Jumia 3.0 – Platform Advantage, Payment, Logistics and Data

Jumia 3.0 – Platform Advantage, Payment, Logistics and Data

So, my last article on Jumia was a scathing review and report of their business model, and why I think Jumia is not in any way a good business.

This article is my attempt at going a little bit deeper, unraveling certain data points, and showing you that of a truth, Jumia (in its present form) is a silly business (it hurts me that this is the business that represents the entrepreneurial drive of a continent of 1.3 billion people on the largest stock market on the planet).

So I’ll start from this comment I put up on a post on LinkedIn a couple of days ago.

“I really don’t know why I remain extremely pessimistic about the stock. In my opinion, it’s more of a numbers game. JumiaPay’s key advantage is based on Jumia’s GMV (Gross Merchandising Volume), the problem is as Jumia is desperately trying to cut cost and become profitable, that number is steadily reducing. JumiaPay’s ceiling on processing is Jumia’s GMV which is around US$250 million per quarter. JumiaPay is growing, but it has a ceiling. When it gets to the point where it now processes all eCommerce GMV, where does it go from there?

JumiaPay probably keeps around 1% of all processed transactions, at US$250 million per quarter, 1% is around US$2.5 million per quarter. That isn’t enough to cover Jumia’s 8 digit dollar losses per quarter. For context, Flutterwave processed more than US$5 billion in transaction volume in 2018, if they had a money guzzler like Jumia’s eCommerce, I don’t know if they’d be able to cope. In my opinion, I think Jumia’s hope is in becoming the Logistics operating system for Africa. eCommerce hasn’t become the mass market product it needs to be in Africa yet. Jumia only has around 1% of its target market of 600 million people as users. Awesome, but in eCommerce terms, still a poor showing. My thoughts.”

Jumia’s GMV

So, for those who don’t know, GMV (Gross Merchandise Volume) is the monetary value of all the goods sold on Jumia’s eCommerce platform.

eCommerce is naturally a scale business – the more you sell, the closer you are to profitability. It’s like retail, if you sell a biscuit you bought N30 for N50, you make a N20 profit. If you only sell one biscuit a day, your business isn’t performing well. Profit comes when you sell 1,000 of that biscuit and make revenue of N20,000. When you do the math and remove your daily cost of rent (if you don’t own the store), employee salaries, and any other associated costs, what remains is your daily profit. Your business doesn’t live on one sale in retail; your business needs a good number of them.

Jumia is chasing profitability – that’s a good thing, for a business that has burnt more than US$823 million and still has no clear path to profitability, I wonder what its profitability strategy was from the onset. In its bid to become more profitable, something remarkable is happening – GMV is reducing. Like I said earlier, if you want to be profitable in eCommerce, you need scale, so it’s more about how many goods you can sell till you get to the point of profitability than any one product you sell.

Jumia office

If Jumia’s GMV is going down while it gradually posts lesser losses per quarter, it means one of two things; one is that Jumia is really confused and doesn’t know what it’s doing, and two which is more likely – is that its CAC (Customer Acquisition Cost) is probably higher than its customer LTV (Life Time Value). In other words Jumia is spending more money that it should to acquire users to its platform and get them to buy stuff. To become profitable, Jumia is cutting down on acquisition costs – which is a good thing, but it is exposing Jumia’s under belly and another horrible insight – the African market isn’t ripe for eCommerce as a mass market product (as I have said before) and Jumia’s US$1 billion GMV is a product of its overspending on customer acquisition. In other words, Jumia has been taking performance enhancement drugs to boost its GMV value. I used to think Jumia was only high on Venture Capital, I was wrong, Jumia is also high on steroids – this business is a junkie.

When it eventually sheds off all its steroids (reduces its customer acquisition costs), it will eventually get to the point where it has to grow its GMV to the profitability point – the tipping point where all eCommerce platforms eventually become profitable.

Jumia isn’t even done with the first step; the second step is still a long way to go.

This is why I like Wall Street, it’s the true test of a businesses’ character. Jumia was heralding the first African unicorn (which I dispute), and Wall Street humbled it. Jumia wouldn’t be taking all these cost cutting measures if it was still a private business raising hundreds of millions of dollars from private investors and lying to itself (and us), that it is the Amazon of Africa. Amazon should sue them for this.

