How Jumia earned the position as the African Amazon in just 4 years
by Elizaveta Naumov
July 19, 2016
Created in 2012 in Nigeria by Sacha Poignonnec and Jérémy Hodara, Jumia was able to become the ecommerce leader in Africa in just 4 years. With record growth, it has seen sales multiplied by 5 in the last two years. Today, Jumia is active in 12 African countries, employees 1800 people and has delivered over 1.6 million orders in 2015.
This exceptional growth has attracted some of the biggest investors worldwide; Africa Internet Group, Jumia’s parent company, has raised $300 million last May from Goldman Sachs, AXA and Rocket Internet. It’s the only company to be valued at more than one billion dollars on the African content and it’s not showing any signs of stopping.
While the African continent has enormous opportunities for online retailers, there are still quite a few obstacles that hinder ecommerce growth: weak internet infrastructure, a complicated banking sector and logistical difficulties.
So how did Jumia help to spread online shopping across Africa? What was the key to their success in a continent where weak infrastructure can put business ventures to a complete halt? We take a look at Jumia, the startup that’s been nicknamed the Amazon of the African continent.
The land of opportunity for ecommerce?
According to the World Bank (Global Economic Prospects), 6 out of 12 global economies that have had the highest growth between 2014 and 2017 are located on the African continent. It’s not surprising then that a number of growing companies, especially in the high tech industries, are taking a risk there.
With a growing population, the rise of a middle class and the increase of internet and mobile use, the African continent seems to be the perfect place for online shopping. So why does it only represent 2% of the global ecommerce market? The answer lies in the continent’s weak infrastructure. While internet penetration is on the rise, it is far from the levels in Europe or Asia; only 28% compared to the 50% average in the rest of the world.
The use of banking services among consumers is still relatively low, although it has grown from 24% in 2011 to 34% in 2014, thanks to the emergence of mobile banking. In comparison, this rate grew from 51% to 62% in the rest of the world during the same time period.
Another significant challenge for ecommerce in Africa is the state of the road system, which in some areas is poorly maintained or non-existent. Only an estimated 28% of the roads are paved. The road density is the lowest in the world, with only 7km for every 100km, compared to 12km in Latin America and 18km in Asia.
A winning strategy: adapting to the realities of the African continent
Despite the complex environment, Jumia took the risk of spreading ecommerce across the continent. In order to adapt to the local market, they took on a long-term strategy that involved:
- Creating a solid logistical infrastructure
- Educating the consumer by showing them that online shopping could be a safe choice
Building their own distribution network
With logistics being one of the main challenges of ecommerce, Jumia decided to create its own fleet of delivery trucks rather than relying entirely on different logistics partners. Their goal was to reduce the geographical fragmentation of the continent and cover a wide territory. Today, Jumia has a larger fleet than DHL, making it possible to distribute across 12 countries: Algeria, Angola, Cameroon, Egypt, Ivory Coast, Ghana, Kenya, Morocco, Nigeria, Senegal, Uganda, Tanzania. The company also uses couriers in big cities like Lagos.
Jumia also offers several alternative delivery options, including click and collect, and delivery through a few select delivery partners. Their long term goal though, is to mainly use their own delivery network.
Cash payment on delivery
Jumia also adapted its payment methods to match the preferences of African consumers. Since 65% of adults don’t use a bank account, the website allows customers to pay in cash to the deliveryman. This also serves to instill confidence in consumers, who are still wary of making online payments.
They also built partnerships with mobile payment providers, like MTN Mobile Money in the Ivory Coast. According to Deloitte, Africa is at the leader in this field, with 52% of payments made through a mobile device. This option is a popular alternative to the traditional banking system and has been one of the key driver’s for Jumia’s growth.
Going beyond physical distribution
Jumia noticed that many African countries had weak distribution networks, such as Lagos, where there are only a handful of shopping malls for a population of 20 million.
In order to offer a wider product range, the company worked with a variety of local and international partners, essentially becoming the gateway to for brands that want to expand into the African market. They take care of everything from warehousing to delivery.
In January 2016, Jumia partnered with Decathlon in the Ivory Coast, where the type of products that the brand sold were not locally available.
Bringing the biggest online events to the local market
Jumia launched several online shopping events in order to increase their brand awareness, including a 24 hour Black Friday event.
They also created Mobile Week in several African countries, most notably the Ivory Coast, Morocco and Kenya. Jumia had a promotion on big name phone brands that were sold at a significant discount for 5 days. The event has been an enormous success– since the launch of the first Mobile Week, Jumia sells more mobile phones than the biggest hypermarket in the country.
Strong sales growth with heavy investments
By adapting their business to local needs, Jumia doubled its sales in less than a year, growing from €61.8 million in 2014 to €134.6 million in 2015. African Internet Group has since then combined all of its ecommerce platforms under the Jumia name.
Despite this impressive growth, the company is far from profitable for the time being: it declared €111.3 million in losses in 2015, mainly due to the heavy investments in logistics that they have had to make in the last few years (delivery fleet, warehouses, call centers, etc.)
Sacha Poignonnec, co-CEO of Africa Internet Group, explains that this strategy will be profitable in the long term: “Jumia took the example of Alibaba, which existed for 20 years in China but only became profitbale after 10 years. They needed to position themselves as a market leader before their sales could surpass their spending.”