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Jumia Setting Sight for Its Next Stage of Growth

Any follower of African e-commerce must be well vast with Jumia. Named as African Amazon by a group of e-commerce players, Jumia is one of the leading e-commerce platforms in Africa. The company was founded in 2012 with the help of German-based leading startup incubator Rocket Internet. The incubator still claims 28% ownership of the company. Rocket Internet is known for floating promising unit that grows fast like Home24 furniture retailer, Hello Fresh and Delivery Hero. Rumors are circulating that the platform might decide to go public very soon.

However, Sacha Poignonnec, the co-founder and co-CEO of Jumia rubbished the rumors of having an IPO. Sacha said that an IPO is just amongst the options the company is thinking about. He added that the company is planning new shareholders or financing. According to Warburg Research analyst, Luca Boventer, chances are there that Jumia will develop a new round of funding.

Launched as an Africa Internet Group, Jumia currently has around 5 million clients. Africa offers great growth opportunities for many online gurus but still has some challenges.

Apart from being a marketplace, Jumia also offers comparison sites, hotel bookings, and its payment service. By now Jumia has secured capital worth $400 million that has come from investors such as Orange and Axa.  In the Q1 of 2018, the company garnered revenue worth $177 million an annual increment of 70.9%. According to the German-African Business Association’s managing director Christoph Kannengiesser, there is a growing middle-class population in the continent, and the e-commerce market is yet to be fully tapped. The highest group of the African population is made up of youths, and that is the group that makes good use of technology. Therefore this will be the group that will foster the growth of e-commerce in the region since there is a high penetration of smartphones in the market. Analysts believe that online retailing market in Africa will hit $75 billion come 2025.

Headquartered in Nigeria, Jumia is currently operational in 14 African countries. Mr. Poignonnec added that e-commerce is all about convenience in Europe many people take it as a new shopping model. That is not the case in Africa where people see it as a solution. In the past, African shoppers did not have any other choice the continent had a small number of retailers, and some of them had high prices. According to him, Jumia is a new model for Africa. Africa has plenty of markets and entrepreneurs have shown strong enthusiasm. However, online retailers go through many challenges. Most African countries have underdeveloped road networks which are a huge challenge to the delivery of goods and service. Couriers have been forced to use motorcycles in major cities due to high traffics, and this has minimized efficiency. Stealing of parcels during deliveries is another major problem. Theft forced Amazon to stop its deliveries for a while in South Africa a few years ago.

The continent makes e-commerce retailer more optimistic for instance Botswana and Mauritius are succeeding economically since they have signed free trade deals. The two countries are also making good use of their raw materials. However, they count for only 0.3% of 1.25 billion African populations. A large number of Africans still cannot go online, the northern part of Africa is yet to be well linked to the southern part, and there is still poor power supply in some countries. Many Africans are still leaving below poverty lines.

According to Africa analyst at Standard Bank, Simon Freemantle, over three-quarters of Africans still, survive below $2 daily. Jumia is carrying out its operations without requiring clients to possess a bank account, and they are allowed to make payments on delivery. The company has worked hard to overcome them, and it has registered significant growth in the recent past. The company is out and ready to compete with the likes of Amazon. What makes Jumia stand out among its competitors is that it has taken its time to understand the region and later on develop an effective infrastructure. This is different from companies like Amazon who only waits for the thriving of e-commerce platform then buys them.

According to Mr. Bonventer, Jumia could be an interesting competitor for both Alibaba and Amazon who could decide to buy the whole venture and its infrastructure. Rocket Internet and Alibaba have carried out deals in the past. In 2017 Rocket Internet sold its remaining stakes in Lazada, an Asian e-commerce company for $276 million to Chinese Internet guru. Moreover, it sold Daraz from Pakistan to Alibaba.

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Written by Denis Opudo

Am an engineer who's a tech blogger, hit me up on dennis@techinafrica.com and we base our discussion on technology in Africa and the rest of the world.
Denis the Tech guru

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