Côte d’Ivoire: Jumia targets rural areas in new growth strategy

For several weeks now, a lorry has been leaving Jumia’s warehouses in Nairobi two or three times a week to make a 12-hour loop around Mount Kenya. The aim is to deliver locally unobtainable products to a dozen towns with populations of between 20,000 and 150,000.

“In these towns, the offer is extremely poor: a television certainly costs 20% more than in the capital and consumers can only choose between a maximum of two brands,” Francis Dufay tells The Africa Report. Jumia’s CEO wants to believe that his group’s salvation lies in these underserved rural areas, where demand is not being met.

Breakthrough strategy

“Our aim is for customers to be able to find the right product, at the right price, at the right time, and in the right town,” says Dufay. “That’s why we’re working to improve the offering by including all the relevant brands on the market at the lowest price and offering an exclusive range that comes directly from our suppliers in China, via our Jumia Global service.”

Since his arrival as the head of Jumia in February 2023 – he had been acting boss since 7 November 2022 – the naturalised Franco-Ivorian manager has been pursuing a strategy that represents a break with those pursued by his predecessors, Sacha Poignonnec and Jérémy Hodara.

Gone are the extravagant expenditures on online advertising and overpriced promotional operations. Currently, the focus is on the rationalisation of a number of services, such as the distribution of food and consumer products – “too complex in most of our countries” – and the levers for long-term growth.

Delivering to rural areas is definitely a better way of attracting growth.

Delivery in rural areas is one of them. In Côte d’Ivoire, Jumia is applying this strategy intensively, having recruited more than 17,600 self-employed workers (out of a total target of 40,000), who are responsible for educating consumers in the street about using the platform by accompanying them through the process.

These outreach workers are paid a commission on the sales they generate. Without disclosing the revenue generated by this activity, Jumia reports that 71% of Ivorian consumers who have made a first purchase on the application order again.

Deploying through partners

“This way of doing business online is not demanding in terms of investment, because we rely on partners for delivery, points of sale and relay points,” says Dufay. In Côte d’Ivoire, Jumia boasts 181 partner kiosks in 107 towns and cities.

In total, the group is rolling out its rural deliveries via more than 1,500 relay points in five of the 11 countries in which it operates (Côte d’Ivoire, Kenya, Nigeria, Senegal, and Uganda).

“Delivering to rural areas is definitely a better way of attracting growth than opening up new countries,” says Julien Garcier, head of consulting firm Sagaci Research. “While it is certain that there is a supply problem in these areas, the unknown factor in this equation remains the depth of demand.”

According to this African market research expert, who has worked for Jumia on a number of occasions, targeting rural areas means there is less competition than in urban areas and less pressure on margins. “While there are more people in rural areas, households are also poorer. The frequency of purchases is therefore lower, as is the average basket,” he says.

The Copia model

The model to which Jumia is committed is not unlike that of Kenyan start-up Copia Global. Founded by Crispin Murira, Jonathan Lewis, and Tracey Turner in 2012, Copia Global has been listed as one of the Financial Times‘ fastest-growing companies for the past two years.

Headed since 2017 by Tim Steel, the company employed 659 staff on sales of more than $30m, growing by almost 50% year-to-year, according to the FT’s ranking.

Since its creation, Copia Global has raised $103m from around 15 investors. Although it had begun geographic expansion into Uganda in 2021, it has decided to withdraw from the market in April 2023 to protect itself from a difficult economic climate.

Jumia, which is listed on the New York Stock Exchange (NYSE), is particularly sensitive to these economic difficulties. “We have been experiencing the same macroeconomic problems for just over a year in Egypt, Algeria, Tunisia and, to a lesser extent, in South Africa and Ghana,” admits Dufay.

The sharp depreciation of local currencies, import restrictions, and disruption to national supply chains are common features of these different markets.

“The 80% devaluation of the Egyptian pound in one year has had a huge impact on our supply capacity and sales because importers have very few goods, local producers prefer to export to earn foreign currency, and consumers are allocating their purchasing power elsewhere,” says the start-up’s CEO.

Wall Street still sceptical

There exists no shortage of challenges internally, either. The voluntary slowdown in sales of consumer goods and promotional operations on JumiaPay are putting a strain on visits and orders on the retail site. “We live with this loss of use. We’re not happy about it, but it’s inevitable and it’s the right thing to do,” said the Franco-Ivorian manager.

At the end of March 2023, Jumia presented ambivalent figures. While losses fell by 49% in constant currency terms over the year, and lost profits slowed by 51% over the same period – their lowest level for four years – revenues fell by 2.7%, to $46.3m year-to-year. “The hole in the accounts is growing less quickly, but the losses are continuing,” said Garcier.

Dufay presented an air of reassurance, pointing out that the Group still has $205m in cash. “We’re in a specific transitional phase, where we’ve stopped doing a lot of things that only brought us short-term peaks in consumption, without yet seeing the full impact of the work we’ve been doing for the last six months.”

This is also true on Wall Street. Investors still seem unconvinced by Jumia’s trajectory. After approaching the $5 mark in early February, the share price has plummeted and is now stagnating at around $3 ($3.26 on 5 June), despite the presentation of first-quarter figures on 23 May.