There has been a growing discussion about the potential of e-commerce in developing countries. This conversation intensified when Africa’s biggest conglomerate, Jumia went public in the United States, becoming the “first African Unicorn.”
The Initial Public Offering (IPO) prospectus – a 270-page summary that Jumia released as part of this filling, has sparked much argument. In another place, Techcrunch has dug into the financial details of Jumia, and online debates have blown up with the question, is Jumia really an African Firm?
We won’t detail these issues here. Instead, we’ll talk about the insights that the prospectus delivers about e-commerce platforms operating in Africa. This is particularly useful as we’ve been struggling with a lack of information on e-commerce and the firm’s unwillingness to share commercially sensitive information.
Here are five lessons we can learn from Jumia’s IPO:
Africa Wants Solutions In Africa, By Africans For Africans
Be ready to design African solutions that’ll solve African problems. If you want to thrive in doing this, then you shouldn’t build an African Amazon based on credit cards.
From click and collect to cash on delivery, you need to build novel solutions that’ll remove friction from online trade. You must also be willing to be an end-to-end value chain player. If the infrastructure doesn’t exist, then be ready to build it from transport firms to the warehouse. And if you’re competing on service quality then be prepared to manage it as well.
Enable indigenous players and don’t compete with them. Most firms that enter Africa end up competing with local business and ultimately driving them out of business. This has been a disaster in Africa, for instance where big companies have killed small business.
Jumia does the opposite. About 90% of its business enables small businesses to go online and grow exponentially.
Those Who Say It Can’t Be Done Must Give Way For Those Who’re Willing To Do It
Presently, Africa is an attractive market. Many companies are waiting for the continent to become ready for e-commerce. It then becomes evident that market development in Africa is the perfect way to grow instead of inertly waiting to dive in “whenever the market is ready.” So, you have to get in early and build the e-highways yourself to enable market growth.
Africa will jump to online commerce over physical trade. Just as Wayne Gretzky puts it: “Get to where the puck is going to be.” With only a few malls in Africa, it’s evident that online solutions have a particular advantage. The cost, logistics, service, and choice at physical stores in Africa is considerably lacking. Therefore, online is a no-brainer.
Africa Is Not A Single Country, But It Can Be Run As One
If you must get unit economies that work, then you need to achieve scale. So, you can choose to either be Pan-African or be eaten. Jumia is in a third of African countries but it’s in over 100 cities, and it addresses up to about 90% of disposable income. That’s smartness.
Being African Is Not A Racial Thing
We’ve seen many criticisms that Jumia isn’t African because its two CEOs are French, its head office was registered in Germany, it’s IT center is in Porto, Portugal, and its shareholders aren’t African. Well, this completely misses the point.
Jumia is the first firm that was grown organically in Africa, extremely services its main African segments interested in mobile shopping and offers a pure-play investment in Africa even into its forthcoming e-commerce industry. For most investors in the world, this is African, and that’s what matters.
Fortune Favours The Brave
Africa isn’t for the timid. If you must excel, then you must take calculated risks. In 2016, the currency of Nigeria and Egypt halved in value. Rather than withdrawing, Jumia hung in there and discovered super-smart ways of thriving and surviving.
For instance, they started selling local products, changed their price points and assortments. Forex fluctuations and access are significant issues to be managed.
Watching Jumia’s Future
The last-minute haste by companies like Mastercard in securing a stake in Jumia perfectly illustrates the agitated interest in Jumia.
We believe that soon, Jumia will soon become the Alibaba of Africa and we wish them well on this pursuit.
If you’ve got any question or contribution, please do leave a comment below. We’d be eager to hear from you.