Double Play Strategy

Someone posted a comment on an article I put up recently, where he said –

“Jumia is actually a triple-platform business: the marketplace goods, the new market place for logistics, and the payment platform. E-coms suffer everywhere for a while.”

While he is correct about eCommerce suffering for a while before becoming profitable, Amazon was unprofitable for seven years, Alibaba for three, there’s also something that needs to be pointed out.

The Goal of eCommerce

The truth is this; eCommerce has nothing to do with commerce or retail, the true purpose of eCommerce is not to buy and sell stuff, the true purpose of eCommerce is to gather users.

The same way retail banking is the easiest way for a bank to access cheap capital – eCommerce is the easiest way for a business to acquire both cheap users and cheap data.

The true core purpose of eCommerce is to create a platform where businesses can get easy and cheap access to users they can eventually cross sell and up sell other products and services to. Amazon does this with Prime. Think about how much Amazon makes from the 126 million Americans alone (65% of its US users) that pay either US$12.99 or US$6.49 a month just to use Amazon Prime. Prime’s value proposition is faster deliveries, from Prime they upsell you Amazon Video and a bunch of other stuff. And what about the fact that Alexa is in 11% of American households.

AWS (Amazon Web Services) is a kind of double play for Amazon, but Amazon was already profitable before AWS came along, AWS is really Amazon’s way of increasing its eCommerce platforms value proposition by constantly cutting down its prices, and drawing more users to its platform. Everything works together to give Amazon a big and powerful Experience Moat

.Unless you have heard the voice of God, competing with Amazon is really a stupid idea.

Alibaba’s foundational product is its eCommerce platform from which it has scaled to launch a whole array of products including; Ant Financial, Aliwangwang (an instant messaging platform), Alibaba Cloud, Aligenie (a smart personal assistant), Fliggy (an online travel platform), and a host of other products.

The real point of eCommerce is to create a platform that makes it easier to cross sell and up sell other products.

eCommerce is largely a low margin business, Walmart makes more profits than Amazon, but Amazon uses its massive scale to up sell so many other products, that it doesn’t really care. Amazon is a US$1.6trn business; Walmart is a US$430 billion business. So much for selling tissue paper.

None of these businesses – Amazon or Alibaba used double plays to try and augment their eCommerce platforms; they were already profitable before they started any kind of double play strategy. The purpose of their double plays were to make the most of their platforms, not to try and make a profit. Losing money doing eCommerce is a bad sign. These guys got it right before thinking double play, Jumia is doing double play without getting eCommerce right. Jumia jumped the gun by getting into Africa when it did without any proper research. Jumia wants to jump the gun again. 

Platform Advantage

As at Q3 2020, Jumia had 6.8 million active users. To give you some context – Fidelity bank has 5million users, Wema bank 1million, Sterling bank around 1.6million, and Heritage Bank 308,000. In other words, Jumia has more users than Heritage Bank, Wema Bank and Sterling Bank combined.

Having 6.8million users as an African business is an impressive feat – no joke, especially when you sell a service as non-essential as eCommerce – Without banking, the fabrics of society are at risk, without eCommerce, you have to walk to the market to buy that fabric.

Banking is essential, eCommerce – not so much. Thumbs up to Jumia here. The big question is finding how to make the most of those users.

The Fallacy of JumiaPay

JumiaPay is the payment processor that Jumia now heralds as its savior. In my opinion, it’s either Jumia is trying to distract everyone while they try to put themselves together, or they genuinely do not know what they’ve gotten themselves into.

What is JumiaPay’s key advantage? It processes the payments on Jumia’s eCommerce platform. JumiaPay has a cap on what it can process till the rubber eventually hits the road. As at Q3 2020, JumiaPay has a platform penetration of 25.6%. JumiaPay will likely have a percentage commission of say 1% to 2.5% – so let’s choose to be generous and say 4%, If tomorrow morning, JumiaPay magically gets a platform penetration of 100% (meaning it processes all of Jumia’s GMV), assuming GMV is at US$1 billion, JumiaPay will make around US$40million in annual revenue. Jumia lost a little over US$33 million in Q3 2020.

