Making e-commerce work in Africa
Payment methods and logistics challenges have made e-commerce in Sub-Saharan Africa (outside South Africa) more talked about than usual. But recent players in Nigeria have shaped the way things work to meet market conditions and are having promising signs of success.
Russell Southwood spoke to Jeremy Doutte, CEO, Jumia Nigeria.
Early e-commerce market entrant in Nigeria Nasper’s Kalahari.com came and went and the “told-you-so’s” said what did you expect: the number of customers was tiny. Rocket Internet start-up Jumia was launched two years in May 2012.
Together Konga (invested in by Sweden’s Kinevik and Naspers) and Jumia are estimated by those who have seen the figures to have around or over 2 million customers.
Doutta (who has also worked for Jumia in Nigeria) says originally they were working on the idea of pushing the Amazon concept into Africa. But they realised early on things were going to be very different: there was not the same logistics chain as you found in developed countries; there was little or no financing; and more or less no electronic payments.
They had to completely rework the model so it remains a bit galling when they hear people saying they just copied it.
”The key success factors were not here so we had to move to cash on delivery.”But the big gap in the market was the lack of quality retailing at something less than premium prices. For the average shopper, finding something they wanted might involve a long journey, at the end of which there was no guarantee the product they wanted would be in stock.
During my visit I also spoke to Rukky Ladoja, the women behind a start-up with two fashion brands in the market: Grey and Even Tribe. The mid-market brand Even Tribe sells more or less completely through Jumia’s online channel.
The numbers are not huge but it has opened up a way of addressing its customers with clothes that reflect Nigerian body shapes and colours wanted, leapfrogging the less than perfect retail sector.
Jumia’s customers buy literally everything but one of the biggest categories is the very item that has been fuelling some of these changes, the mobile phone. This is followed by fashion wear. Recently it added diet supplements and “this supplier is now in the Top 15 of our suppliers in 2 weeks.”
Jumia offers its delivery service across the whole of this large country:”There are some challenges to reach everywhere but we have 16 logistics hubs and a small warehouse.”
So how long does it take to get something delivered for a customer in the northern city of Kano? 2-3 days says Doutte but a customer had posted on his Facebook page that with one item the next day. Nevertheless Doutte prefers to stick to the 2-3 days delivery time.
60% of its orders come from Lagos and the rest from elsewhere. It wants to expand the volume of orders coming from elsewhere and is “planning to push the geographic spread.”
There is also an issue in terms of access to devices to do the ordering: there are more smartphones than laptops and PCs in the market. For example, according to our latest market research study, only 6% of people in Northern Nigeria have access to laptops or PCs respectively.
So Jumia is pushing entry-level smartphones with its own app pre-loaded. It is working with a Chinese OEM out of Dubai called Innjoo to provide low-cost smartphones direct to customers over the platform. Doutta says that there US$50 smartphones “but they are not so good” but for US$75 “you can get a very good phone with a 5 inch screen.”
Until recently, orders by device origin were split 50/50 between Laptops and PCs and mobile phones. The latter has begun to creep up to 53%.
Overall, Doutta says that it plans to dramatically increase the customer experience with better trucks, better tracking and bigger warehouses. It already employs 1,200 staff directly and a contracted sales staff of 800. It puts 800 motor cycles and trucks on the road.
Doutta also has worked at Jumia Morocco so I asked him what were the key differences between it and the Nigerian market?:”Here the market is dramatically bigger and drastically under-served: there is also weak and limited offline retail. There are malls and shops everywhere in Morocco.
They may not be as good as Paris or London but they’re very good. Here the retail offer is average. It’s hard to go to Shoprite on a Saturday afternoon. Nigerians like to innovate and try and are really open-minded. E-Commerce is an aspirational way of shopping.”
He says that Konga is Jumia’s main competition but that there is also a much smaller operator called OLX. It also has a sister company called Kaymu.co.ng which provides a marketplace model for retailers.
He says that there are three key things that investors or start-ups coming in from outside the continent need to understand:
1. People think it will be cheap to operate in Africa. He says everything is expensive in Lagos from the power bill he was looking at when I arrived to the monthly cost of his apartment.
2. There will be no competition. Wrong again. Konga is providing strong competition and “Africans are amazing entrepreneurs. You need to be very smart and strong (to survive). They will do amazing things”.
3. There will be lots of innovation. In fact it’s actually harder to innovate than elsewhere.
He also pointed to the dearth of good, high-quality people, something that other companies in the field also identify as a problem:”There’s the big challenge of human talent. It’s not available in large enough quantities for the size of the opportunity available.”
But given the scale of the opportunity in Nigeria and elsewhere that’s a nice problem to have rather than there being no opportunity.
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