Giants of e-commerce in Africa: The case of Jumia

This guest article was contributed to TechCabal by Osinachi Ukomadu. Seven years ago, Tunde began using Jumia to sell goods. He only had a little capital or experience, but he saw potential in the platform and decided to take a chance. Tunde began by selling small items like phone cases and chargers. Still, as he gained more customers and positive reviews, he expanded his inventory to include smartphones and other important phone accessories. In addition, he spent countless hours researching trends and negotiating with suppliers to ensure he could always offer competitive prices. Despite the challenges of running his own business, Tunde persevered. He dealt with demanding customers, shipping delays, and cash flow issues but never gave up. One of his biggest challenges was when someone tried to sabotage his business by leaving fake reviews. He contacted Jumia’s support team and worked tirelessly to dispute the false claims. Soon enough, the competitor’s reviews were removed. After a few years of hard work and several improvements from Jumia, Tunde’s business enjoyed success. He could hire employees, grow his inventory, and expand with a physical store. Jumia pioneered e-commerce in Nigeria and is one of Africa’s largest e-commerce companies. In 2022, they celebrated 10 years of e-commerce in Nigeria, and currently, they are active in nearly a dozen countries in the continent. They are also often called the Amazon of Africa because of their giant strides in the industry. Many people try to disparage them by saying they tried to copy the Amazon model; whether that is true or not is inconsequential. However, it is undisputed that putting something on the ground when they launched was a feat. This was when all the necessary infrastructure was not in place to establish a thriving e-commerce business in Africa. So, give them some credit for building a frontier.  Jumia created its e-commerce business in the face of a lack of infrastructure and the right resources to foster growth. It was challenging, and they’re still facing such challenges today as they spread e-commerce across Africa. It’s been a case of establishing in some locations and quickly closing and moving to other places if it doesn’t work. However, it is crucial to note that just because a structure worked in the US, such as the Amazon model, doesn’t mean it will work in Africa. Every country and continent are beginning to adopt and localise technology and technology-enabled businesses in their climes. Adopting the Amazon model Before now, there was Internet 1.0, a copy-and-paste model, where everyone tried to do a version of an American company in their locality. However, people are beginning to realise that such ideas hardly scale because the local needs and challenges differ entirely from the locations they are copying those business ideas from. That’s the challenge that Jumia ran into and is still struggling through. This is because many things that make e-commerce work in Africa differ entirely from what makes e-commerce work in the US. The social nature of commerce in Africa, the payment rails, the logistics infrastructure, and the trust gap are critical missing pieces. They tried to solve all of these using the model that Amazon had mastered. However, they encountered challenges and had to develop ingenious solutions to handle some of the issues. It is challenging to change the culture that has prevailed in society for a long time. You have to ride the wave of that cultural norm while introducing a new way of doing things. E-commerce 2.0 and E-commerce 3.0 will drive this change. E-commerce 2.0—or B2B e-commerce and the like—is what Alerzo and Marketforce are operating, and it is enormous. E-commerce 3.0, on the other hand, is a peer-to-peer kind of e-commerce currently taking place in social commerce. So much of that will drive what e-commerce will be in Africa, and the big players will either figure out how to adapt to these new models or keep playing the old game to their detriment. Growth of Jumia The first-mover advantage of Jumia The first-mover advantage was indeed a real advantage for Jumia. They gobbled up a lot of customers when they came in initially, which helped them gain ground. They figured out how to bring goods into the country that ordinarily were challenging to get locally or, if available locally, were prohibitively expensive. Previously, someone would have to travel out of the country by obtaining a visa, buying a plane ticket, flying out, finding a supplier, buying the items they need, putting them back on a plane, and bringing them back into the country. In most cases, they would double the item prices compared to the price they paid in order to cover their expenses. In comparison, Jumia brings these things into the country in volume leveraging economies of scale, and you, an ordinary trader, can’t compete with their economy of scale. The economy of scale was a great advantage for them in bringing in items like phones and other consumer electronics to sell at reasonable prices compared to what was sold in the local market.  Access to adequate funding Being well-funded and having the right people at the helm of leadership was critical to Jumia’s growth. They could build the kind of infrastructure that was not available; the logistics infrastructure, payment capabilities, etc. They also innovated with a pay-on-delivery system, which was a creative solution to payment issues. This helped them get many customers because trust was a huge challenge. The trust deficit is still there, but they lowered that barrier of trust with cash on delivery. This helped them win the hearts of many customers. However, they’re currently pulling away from that payment model because it’s become quite expensive. Some customers place an order only to reject the order upon arrival. This costs time and money in the fulfilment process. However, compared to the local market, they still have more variety, quality products, and better prices than most. More opportunities for growth The local market is getting smarter, and they are figuring out