I said I would write this any day Jumia drops below $400 million on market cap. At the moment, my robot trackers have alerted me that Jumia is trading at $397 million in the New York Stock Exchange. It was close to $$4 billion in April 2019. Largely, Jumia has bled around $3.5 billion since April!
(We are analysts and learners; do not take this as mocking or attacking anyone. I have failed ventures starting from StartCrunch which cloned Kickstarter, the world’s leading crowdfunding site. The founder of Kickstarter was my roommate at TED Fellows camp. I did everything right except that trust in Nigeria was zero to give strangers money over the web! So, feel free to analyse my businesses.)
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.
Once it has done that, it can focus on JumiaPay. Its deal with the buyers must include arrangement to power their payment systems for years.
I have made tough calls in the past like when I told Konga to sell itself. And within a month, Konga sold itself. Jumia ecommerce is challenging,but JumiaPay is amazing and is the future. I do think it is better Jumia focuses on the payment business. Building a pan-African ecommerce business is hopeless until 2022 and markets are not patient to help Jumia at this moment.
My call to everyone is to stay out and wait until that inflection point arrives. Interestingly, the company that will unlock sub-Saharan Africa’s ecommerce (excluding South Africa) has not been started! (Note: Konga runs a hybrid commerce which is simply amazing and cannot be discussed in the same context as Jumia anymore. Also, while Instagram and Facebook are avenues to sell, they do not have leverageable factors to enable a brand build a top-brand ecommerce business. If you sell on Instagram, the shipping problem has not disappeared. So, while Facebook and Instagram could be major competitors to Jumia, they do not solve the marginal cost problem which Jumia continues to face.)
That is why ecommerce does not scale in Africa as the distribution cost does not marginally reduce as scale happens. Why that does not happen is because logistics is a physical component of the distribution cost, not a digital element, and cannot be reduced via codes online. In other words, ecommerce is nothing “electronic” when it comes to Africa; it remains an offline business because the marginal cost is dominated by offline logistics as we have no efficient postal system which startups can leverage for growth.