The old narrative of Africa on the margins is fading fast. Internet and e-commerce are playing a big role in leading the transformation, thanks mainly to Jumia: the Nigerian e-commerce that operates in 24 countries across the continent
Many international tech giants, especially Chinese, have entered the African market fostering the local digital scene. Thanks to a stimulating competition, the e-commerce market is thus emerging with extraordinary results.
According to the research site Statista, the digital industry was worth $16.5 billion in 2017 and it is expected to hit $29 billion by 2022 while necessary infrastructure, such as mobile phone ownership, and household incomes continue to rise.
With the surge of internet penetration on the continent, many Africans are easing into the habit of shopping online. According to a McKinsey’s report, today, e-commerce in Africa represents 2-3% of total purchases, but it could account for up to 10% of retails sales with a value of around $75 billion by 2025, as more Africans gain access to the internet.
Here, the e-commerce market is fully represented by the Nigerian Jumia, Africa’s first e-commerce website, which gained 48% of the continent’s market operating in 23 different countries. A platform that jumped from 2.7 million users in 2017 to over 4 million users the next year: an all African success story.
© Jumia. The Lagos-based marketplace Jumia is Africa’s number 1 online retailer, which provides a large variety of services in addition to online sales.
Headquartered in Lagos in Nigeria, Jumia was founded in 2012 by two ex-McKinsey consultants, Sacha Poignonnec and Jeremy Hodara, together with Tunde Kehinde and Raphael Kofi Afaedor. Last April, the Nigerian marketplace became the first African technology company listed on the US stock exchange.
With three-figure growth rates, Jumia became Africa’s first unicorn when, in 2016, it achieved a $1 billion valuation after a $326 million funding round that included Goldman Sachs. According to data provided by the company, in 2018, the marketplace processed more than 13 million packages across many African countries such as Algeria, Egypt, Cameroon, Kenya, Ghana, Ivory Coast, Uganda, Morocco, Senegal, Tanzania, and of course, Nigeria.
However, Jumia does not sell products only. Like Chinese platforms, the African marketplace also provides a variety of services such as food delivery and travel booking. It is made of nine portals in 23 countries that serve every possible need, from the classic e-commerce to travel, from food to taxis, from job offers to the sale of houses. Jumia represents the sum of eBay, Booking, Uber, and Uber Eats, looking more like Alibaba than Amazon.
In 2017, e-commerce in Africa generated $16.5 billion in revenue and it is expected to reach $29 billion in 2022. In a region where the internet is not fully spread and financial institutions are almost absent, Jumia has managed to set its own e-commerce model.
Due to its variety, the company’s founders believe it is going to achieve Chinese-like successes, with an extraordinary boom both in Africa and worldwide. And big international companies seem to share the same feeling as major firms such as Rocket Internet, Mtn, Orange, Axa, and Goldman Sachs are among the first investors.
But what is the secret of this success? In addition to offering products in local currencies, Jumia has adapted e-commerce as we know it to the African reality where not everyone has a bank account or an e-wallet. It thus allows customers to buy goods from their smartphones from the most remote area and then pay by cash on delivery (COD), which is actually the most preferred payment method in Africa.
Moreover, in a continent where only one-third of the population lives less than 2 kilometers from a paved road and wheel transport costs up to eight times more than in Brazil or Vietnam, Jumia offers a delivery-time from one to two days in urban areas, and under six days in other parts of the countries. In order to reach those standards, the company had to set up its own logistics network. The CEO and founder Poignonnec has explained that they “have a distribution center in all the big cities, with a stock of products, while for delivery we integrate our fleet with local suppliers.”
© Bloomberg. In addition to offering products in local currencies, Jumia has adapted the online retail to the African reality, thus creating an African way to do e-commerce.
The mission is to connect African consumers and entrepreneurs in order to do better business together. Jumia is, in fact, creating a platform where small, medium and large African companies link with their potential market, thus becoming a hub for products and services.
Today, it counts over half a million sellers and over 4 million users. Moreover, in addition to responding to the needs of consumers and businesses, it also trains and offers employment for many Africans who are qualified in areas such as Engineering, IT, online marketing, and web development.
In a metropolis like Lagos, where shopping centers are few, buying on the internet is more convenient. However, in peripheral centers and villages, where many products do not even arrive, it is a necessity. Therefore, during the last Black Friday, Jumia received a million orders. “We’re making people’s lives better,” says Ms. Poignonnec. “But the path is long. Even for the upper-middle class e-commerce remains a novelty,” she adds.
In 2017, Jumia reported revenues of over $566 million, a 42% increase compared to 2016. But it now aims to make Egypt its largest market on the continent, using the vast network of unlicensed street vendors.
Although its overall successes, Jumia is now targeting Egypt aiming at making the country its largest market on the continent by leveraging the vast network of unlicensed street vendors. This is why the company asked the government to regulate the network of street vendors as soon as possible by offering very favorable tax incentives and loans so that they can offer Jumia’s online product catalog to passers-by, thus creating an African way to do e-commerce.
Egypt’s 96 million consumers are gradually discovering online shopping as an alternative to their traditional cash-driven retail outlets. Only 5 to 8% of Egyptian internet users have made a purchase online, and it was mostly in cash. Therefore, the “informal” economy, that of street shops and street vendors, is worth at least 37% of total domestic consumer spending.
According to the company, Jumia’s sales in Egypt grew 190% in 2017 from the previous year as consumers and retailers – struggling with inflation hovering around 30% for most of 2017 – looked for cheaper products and bigger audiences. Today, Jumia has served 1.5 million customers since its Egypt debut in 2012 but it still represents the marketplace’s second-biggest market after Nigeria.
In a region where the internet is not fully spread and financial institutions are almost absent, Jumia has managed to set its own e-commerce model. Moreover, in order to lead consumers to prefer online payment to COD, the company also announced a partnership with Mastercard for its payments system JumiaPay.
© Unsplash. Nigeria. Being Africa’s most populous country, Nigeria is home to 40% of African e-commerce companies and represents Jumia’s first market.
The old narrative of Africa on the margins, disconnected from the global economy, driven by conflict or corruption and heavily dependent on foreign intervention and donations, is fading fast. The internet is playing a big role in leading the transformation, as well as the increasing importance of e-commerce.
In recent years, the African economy has continued to grow steadily. In 3 of the 54 countries in Africa, the per capita GDP is higher than that of China, and the purchasing power of African people is gradually increasing. Africa’s population is also growing rapidly, especially its middle class, which is expected to make up 1.1 billion out of 2.5 billion Africans by 2050. And this emerging population with increasing disposable income represents an obvious opportunity for e-commerce.
With 195 million people, Nigeria is the most populous country in Africa and the largest economy in the continent in terms of gross domestic product. The country’s internet penetration rate is 48%, and 40% of African e-commerce companies are based here.
However, it is not all “fun and games”, though. In the Dark Continent, e-commerce platforms that have the ambition to change customers’ shopping habits at a continental level must deal with 54 different markets, 54 central banks, exchange rates, and with many different taxes and legislative systems. It seems enough to discourage any online shopping website.
Nevertheless, although e-commerce is far from Africa’s largest earner, the market is growing, and it is growing fast. Therefore, the potential is huge. Especially taking into account that here the use of the smartphone has grown by 70% only between 2017 and 2018, creating a potential base of 660 million internet users.
While investors believe in the startup, consumers show to appreciate Jumia’s offers. And while the Nigerian company is shaping the local e-commerce sector as it pleases, it will continue fostering the internet landscape without disappointing the expectation.