Close
“Africa has the biggest potential for ecommerce in the world,” Hodara – Jumia Group

“Africa has the biggest potential for ecommerce in the world,” Hodara – Jumia Group

Often referred to as the “Amazon of Africa”, Jumia may soon be listed on the New York Stock Exchange. Its Co-CEO Jeremy Hodara talks to African Business about its recipe for success.

Since its creation by two ex-McKinsey consultants in 2012, Jumia, Africa’s ecommerce champion, has racked up an impressive range of achievements. Following substantial investment from the likes of AXA, Goldman Sachs, MTN, Orange and Rocket, in 2016 it became the continent’s first startup to be valued at over $1bn. Along the way Jumia has expanded from its original location in Nigeria to 14 other African countries including Kenya, Tanzania, Morocco and Côte d’Ivoire and has widened its online marketplace through subsidiaries offering food, travel, housing and cars.

Despite registering a loss of €120.1m ($136.5m) before earnings interest, tax, depreciation and amortisation in 2017, the Lagos-based company is confident it will soon reach profitability as capital expenditure decreases and revenues continue to grow. Jumia is reportedly preparing for a New York listing in the first quarter of this year, in which shares worth $250m may be sold, as Rocket Internet, one of its principal investors, seeks an exit.

Cornering the market

As the internet continues to boom across the continent, Jumia believes it can compete with global counterparts like Amazon and China’s Alibaba due to the fact that shopping in Africa is not associated with physical high streets. Online retailers, therefore, can potentially corner more of the market.

“The potential for ecommerce in Africa is way bigger than what it is in any other region in the world simply because there is no alternative,” says co-CEO of the Jumia Group, Jeremy Hodara. “If you are in the US you don’t need Amazon; you can go to the shops or the mall. You are never going to have the density of physical retail in Africa that you have in the US, because history is playing it differently. Africa will gradually have more stores, but these aren’t going to be the main way to access goods.”

To ensure the dominance of the digital market, Jumia has been working to bring more products and services online. In 2012, just 50,000 goods were available compared with over 5m today. According to Hodara, much of this increase has been supported by an aggressive strategy to increase the number of vendors ranging from manufacturers of local products to global brands. The firm sells products directly and links vendors to customers.

High-profile firms that work with Jumia Group include Pernod Ricard, a French beverage company, and Carrefour, a French retailer, through its franchise in Kenya. Both companies are looking to use Jumia as a way to boost the visibility and sales of their products. Indeed, many international brands are beginning to put their faith in online retail in order to overcome the challenges associated with marketing goods in Africa.

Road blocks

But securing a range of products at the supply end is just one hurdle for companies like Jumia. Ensuring these goods make their way to the customer poses a number of logistical and infrastructure challenges, which are more of a concern for Jumia in its African context.

Jumia’s Express service claims to be able to deliver a range of locally warehoused products within a day in some major cities and within two to four days in a number of others. “If you live a little bit further out it can be five to seven days, but in general it’s very much the same as if you were living in the US or Europe in terms of time,” Hodara states.  

This is no easy feat. To achieve such delivery times the company has invested heavily in its own distribution network, choosing to create its own delivery fleet rather than rely on existing structures. In fact, the little-known Jumia fleet claims to run more trucks than German-based global courier company DHL.

Digital infrastructure also presents problems. Last year the company processed over 8m orders and had more than 550m site visits. To deal with heavy traffic, Jumia’s servers are based in Portugal at the Porto Tech Centre where over 200 IT specialists work to maintain the online infrastructure and to drive tech-enabled innovation throughout the company.

Hodara argues that one of the major problems the company faces in terms of technology is the irregularity of visitor traffic to the websites. Black Friday, for instance, has routinely swelled the company’s traffic in places like Kenya and Nigeria.

