deals, the executives said.
Ms Anammah said the diversity of its markets allowed Jumia to use smaller countries such as Ghana or Ivory Coast as labs for projects they might roll out in bigger markets like Nigeria and Egypt — or, in the case of Jumia Pay, which debuted in those two large markets in 2017, vice versa.
Still, there are hiccups. Customers complain about slow or missed deliveries, or getting the wrong item, or multiple items listed at wildly different prices.
In Lagos, Mr Aye delivered four packs of detox tea to Akinlowo Olawoye, a lawyer, who was collecting it for his sister. He hadn’t ordered from Jumia for about two years, when delays and payment issues were common, he said.
Since then, he has mostly ordered Nigerian products from classified sites such as jiji.ng, where he can speak directly to the seller, arrange a meeting, view the goods and decide whether to purchase. For foreign products, he goes to Amazon’s US site — the extra cost is worth the peace of mind, he said.
Mr Olawoye asked if he could open the box before paying. Mr Aye explained Jumia’s new rule — pay first, open and then return within seven days if it is not satisfactory.
“It’s still the trust issue,” Mr Olawoye said, about wanting to see the goods before paying. “I wouldn’t expect to be able to do that with Amazon — and it’s sad, but we’ll get there eventually.”
Is Jumia an African tech company?
Jumia has come under fire over whether it is actually an African start-up, given it is incorporated in Germany — where its second-biggest investor, Rocket Internet, is based — its top tech team is in Portugal and its co-chief executives are French and based in Dubai, or whether it is using the continent as a marketing gimmick.
On social media, people from across the African tech scene accused the company of being a neocolonialist operation exploiting Africa.
Mr Poignonnec avoided saying, as he did to another outlet, that Jumia was “African”, instead highlighting where its focus lies.
“We only operate in Africa and our business [is] entirely focused on serving the consumers in Africa and that’s really what we have done since day one,” said Mr Poignonnec, noting that Jumia had created thousands of jobs directly and indirectly in Africa via the many employees who have gone on to start their own companies.
“When we founded the business, we were many people around a table founding Jumia. We had people in Nigeria, in Egypt, in Morocco, in South Africa and later in Kenya,” he said. “The last concern we had was where are you from — we were just passionate about building the business.”