The New Jumia Evolving As The Ecommerce Firm Exits Cameroon And Tanzania

The New Jumia Evolving As The Ecommerce Firm Exits Cameroon And Tanzania

As I suggested a few days ago here, that Jumia would be better served pursuing a pan-African fintech playbook over an ecommerce one, the company has started the redesign. Jumia has left Cameroon and Tanzania over the last two weeks. The most painful thing, though, is that the company could not sell to any local operator. It simply closed the shops, fully or partially, like the ways Kalahari, Mocality and others did many years ago. You may read this seminal piece I wrote in the Harvard Business Review on ecommerce in Africa to understand the challenge in the sector.

Now on Jumia, I think it needs to spinoff JumiaPay and sell Jumia, the ecommerce business to anyone that can buy. That disposal can happen at local level where Jumia Nigeria sells to a player in Nigeria while Jumia Kenya is sold to another company.

Largely, as I have noted here many times, operating a pan-African ecommerce venture is hopeless, because your marginal cost instead of going to near-zero, as you scale, turn into a curve that looks like an average fixed cost curve (a shape that is similar to the one you see in Dangote Cement which confirms that ecommerce in Africa is a physical business, not electronic). When that happens, scale does not bring efficiencies on transaction and distribution which  are critical for the profitability of digital businesses.

I project that Jumia will shrink from 14 countries it began November 2019 to eight countries by Q2 2020. Once it does that, it would begin to see some elements of profitability (not immediate but on the horizon) even though its GMV will drop.

This redesign is key – geographical footprint means nothing in Africa. There are about five countries in sub-Saharan Africa that matter; others are just for shows. Do not think that being in 14 countries would deliver leverageable opportunity if you cannot validate your hypothesis in three. Our markets are heterogeneous in nature making lessons learned not easily transferable. Yet, you can use large footprints to raise capital at higher valuation; Jumia used that playbook. But at the end, for non-electronic businesses like Jumia, hitting profitability becomes harder.

Image result for near-zeromarginal cost, tekedia

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3 thoughts on “The New Jumia Evolving As The Ecommerce Firm Exits Cameroon And Tanzania

  1. What’s Jumia’s vision for Africa? Same old exploitative and transactional mentality, with which most multinationals come to Africa. It’s never about development or long-term objective, but as always, a continent to exploit and profit from, now it’s not working according to plan.

    If Jumia really had a development agenda and long-term plan for Nigeria and Africa, being a dominant ecommerce player, it could have done what Amazon did with AWS in Logistics here: build the ecosystem, and then every other ecommerce player pays tax to you! But no, Nigeria is never good for development, but so great for exploitation and profiteering…

    Let me not go into its governance structure, because the idea of enlisting merchants to sell on your platform, with no credible quality control or due diligence is beyond ridiculous; that’s part of why it’s collapsing, people are losing confidence on daily basis. Turning itself into fintech won’t save it, rather it will become a small player, one of the also rans.

    There is a market for any big player in ecommerce here,but you must do things differently. But if you just land here with quick profit mindset, you will fail spectacularly.

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    1. I quite agree with the above comment. Top quality is no where Close to most of the products from jumia’s platform. As such customers confidence is waning. More so Logistics is an area that need to be paid attention to by a serious player to make it work, there by turning around the fortune of e-commerce businesses.

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  2. “As I suggested a few days ago here, that Jumia would be better served pursuing a pan-African fintech playbook over an ecommerce one, the company has started the redesign.”

    Jumia needs to reinvent itself, especially the business model and not abandon or selloff its e-commerce business. It would be suicidal for Jumia to abandon its e-commerce business for fintech when MTN Nigeria, Airtel, OPay, PalmPay and so many other deep-pocket companies have been approved by the CBN and are leveraging on reach and huge fund to build their fintech unit. Jumia debt is over $1 billion with share trading at about $5, down from about $47 in April, while OPay just raised another $120 million (over $180m in total) and PalmPay $40 million, meaning the company would struggle to attract additional fund.

    Jumia is better off in the e-commerce industry where it is the first, the company needs a better business model and it has to be unique to each country but must maintain its core value like true global company. Just like the management said when they pulled out of Cameron a week ago, their business model wasn’t working but with Tanzania added now, it doesn’t seem to be working anywhere hence changes need to be made. JumiaPay would struggle without Jumia e-commerce as must of JumiaPay customers are from e-commerce. Jumia would struggle to grow its fintech without its e-commerce.

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