Jumia: Short term success without long term vision
A study on how Jumia’s business model is dependent on long term growth, yet the operating model sacrifices long term gains for short term success
Jumia Nigeria is the largest e-commerce company in Nigeria based on revenue and orders. With over 20,000 orders per day and a work force well into the thousands, Jumia is really staking its claim as a power player in the Nigerian marketplace.
Despite this success however, Jumia has been unable to align its business and operating models. Though the business is reliant on rapidly growing within Nigeria by exposing new users to ecommerce, its operating model has not been developed for long-term, stable growth. In fact the operating model focuses almost entirely on short-term goals which compromises the company’s mission of being the market leader in Nigerian retail well into the future.
Jumia provides value to the customers by delivering a very wide assortment of products at competitive prices. They also offer an incredibly transparent marketplace by listing all goods online in an easily accessible format. For delivering these products they extract a fee for delivery and procurement. The success of Jumia is dependent on a few factors:
- Jumia offers a wide array of products from clothing to electronics to seasonal
- Jumia offers some exclusive brands that cannot be found elsewhere (i.e. luxury fashion launches that one cannot achieve in a physical store
- Jumia’s advertising budget far exceeds its competitors. It is able to get unprecedented access in print, media, and radio
- Jumia often runs promotions to take advantage of both local and international holidays
- Jumia promises better service delivery than competitors. This is important as many consumers are new to and wary of ecommerce
- Jumia has an extensive consumer relations network to respond quickly and appropriately to customer issues
Jumia is delivering a new product to Nigeria and to succeed it must win over the population. In the short term, Jumia has done this exceptionally well. They have brought in a diverse array of products and signed some great exclusive partnerships. Their promotional strategy has brought the firm a lot of buzz and they are a highly recognizable brand now in Nigeria. Finally, they have noted customer feedback and adjusted their strategy to take this into account.
However, these strategies have all given them short term success. While they have grown incredibly quickly, their real goal is to be the market leader for years to come. Their current operating model does not allow for this possibility.
As a Rocket Internet-backed company, Jumia has a large international presence and backing. This has permeated in the company in tangible ways (personnel, company network, advertising language) and intangible ways (company culture, hiring practices, relationship with customers). This has affected its operating model tremendously:
- Human resources
- Most developers and engineers are based abroad
- Many core functions (marketing, HR, etc.) and strategic decision makers are based in Europe
- Constant growth of equipment, warehousing space, delivery capacity
- Increased geographic coverage of Nigeria
The operating model is built to help Jumia achieve rapid growth and short term success. Their emphasis on rapid expansion and high capital expenditures to achieve this has given them an advantage in the market. Jumia is better funded than its competitors and has a strong international base of support. However, this is not enough to ensure the company achieves its goals.
Jumia’s emphasis on advertising really takes advantage of this fact. Their promotions have reached a huge swath of the population and have caused huge market penetration. However, this will not lead to long term success for a few key reasons:
- Education: Jumia has taken no strides to educate the population on how to use ecommerce or how certain promotions work. Therefore, the society does not understand many of Jumia’s innovations. This can be seen through some the backlash Jumia has received following promotions
- Talent development: Jumia has no succession in place for current talent. Unlike competitors who source local employees and train them for management, Jumia prefers to import the company’s leaders.
- Community engagement/ innovation: Jumia has not invested in developing Nigeria to better support its products. Eventually inability to make strides in payments, product delivery, energy sourcing, etc. will stifle performance.
Jumia has built a business model that guarantees short term success. But the company’s goal of long term growth is stifled by its operating model.
Student comments on Jumia: Short term success without long term vision
Thanks for your post and insight!
Jumia, like a number of other/perhaps a majority of large Nigerian companies, seems to have a great deal of trouble investing in domestic human resources. Do you believe that importing members of the Nigerian and/or African immigrant Diaspora to work in Nigeria/Africa for Jumia helps solve this problem or merely places a bandage over the wound?
Presumably, Jumia has either taken the time to recruit Nigerians educated in Nigeria for senior/relevant positions and found difficulty with this. Should Jumia be held responsible for the educational systems on the ground in Nigeria and its other markets, or is it not doing enough to find “truly local” talent?
Finally, do you think this situation would be different were Jumia backed by Nigerians/Africans, as its largest competitor, Konga (founded by an HBS MBA), is?