Jumia – Ecommerce in Africa

With the world’s largest population growth of any continent, increased access to the internet, increased urbanization, and increase in per capita income, African consumers’ demand for products is rapidly increasing. These population, technological, and economic pressures are stressing the traditional retail markets of the African continent. Jumia, founded in 2012, seeks to add value to the growing consumer base of the African continent by leveraging technology and logistics to provide an ecommerce solution to rapidly growing consumer demand.

Value Creation

Jumia’s value proposition can be categorized along the dimensions of wide product selection, convenience, fast, trusted, and reliable delivery, secure payments.

Wide Product Selection

Jumia provides unmatched product selection and choice to African consumers through its ecommerce websites (each tailored to the specific country’s market). Products range from phones, the most popular item sold, to clothing and beauty products.

Convenience

Increased smartphones and internet penetration on the African continent are driving rapid ecommerce sales on the continent. By 2025, Africa is projected to surpass half a billion e-commerce users and the ecommerce sales are expected to grow at a compound annual growth rate of 13.11% between 2023 and 2017. As the largest ecommerce platform on the continent, Jumia is pivotal to this growth. Central to its market lead is the end-to-end convenience that it provides its customers from online purchase (with the ability to pay through mobile money for some transactions), to tracking and delivery. With the continent’s increased urbanization resulting in suffocating traffic, convenience is a considerable value proposition for many customers.  

Fast, Trusted, and Reliable Delivery

Africa’s infrastructure deficits make it difficult to provide reliable delivery services to consumers. Jumia has not, however, found these challenges insuperable. By developing its logistics capabilities, they’ve been able to find workarounds to many of these infrastructural l challenges. These workarounds include: managing its own internal delivery fleet in areas where it would be most efficient while partnering with local delivery services in regions where it would be prohibitive for them to do so, inhouse warehouses, creating its own pick-up stations, and package tracking.

Secure Payments

Mobile money payments and transfers have become ubiquitous on the African continent since the introduction of M-Pesa in 2007. In 2022, 66.3% of all mobile money transactions occurred in Africa. This ubiquity of mobile money payment and transfer has built a trust in the African population for the payment mechanism. Jumia developed its own mobile money wallet in 2016, called JumiaPay, allowing merchants and customers to seamlessly transact in the platform.

Value Capture

In business, it’s important to capture value where value is created. As discussed above, the key nodes at which Jumia creates value are product postings and selections, electronic payments systems, and delivery. Jumia captures value at all these points. For postings, selection, and delivery Jumia captures value with commission and fulfillment fees (making up 70% of their revenues). While Jumia does not capture direct monetary value from JumiaPay, the convenience that it provides drives indirect value to Jumia in increasing transactions and customers and suppliers on its platform.

Challenges

The primary challenge that Jumia is facing in scaling its business is the lack of robust civil infrastructure in Africa. While, the firm is finding workarounds to these infrastructural challenges, they are nevertheless costly. Economic instability in the continent also dampens scalability. A palpable example is the firm losing 1 million customers in Nigeria from Q2 2022 to Q3 2023 due to the country’s chronic inflation. A lack of locally manufactured goods also increases distribution costs to the end customer.

Sources

Sturgeon Capital. “Jumia: The Challenges and Opportunities Facing the African E-commerce Giant.” Accessed on November 7, 2023. https://sturgeoncapital.com/jumia-the-challenges-and-opportunities-facing-the-african-ecommerce-giant/.

TechCrunch. “Jumia co-CEO Jeremy Hodara Talks African E-commerce and His Company’s Path to Profitability.” Accessed on November 7, 2023. https://techcrunch.com/2021/02/26/jumia-co-ceo-jeremy-hodara-talks-african-e-commerce-and-his-companys-path-to-profitability/.

Nairametrics. “Jumia Loses 1 Million Customers to High Inflation in Nigeria, Others.” Accessed on November 7, 2023. https://nairametrics.com/2023/08/15/jumia-loses-1-million-customers-to-high-inflation-in-nigeria-others/.

Jumia Blog. “Jumia to Launch Mobile Money Wallet – Jumia Pay.” Jumia Blog, https://blog.jumia.com.ng/jumia-launch-mobile-money-wallet-jumia-pay/.

Ecofin Agency. “Africa Accounted for Over Two-Thirds of the Global Mobile Money Transactions in 2022: Report.” Accessed on November 7, 2023. https://www.ecofinagency.com/finance/2604-44461-africa-accounted-for-over-two-thirds-of-the-global-mobile-money-transactions-in-2022-report.

Business Wire. “Jumia Opens Logistics Service to Third Parties.” Accessed on November 7, 2023. https://www.businesswire.com/news/home/20201102005539/en/Jumia-Opens-Logistics-Service-to-Third-Parties.

Statista. “E-commerce Worldwide – Revenue Projections.” Accessed on November 7, 2023. https://www.statista.com/outlook/emo/ecommerce/worldwide?currency=usd#revenue.