Unless JumiaPay can show some legit off platform capabilities, JumiaPay is not Jumia’s magic key to profitability.

JumiaPay is a thirteen year old eating cornflakes and watching Nickelodeon. When it’s time to go into the real world (and compete off platform), it will have to face businesses like Flutterwave and Paystack – businesses that had no native eCommerce platform to give them an advantage – businesses that started out eating eba and egusi soup with no meat. These guys know their onions. This is one of the most competitive spaces in African tech. I really don’t know if JumiaPay stands a chance.

Jumia Logistics

Jumia announced it would be spinning out its Logistics business and making it open to third party users. This is a strategy I find commendable – Jumia may end up becoming the operating system for African eCommerce over time; they have the structure to make that happen.

Way Forward

What do I think is the way forward for Jumia you may ask? I have three suggestions;

  • Invest in CX

Jumia innovates in a market that is largely agnostic to eCommerce (when only 1% of the 600 million people in your target market use your product, that’s a clear sign of agnosticism), having horrible customer experience just makes things worse. A good number of people have ordered goods on Jumia, and got the wrong thing (or something substandard) delivered to them. Trust is a powerful currency Jumia needs to avoid toying with.

Get a CX department that’s laser focused on giving your users the best possible experiences. I know Jumia is a big business, and it may be challenging to execute, but having a horrible customer experience will do the Jumia brand a lot more harm than good in the long run – plus if a well-funded competitor comes in with a value proposition that fixes that friction, he may take your market from you – may another not reap where you have sown.

Create an all or none objective – any product you can’t effectively monitor its quality, don’t sell it. If you have to sell them, create an efficient system that both punishes detractors, and makes sure customers are speedily attended to and given a replacement product, or their money back – all this should happen in 24hours from when the complaint was lodged, or at most 48 hours. Don’t turn to Nigerian banks that say they’ll reverse your money (your own money) in 14 working days. 

  • Invest in JumiaPay’s off platform abilities.

In my opinion, JumiaPay has no real value if it can’t scale as an off platform solution (especially if the platform is shrinking). The payment processor space is one of the most competitive spaces in African tech. GTBank has a cut, Interswitch has a cut, Flutterwave has a cut, Paystack (now Stripe owned) has a cut, even Remita has a cut – this isn’t a space for thirteen year old, cornflakes eating, Nickelodeon watching kids – this is a space for men – men armed to the teeth. Jumia has a learning advantage through its on platform experience, but if it will scale off platform, it needs to come armed – you don’t bring a knife to a gun fight.

JumiaPay should invest in getting some of the best people in African fintech on their team. This isn’t the time to import one white guy that schooled at HBS (Harvard Business School) that sees coming to Africa as an adventure – JumiaPay needs people who know the lay of the land, people who can compete in the trenches. Flutterwave and Paystack will not welcome them with open hands. Remita is a dangerous product to have as competition.

JumiaPay needs to find a meaningful value proposition to give its mobile app; paying bills and buying airtime is not a value proposition – the loans part is commendable, but anyone who uses Jumia already has a bank account, and almost every (if not all) bank apps can help you pay bills and buy airtime.

Jumia has more than 10,000 sellers on its platform – who are likely all SME’s. The middle market segment is one of the best segments to innovate and create value for in Africa. It needs to find ways to create real value for them. 

  • Use your data

Facebook is one of the most powerful business’ on the planet. Facebook is the go to information platform for more than 2 billion people worldwide. If given the chance, Facebook can legit influence any election if it chooses to.

With more than 6million active users, Jumia is one of the most powerful internet company’s in Africa. Jumia has more data on how consumers spend, what they spend on, how much they’re willing to spend, and when they spend online than any other business in Africa. Jumia needs to find innovative ways to use this information to create and extract value for itself. 


Jumia’s stock is up more than 500% year to date – bad news for short sellers, good news for stags, mixed feelings for value and growth investors. If you’re a growth and/or value investor, you want to invest in a stable business that has growth potential. Jumia stock is volatile, more volatile than Nigerian politicians and their party affiliations.

In my opinion, we should stop talking about Jumia (in its present state) and focus on sending another business (hopefully Flutterwave) to Wall Street to make us proud. Till then let’s just leave Jumia alone.

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