The Vodacom Group, which is transitioning from a traditional telco to a tech company, views fibre optic internet as the next frontier to be conquered ... in South Africa and the rest of the continent, says Vodacom CEO Shameel Joosub.
The man in his forties, wearing a black polo shirt and leather loafers, is a regular in the back courtyard of the PlaYce Marcory Zone 4 shopping centre in Abidjan. Moustapha, a cosmetics shop employee, visits this Jumia “vendor drop operation” twice a day. This warehouse of about 800 square metres faces the discreet entrance door leading to the Ivorian headquarters of the famous African e-commerce platform. Filled with boxes of all sizes, the dark space where an industrious atmosphere reigns is one of the many warehouses that the brand with the black shopping cart logo makes available to small sellers in the country’s largest city.
For four years now, Jumia has enabled Moustapha’s boss, as well as many other merchants, to deliver items ordered online to their customers quickly. The parcels are pre-packaged in the colours of the group, which is listed on the New York Stock Exchange, and then transferred to a larger sorting centre on the outskirts of Abidjan. They are finally delivered within one to four working days, depending on the address.
Cumulative losses of $1.7 billion
Called Jumia Express, this speedy delivery service for business customers is one of the many services that Jumia has developed in recent years to diversify its revenue streams. At the end of May, Jumia Côte d’Ivoire, for example, launched a household shopping delivery service in Abidjan, with the promise of dispatching various orders in less than fifteen minutes anywhere in the Ivorian economic capital, which is known for its traffic jams.
Over the years, this quest for revenue has transformed Jumia into a sprawling group, present in logistics as well as in e-commerce, payment and online advertising. Ten years after its creation and strengthened by this diversification, the pan-African e-commerce pioneer, which claims 8 million active users in 11 countries, recorded a 2021 turnover of $178 million (€168.6 million). A relatively stable result compared to 2019, but still insufficient to amortise the investments injected for its daily operation and the conquest of new customers.
Since its beginnings in 2012, the group led by the Frenchmen Sacha Poignonnec and Jérémy Hodara has accumulated losses to the tune of $1.7 billion (including $227 million for the year 2021 alone). By way of comparison, the US company Amazon – with which Jumia has long been unfairly compared – spent $3 billion before becoming profitable eight years after its inception.
How long will the company be able to sustain these expenditures? It’s impossible to know, as the first African unicorn in history has fallen back below $1 billion in market capitalisation. For the past few months, its stock has stagnated at around $7, a market capitalisation of just over $720 million. And yet, its resilience has not wavered.
From the depreciation of the naira in 2014 to the accusations made by financial analysis firm Citron Research, which did not hesitate to degrade Jumia’s image and jeopardise its listing on the stock market, the platform has, in ten years, withstood numerous threats and has been able to keep its model evolving in order to survive in a field with numerous competitors.
The brand has continued to expand, multiplying delivery companies and warehouses on the continent, whereas Cdiscount went out of business after having modelled its French strategy on West Africa. And Afrimarket ran out of cash and filed for bankruptcy, later admitting that it had underestimated the capital necessary to build a viable platform.
Exigency, flexibility and fundraising
Compared to the competition, Jumia certainly benefited from an initial advantage, which was otherwise unavailable in Africa at the turn of the 2010s: being a part of Rocket Internet, a German structure experienced in mentoring start-ups and raising funds. Born in the Berlin offices of this maker of champions (Zalando, HelloFresh and Delivery Hero were created and developed by Rocket Internet), Jumia is still housed in an outmoded building at 104 Skalitzer Street in Kreuzberg, an alternative district in eastern Berlin that is among the most popular with Europe’s trendy youth.
“Rocket Internet is a very demanding company, which can even be brutal, but it allows us to be very adaptable and to move quickly from one model to another,” says a former competitor of the platform, who recalls Jumia’s switch in 2016 from a formerly centralised and all-proprietary model to a marketplace model, which makes the company’s web platform and logistics available to external merchants.
Very quickly, a hybrid model became obvious to us
At this time, which also saw the reunification of all the brands under the single Jumia banner, French engineer Florian Azzopardi was chosen by the founders to speed up the recruitment of merchants. “We quickly multiplied by ten the number of merchants that had been almost stable since the creation of the company,” he says. The shareholders’ objective was to reduce costs and give Jumia the capacity to quickly duplicate its model in several markets, and thus justify a future stock market listing (IPO).
“Very quickly, a hybrid model became obvious to us. We had to guarantee the quality of service and the availability of certain best-selling products, such as smartphones, for which we bought stocks. At the same time, we had to make Jumia the place where everything could be found, and therefore grow our seller base,” recalls the former Jumia employee. The start-up then had a comfortable envelope of €326 million provided by American bank Goldman Sachs, French telecoms operator Orange and its compatriot, the insurer Axa.
This new strategy, coupled with the financial boost, helped Jumia create synergies and weather contain losses, due in particular to the depreciation of the Nigerian naira in early 2016. The platform also had another advantage thanks to its geographical footprint. “The early launch of many markets diluted the risk exposure in each country,” says Azzopardi, who now runs the Afikaris art gallery in Paris.
Attracting and recruiting youth
Côte d’Ivoire is one of the pillar markets that Jumia held on to during its slimming treatment, which took place the day after its listing on Wall Street. On the third floor of the Marcory Zone 4 building, the atmosphere is young – the average age is 30 – and above all very industrious. The priority is the launch of Jumia Express and, in the medium term, the coverage of all Ivorian cities with more than 5,000 inhabitants. “We already serve all cities with more than 50,000 inhabitants,” says Ange Pete, Jumia Côte d’Ivoire’s marketing director.
Hired in 2017, the man who founded the transport and driver service Taxijet is one of the local talents that Jumia has managed to attract since its inception. “Recruitment is one of the platform’s strengths. From very early on, it knew how to identify the right local profiles with whom it could entrust responsibilities,” says a former employee of Cdiscount in Africa.
“Jumia is a company that gives you the space to express yourself and trusts very young people, as soon as the managers feel a potential or a particular motivation”, says Azzopardi, who was promoted to marketplace director at the age of 27. Co-founders Poignonnec and Hodara are part of this generation. And their longevity at the head of the African flagship of e-commerce is a surprise to many. “After the IPO, they were in a position to leave with a few million in their pockets, but they preferred to stay. Few entrepreneurs would have made that kind of choice,” says a former competitor with admiration. At a time when other models are emerging, this kind of experienced governance has the potential to keep making a difference.
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