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Africa’s e-commerce platform Jumia soars

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Juliet Anammah is the head of Jumia Nigeria. Picture: Supplied
Juliet Anammah is the head of Jumia Nigeria. Picture: Supplied

Africa’s e-commerce platform Jumia has seen its income shoot up by 38% compared with the previous year, while the value of its orders was 68% higher.

The company does business in 14 African counties and recently listed on the New York Stock Exchange.

Although the company has not yet made a profit and experts have warned about various challenges, they are optimistic about the company’s potential for growth.

Bradley Elliott, founder of Platinum Seed, which researches online retail businesses, said that, although Jumia is known as the Amazon of Africa, a better comparison would be with Alibaba in China.

“Jumia understands the infrastructure issues, the cultural nuances and the African business environment – just like Alibaba in China,” Elliott said.

“Amazon has not yet earmarked Africa as a target market. I doubt they will want to compete directly in terms of the market, infrastructure and payments.”

At the end of December, Jumia had 4 million active users, up from 2.7 million in December 2017, said Elliott.

The potential for further expansion is clear when looking at Africa’s GDP, which could grow by 6% this year.

More than 34% of the continent’s inhabitants are regarded as middle class, and this number is growing.

Rocket Internet, a Dutch investor in start-ups and one of the first investors in Jumia, is of the opinion that Jumia can service the entire continent, said Elliott.

The biggest shareholder before Jumia listed was cellphone group MTN.

In the run-up to the listing, the French Pernod Ricard and Mastercard jointly invested €125 million (R1.9 billion).

Sacha Poignonnec, who founded Jumia alongside Jeremy Hodara seven years ago, recently told Harvard Business Review that retail activity in Africa would move online rapidly, and that e-commerce could make up 15% of total retail figures within 10 years.

Jumia estimates that online sales currently comprise less than 1% of Africa’s total retail sales.

Acha Leke and Tawanda Sibanda of McKinsey & Company wrote in a recent Harvard Business Review article that Jumia’s growth could benefit from the fact that there are already 122 million active users of mobile financial services.

Furthermore, the number of smartphone connections could double from 315 million now to 636 million by 2022.

In the same period, mobile data traffic could see as much as a sevenfold increase in Africa.

In a recent interview with Bloomberg, Poignonnec said that e-commerce awareness was important and millions of Africans had yet to realise its benefits.

Elliott said Jumia saw the fastest growth in east Africa last year (Kenya, Rwanda, Tanzania and Uganda), with an increase in total annual income from $5.2 million (R74 million) to $12.8 million.

North Africa (Egypt, Morocco, Ivory Coast and Nigeria) contributed $44.5 million to income and South Africa contributed $17.8 million.

According to Elliott, household items, men’s clothes and cellphones (each 14% of sales) are the most popular order items on Jumia, followed by beauty products and perfume (13%), and women’s clothes (11%).

The platform sells 6 million products from about 81 000 sellers.

According to Elliott, it hopes to double the figure to 12 million by 2021.

In 2016, Jumia became the first privately owned start-up business, which saw its value exceed R1 billion.

In the business world, this is known as a “unicorn” – a term used by the venture capital investor Aileen Lee in 2013 in reference to how rarely such ventures are successful.

According to Rocket Internet’s financial report for last year, Jumia’s income increased to €131 million last year, an increase of 39% over 2017’s €91 million.

The total value of goods that had been ordered (including shipping, VAT and before any other deductions such as discounts) for the 2018 financial year was €828.2 million.

Last year, Juma Logistics handled 13.4 million packages.

Elliot said this was an example of the fact that Jumia was not only changing payment methods in Africa (through its cooperation with cryptocurrency Telcoin), but also logistics.

In an article on LexAfrica’s website, Boston Consulting Group points out that there are certain difficulties Jumia faces, such as infrastructure.

In Africa, logistics can push up the costs of manufactured goods by 320%, while returns can be as high as 30% because those delivering goods can find it difficult to find the right addresses.

The London Financial Times, in an article on its website ftonline.com, also warns that traffic, logistics and users who are wary of online shopping and deliveries were some of Jumia’s biggest challenges.

Juliet Anammah, the CEO of Jumia Nigeria, told the London Financial Times that the company offered its clients the option of payment on delivery because scores of them were afraid of being taken advantage of by fraudsters, or because they were hesitant to share personal information online.

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