Meet Jumia, the Amazon of Africa!
Most of you still haven’t heard about it, but Jumia is for now the sole startup valued at over a billion dollar in Africa (#unicorn).
Jumia was launched under the African Internet Group name in 2012. It first started its operations in Nigeria. 5 years later, Jumia is present in 14 countries and has 14 million products available on its platform. Jumia boasted 550 million visits and 800,000 online orders in 2017.
What is Jumia.com?
Quite similarly to Amazon, Jumia is a platform that connects buyers to merchants. On the platform you can purchase products directly from manufacturers such as, Décathlon which used Jumia as its distributor in the Ivory Coast to test the market. Alternatively, you can buy any products from diapers to a basic USB stick from sellers. Sellers (more than 500,000 African companies of any scale) use Jumia as their online marketplace to reach an untapped audience.
What about Jumia Group?
Jumia is most known for its shopping site Jumia.com. However, the parent company also owns Jumia Travel (the African Expedia previously known as Jovago), Jumia Food (local equivalent of Deliveroo), Jumia Deals (an African version of Craigslist). Jumia also recently launched or acquired Jumia Jobs, Jumia Fresh, Jumia House, Jumia One, among others.
Jumia’s strengths
Jumia is dominating the African e-commerce market thanks to a strong financial backing that allows for significant investments. This results in many developments enabling Jumia to tackle both the logistical and transactional barriers.
Deep pockets
Jumia has the support of strong shareholders notably Rocket Internet and MTN who have invested in every round since the series A. Jumia also raised money from Orange, Axa Group and Goldman Sachs, among others. These financing rounds enabled the company to stack $767.7 Million in cash allowing a significant burning rate to ensure a fast and efficient penetration in Africa. This type of industry is a winner takes it all market, therefore the non-profitability of Jumia (yet!) is not necessarily worrying. As a comparison, Amazon only had a few quarters of profitability in its first two decades.
Strong and own distribution network
According to the International Road Federation in 2016, fewer than a quarter of African roads were paved. A study by The Economist shows that it is less expensive to send a parcel from Chicago to Mombasa (21,416 km by sea), Kenya’s main port, than from Mombasa to Kampala, Uganda (1,133 km).
Jumia fully understood that logistics are key in Africa and therefore built its own logistics and distribution network. It is now presented as better than DHL in Africa. The strength of Jumia’s logistics relies notably on strategic warehouses in most of the countries it operates in combined with a fleet of Jumia’s delivery men.
To better address the needs of the population its targets (still significantly unbanked), Jumia also accepts cash on delivery. Jumia is now working to eliminate the costly handling of cash through JumiaPay, the company’s own wallet that works with most mobile moneys on the continent.
By developing a reliable and strong logistics network, Jumia is not only tackling one of the main and costliest barrier to entry for e-commerce companies in Africa, but also making it harder for its rivals to compete.
How do you sell online to people not online? JumiaForce
In a continent where internet penetration is still scarce (36.5% in 2017 according to We Are Social), acquiring new clients as an e-commerce company can be challenging, especially in rural areas. To tackle this issue, Jumia relies on JumiaForce. The latter is a network of agents operating within the countries where Jumia is present. These agents are equipped with a WiFi tablet and go door to door to place customers’ orders and ensure direct customer service. This service is possible also thanks to an affordable workforce in the countries where Jumia operates.
Why Jumia is set for success?
Jumia Group already enjoys flattering statistics with over 8,000,000 packages handled in 2017, over 14 million products, hotels, restaurants and other services listed resulting in one transaction or lead every two seconds. Yet, there is room for more…
Currently, e-commerce represents a 0.6% share in the African shopping market when it is 12% in USA and 20% in China. The share of e-commerce in Africa should therefore significantly grow in the coming years. McKinsey predicts that, in 2025, $75 billion worth of goods and services will be bought online in Africa.
This is driven by a few long-term trends:
- Target countries still through their demographic transition. 1.2 billion African in 2017 estimated to grow to 2.5 billion in 2050. Young populations with an average age of 20.
- A rising middle-class with an +80% expected growth in 2020–2030 to ultimately reach 1.1 billion people by 2050.
- After East Asia, Africa is the world’s second fastest growing economy with an average growth of 4.5% in 2017.
- Internet penetration: According to a dual study by the agencies We Are Social and Hootsuite, in 2017, the number of internet user increased by 20% YoY
- Mobile penetration: 82% in 2017 with an increased growth of smartphone use by 70% from 2016
- Physical infrastructure is being built all over the continent (70% increase in investment from 2007–2017), which should smoothen the transport of goods
New leapfrog?
Most of you have bought their first smartphone in a store. In a near future, it is possible that most Africans will have first bought it online hence skipping brick and mortar retailers.
