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Jumia tries to vault Africa from street market to e-market

25 October 2013, 09:39

Berlin - The online retailer Jumia, a would-be African Amazon, is betting that it can propel the continent's rising middle class consumers out of the street markets and straight onto its websites, missing out the department stores and shopping malls in between.

The key, it says, is the smartphone, already helping much of Africa's economy brush aside the continent's lack of reliable transport or fixed phone and Internet connections.

In Lagos:
"Most of the people have phones, but there are only three malls for 20 million inhabitants," Jumia's French co-founder, Jeremy Hodara, told Reuters from in a telephone interview from the city.

"It is a unique time. People are hungry for consumption. It is the right time to leapfrog over 'offline'."

For now, e-commerce is still in its infancy in most of Africa.

Even in South Africa, the continent's most technologically advanced country, the research firm World Wide Worx estimates e-commerce sales were just 4 billion rand last year, or about $80 per internet user.

Even Spain, which has a similar population size but is an e-commerce laggard by European standards, had online sales of 6.7 billion euros last year - albeit with a per capita GDP almost four times that of South Africa.

Amazon, the world's biggest Internet retailer, has no local operations in Africa and only ships to South Africa, although delivery charges make it a pricey option.

But the phenomenon seems set to take off. One market research firm suggests that Nigeria, will have almost tripled its online purchases in just three years to more than $1 billion by 2014.

Looking for a head-start

Jumia is one of the firms trying to get a head-start in that market, not yet profitable but spending heavily, following Amazon's model, to grab market share and establish its brand.

The web information company Alexa, which is owned by Amazon, says Jumia is the 22nd most visited site in Nigeria, slightly behind its local e-commerce rival Konga at rank 20.

Launched only 16 months ago by Rocket Internet, the German venture capital group behind the booming European online fashion retailer Zalando and South African e-seller Zando, it now claims more than 150,000 page visits per day.

It operates in Nigeria, Morocco, Ivory Coast, Egypt and Kenya, offering up to 100 000 different items from sale from its local warehouses, and plans to expand to other African countries before the year is out, although it is not yet saying where.

Hodara, a 31-year-old French business graduate who cut his teeth at consultants McKinsey, said the fact that the World Retail Congress picked Jumia as "Best new retail launch" this month, rather than best in e-commerce, showed its potential.

"We are in a game to become the biggest retailer of Africa, not the biggest e-commerce player," he said. "If you look at the U.S., e-commerce is 15 percent of retail. We think that in Africa ... e-commerce is going to be 40, 50, 60 percent."

Developers are rushing to build more malls to serve Africa's rapidly expanding middle class, but are struggling to keep pace with the demand for more consumption. Often, they are hampered by hefty costs and the difficulty of securing land titles, not to mention the kind of security issues highlighted by the deadly attack on a high-end Nairobi mall last month.

Africans no less demanding

Jumia, whose main investors are emerging markets telecoms group Millicom and Sweden's Kinnevik, promises to deliver products ranging from fashion to consumer electronics in one to five days, even to remote villages.

That pledge has proven a big draw, particularly in gridlocked megacities such as Lagos, where Jumia has recruited its own fleet of scooter drivers to beat the traffic. It now employs some 1,000 staff, 95 percent of them Africans.

"People are as demanding as in London or the U.S. If you say you will deliver tomorrow at 5, and it's 5.15, they call you like crazy. You cannot do less because it's Africa. It has to be as good as in New York," Hodara said.

"If doesn't work perfectly, they are afraid it is a scam."

Most customers pay cash on delivery at first, using credit cards only once they trust Jumia.

Kinnevik Chief Executive Mia Brunell said she was impressed with how the company was dealing with challenges such as the fact that some customers might not even have a formal address.

"When you find solutions to logistics and payment problems, you really create loyal and satisfied customers," she said.

Hodara predicted that Jumia would be profitable within 12-18 months.

But he said it was too early to say if the firm would then consider a stock market listing, saying it could also end up as a division of Millicom.

"It is hard to predict. Things are going so fast. At the moment, 200 percent of our brain is on building the business," he said.

- Reuters


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