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Jumia’s Airtel Kenya partnership won’t end delivery payment problems

By Andrew MacDonald, David Whitehouse
Posted on Monday, 28 September 2020 23:04

A Jumia worker tags a package at the warehouse in Lagos, Nigeria. REUTERS/Temilade Adelaja

Jumia’s strategic overhaul continues with a partnership with Airtel Kenya allowing consumers to make pre-payments using Airtel Money.

The service is aimed at enhancing the contactless-delivery initiative Jumia started in March as a safety measure against COVID-19.

Consumers are encouraged to prepay for their purchases to avoid cash changing hands. The option “will make it easier for more consumers to incorporate online shopping as part of their daily transactions,” says Jumia’s head of financial services Nelly Movine.

READ MORE Coronavirus is triggering deep digital change in African fintech

Kenya is the latest Jumia market to have a prepayment option after Ghana and Uganda. The aim is to limit the damage to Jumia caused by “last mile” issues such as delivery personnel being unable to find the address, or the customer changing their mind when they see the goods. Yet the Airtel agreement still allows clients to pay on the spot with Airtel Money, leaving the problems of payment on delivery unresolved.

Safety is at stake. 

  • In 2017, a Jumia delivery man was killed in Port Harcourt, Nigeria, while delivering i-Phones to customers who were to pay on delivery.
  • Neither will the new option do anything to ease the harsh economic environment caused by COVID-19. In August, the company said that the pandemic had led to “reduced appetite” for more expensive, discretionary purchases.

Jumia has been beset with difficulties since its New York IPO in April 2019. The company’s record of pre-IPO losses has continued and the company has pulled out of markets such as Cameroon, Tanzania and Rwanda. The company in August agreed to pay $5m to settle class action lawsuits in the US over its IPO documentation.

German tech investor Rocket Internet, which in November 2019 had an 11% stake in the company, had completely bailed out by the start of April. Jumia shares, which started trading in April 2019 at $14.50, now change hands for $7.77.

Escrow Option

Africa’s large unbanked populations and prevalence of cash have made prepayment difficult for Jumia to scale. In Nigeria, the company’s biggest market, customer reluctance to part with money with goods unseen, or to share banking details online, have proved cultural obstacles.

READ MORE Jumia whips out cheque book to calm Wall Street

Escrow payments in a secure, third-party account offer one way to square the circle. A financial commitment has been made, but can still be rescinded if the goods are deemed unsatisfactory. AtaraPay is an example of such a third-party service in Nigeria.

  • According to Blessing Agoruah of LeLaw Barristers & Solicitors in Lagos, it’s “imperative that Nigerian online shopping platforms introduce functional escrow services in order to have a safe shopping environment for their customers.”
  • In a piece published by Lexology in August, Agoruah notes that some Nigerian e-commerce platforms such as Konga provide escrow options, but questions how far customer awareness of them has developed.
  • “Knowing that a trusted third party is involved to ensure the integrity of the process will make buyers more committed and reduce the return rates of goods,” she writes.

Jumia is also considering opening its logistics operations to third parties in a bid to increase revenue. “It’s not live yet but it is on the radar,” a spokesperson said on 24 September.

  • The company plans to expand into rural areas and reduce reliance on customers in capital cities, the spokesman added.
  • In Côte d’Ivoire, 50% of Jumia’s deliveries are already outside of the capital.

Bottom line

Jumia is still far from proving that it can devise a safe operating strategy, yet alone a profitable one.

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