 “The challenge is very much that the pattern of purchase can vary widely from time to time,” he says. “With Black Friday for example we have such a significant increase and spike in traffic that creates an enormous flow, but I’d rather have this problem than the opposite. As a fast-growing tech business we are here to solve those problems.”

Making it pay

Indeed, Jumia must constantly innovate in order to stay relevant to its customers. The company has been hailed as the market leader in online shopping across the continent, but faces local and regional competition at all turns.

One area where Jumia must keep abreast is by ensuring its payment methods are tailored to its customers. Africa’s cash-based economies have in recent years given way to a surge of innovative payment methods, led by everyone from startups to telcos to commercial banks. Online payments through credit or debit cards are rare and mobile money schemes like Kenya’s M-Pesa take precedence.

In 2016, Jumia introduced its own payments platform, JumiaPay, replacing the old system of paying through third-party platforms or by cash on delivery. “Payment methods used by our customers are very different from country to country,” he says. “The beauty of JumiaPay is that it’s agnostic so you can plug in whatever payment method you want and then you are connected to the entire Jumia ecosystem.”

Expanding

With demonstrable success to date, it’s worth wondering whether Hodara has the global ambition of a Jeff Bezos or Jack Ma. While Jumia is constantly expanding, Hodara reveals that for the moment the company is focusing on its core markets and fine-tuning its business model. Investing in new assets like warehouses and trucks requires enormous capital, and hence until the company reaches profitability, Jumia will likely take things a step at a time.  

“Actually we are happy with our set-up in 14 countries,” he reveals. “Our job now is to bring our existing customers more products and at better prices; to expand into more cities; and to accelerate the delivery time rather than open in an extra 15 countries or so.”

For the moment, the number of countries on the continent that suit Jumia’s business model may be approaching its limit. Although Africa’s internet revolution should not be downplayed, it should also be recognised that penetration varies widely from country to country. To support an online retail business such as Jumia, the number of active internet users is vital. While Nigeria boasts more people online than the entire population of France, this is by no means the norm.

“We are an ecommerce company and so it takes a lot of infrastructure to grow; we have warehouses, we have our customer service – so we need a vast population to be able to absorb that cost,” he comments. “It’s very important to look at the size of the internet population and we only go into places where that population represents more or less 80% of the entire population.”

Limits to growth

The other limiting factor to Jumia’s growth is whether a shift to day-to-day internet shopping will become the norm for many Africans, or, as is the case now, whether websites like Jumia continue to be used for one-off purchases. Although a brick and mortar high street is only a minor feature of the continent’s commercial set-up, it is unclear whether consumers will drive all their purchases through the internet. Mall culture is rapidly making inroads across Africa and everyday purchases will only be successful if smartphone purchasing gains a serious foothold.

 “I think the adoption of ecommerce has already happened for one-time purchases but shifting the mindset to saying I need my phone to buy anything is different,” recognises Hodara. 

Still, Africa, with its booming population and ever-growing internet penetration, is ripe for the wholesale adoption of ecommerce; and based on the company’s performance within only six years, Jumia looks like the natural provider of that service.

Interviewed by Tom Collins

Related Posts

  • Remaking Africa’s tax system

    A digital overhaul of Africa’s tax system is needed to boost revenue collection, regional coordination and financing, UN experts tell African member states.

  • Rwanda’s export drive reaps success

    How the country is focusing efforts on building a vigorous export sector in a bid to bring down the trade deficit, diversify the economy and sustain its growth momentum.

  • Meeting of African Ministers Opens In Marrakech

    The 52nd Conference of African Ministers of Finance, Planning and Economic Development opens in Morocco with an agenda to overhaul fiscal policy, trade & the private sector in a new digital age.

  • Reviving tourism in West Africa

    West Africa has huge tourist potential, but factors such as poor transport, security concerns and the ebola virus have held it back.

Join our mailing list

If you would like Independent, Informative and Invaluable news analysis on the African continent, delivered straight to your inbox, join our mailing list.

Help us deliver better content