Sunday , May 19 2019
Home / zimbabwe / Jumia's rise exposes the challenges of online shopping in Africa

Jumia's rise exposes the challenges of online shopping in Africa



Nanda Aye's client called him three times in the half hour that it took him a few blocks to walk across a notorious path toward the Lekki Bridge.

"I'll be there this morning, ma'am," he said, his three-wheeled truck idling. "This morning, yes, this morning." Requested by a specific time of arrival, or at least a window of a few hours, Mr. Aye hesitated.

The messenger for whom he works, Metro Africa Xpress, trained him to be vague if customers are disappointed with his client, Jumia, the pan-African e-commerce site listed on the New York Stock Exchange last month with an assessment of US $ 1.1 billion.

The delivery of Aye shows some of the biggest challenges facing Jumia, and investors who have increased their stock by more than 200%, while trying to expand an African e-commerce business: traffic, logistics and perhaps most important, distrustful customers of online shopping .

Like its rivals in many developing countries, Jumia offers payment on delivery "as a marketing tactic," as customers are worried about being cheated and feel uncomfortable sharing their information online, said Juliet Anammah, executive director of Jumia Nigeria, which accounts for about 25%. of the business by sales, vendors and customers.

"If you have these kinds of mental barriers, one way to break them is to say you're not sure, use money on delivery – and when things get to you, you decide if you want to," she said.

But the money on delivery has a much higher rate of return and carries risks. Jumia has reshaped his system to ensure that motorists never have too much money after a third-party outsourcer in Nigeria was killed two years ago.

Aye delivered five addresses scattered across Banana Island – probably the richest neighborhood in Nigeria. But Jumia insists that it is not limited to a small market of wealthy buyers and that its potential market is much larger.

Sub-Saharan Africa is expected to have 690 million smartphone users by 2025, up from 250 million by the end of 2017, according to the GSMA, the trade body for mobile operators.

Sacha Poignonnec, co-founder and chief executive of Jumia, said that this scale is an important advantage. Some 700 million people live in the 14 countries where Jumia operates, many of which have the fastest population growth rates in the world.

"There are already 400 million internet users in our market, and last year we had 4 million consumers," he said.

"So the question of how big the middle class is, or how many of the 700 million can spend money on us – do we just know we have $ 1.5 trillion in consumer spending? [in Africa] we want to contribute to switching from offline to online and we have tens of millions of consumers to search for. . . Today we are very far from achieving any type of ceiling. "

But to become Jumia's buyers, smartphone users will also need data connections, disposable income, and bank accounts or mobile payment portfolios. Only Nigeria harbors the majority of people living in extreme poverty in the world, 87m.

Thus, e-commerce is unlikely to grow in tune with the growing penetration of mobile data, according to Uzoma Dozie, who prioritized the expansion of mobile banking as CEO of Diamond Bank of Nigeria.

"As you enter these conditions, your market size drops, and when you add the issue of trust and payments, you now have a very small market," Dozie said. "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 event and movie ticket company and a payment system that gives users access to microloans.

Jumia spent a lot of money on its aggressive effort to gain market share, posting losses of approximately $ 1 billion, including $ 195.2 million in revenue of $ 149.6 million last year.

Poignonnec said that Jumia was focused on cutting costs while earning users, but that the hundreds of millions of dollars he invested over the last seven years gave him the scale to be the only pan-African e-commerce player – even as rivals withered. .

Last year, Nigerian rival Jumia, Konga, which is backed by Naspers, was sold to Zinox, a computer and data center company, after cutting about 60 percent of its staff. Several other e-commerce sites have been downsized, deactivated, or directed to other companies.

"Given what it takes to actually build and deliver an appropriate e-commerce offering in any market, it makes more sense for the investment to be amortized in several countries rather than one country – all that have expanded were single-country," he said. Anammah.

Sub-Saharan Africa is expected to have 690 million smartphone users by 2025, up from 250 million by the end of 2017, according to the GSMA © EPA

Being a Pan-African also helped Jumia partner with companies such as Pernod Ricard, Mastercard and China's mobile phone maker Xioami, who would rather sign a big deal than individual deals in each country, executives said.

Anammah said the diversity of its markets allows Jumia to use smaller countries such as Ghana or Ivory Coast as laboratories for projects that could be launched in larger markets such as Nigeria and Egypt – or, in the case of Jumia Pay, which debuted in those two countries. large markets in 2017, vice versa.

Still, there are hiccups. Customers complain about slow or missed deliveries, or get the wrong item, or multiple items listed at very different prices.

In Lagos, Mr. Aye delivered four packages of detoxification tea to Akinlowo Olawoye, a lawyer who was collecting it for his sister. He had not asked for Jumia for about two years, when delays and payment problems were common, he said.

Since then, he has mainly ordered Nigerian products from sites ranked as jiji.ng, where he can speak directly with the seller, schedule a meeting, see the goods and decide whether to buy. For foreign products, it goes to Amazon's US site – the extra cost is worth it, he said.

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 issue of trust," Olawoye said, about wanting to see the goods before paying. "I would not expect to be able to do that with Amazon – and it's sad, but we'll get there eventually."

Is Jumia an African technology company?

Jumia has been criticized for being an African start-up, since it is incorporated in Germany – where its second largest investor, Rocket Internet – is based – its technology team is in Portugal and its executive co-chairs are French and headquarters in Dubai, or whether it is using the continent as a marketing trick.

In social media, people across the African technological scene accused the company of being a neocolonialist operation that explored Africa.

Mr. Poignonnec avoided saying, as he did the other way out, that Jumia was "African," instead, highlighting where his focus is.

"We only operate in Africa and our business [is] totally focused on serving consumers in Africa and this is really what we have done from day one, "said Poignonnec, noting that Jumia had created thousands of jobs directly and indirectly in Africa through the many employees who started their own businesses.

"When we founded the business, we were many people around a table that founded Jumia. We had people in Nigeria, Egypt, Morocco, South Africa and then Kenya, "he said. "The last concern we had was where you are from – we were just in love with building the business."


Source link