Jumia Business model not sustainable in African market – Expert

Bukola Olanrewaju November 26, 2019 E-business, TECHNOLOGY Leave a comment

…..Anxiety looms as organisation closes operations, report huge operational loss

Amidst the ruckus caused by the closure of Jumia operations in Cameroon, analyst and technology experts have described the situation as unsurprising.

According to them, although the growth of e-commerce is going strong around the world and African continent has also been seduced by online sales and electronic transaction; Jumia business model is not sustainable for African market.

Also, a consulting firm, McKinsey & Company Home stated that Africa’s booming e-commerce sector can not only jump-start small businesses but also help large companies enter a market full of energized consumers.

Still smarting from its ill-fated listing on the New York Stock Exchange, the folding up of Jumia operations in Cameroon without prior information to the public and workers makes the development the third African country in which Jumia has shut down operations. The earlier two being Gabon and Congo Republic.

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Registered in Germany, Jumia is said to now operates in thirteen African countries with its headquarter and management team in Dubai.

According to Jumia, the closure is necessary as its current model is not suited for the country. “We came to the conclusion that our transactional portal as it is run today is not suitable to the current context in Cameroon. We wanted to see how business evolved. We can come back, but for now we’re closing (to have) time to study the market.” It did not state when and how it will return to the Cameroon market.

In its recently released Q3 financial report, the company saw its operational loss increase to $55 million from the $45 million recorded in the same quarter last year.

This means Jumia has now lost $180.1 million for the first nine months of 2019 alone. In 2018, that figure was $129.2 million.

Analysing the situation, a tech entrepreneur, Rebecca Enonchong said the illusion that Jumia is a huge conglomerate doing gaint e-commerce is finally showing it is not.

According to her, although the company has 13 markets now, it barely existing in Rwanda and South Africa, which should be a huge market.

“Jumia was not built to last but built to sell either to investors or acquirer. The fundamental of the business does not support the evaluation of the numbers.

“I think investors have realized that the numbers and the attraction that should exist in such broad market isn’t there, Enonchong said while speaking on CNBC Africa.

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She further stated that Jumia did not fail because Africans are not interested or practising online purchases; Jumia simply fail to understand how Africans buys.

“Jumia failure is simply a misrepresentation and lacks of understanding of the people they are trying to serve. This is evident in their logo.

“Who are your customers and how they do buy; after which you create a product that mimics their manner of buying offline then put it online.

“Africa has 40,000 physical sellers and being able to mimics that in an application is something I know will be successful”

Furthermore, Enonchong said in a research survey recently carried out among 600 Africans, it was discovered that 87% had made online purchases using WhatsApp while 69% made online purchases using Facebook.

“Africans buy on the Internet but they do not buy using traditional shopping carts system which are not adaptable to African market.

“I think this is a lesson. Don’t try to adapt a market to a product but create a product that is adapted to your customers.

“I hope Jumia take this time as an opportunity to revisit its business model

A Quartz Africa report said Jumia was recently immersed in some operational challenges in Nigeria.

“The company has disclosed it recently uncovered instances of improper orders placed and subsequently cancelled on its marketplace platform wrongly inflating its order volume.”

Some of the improper sales practices, the company admitted, were carried out by its own personnel in “Jumia Force (J-Force),” its network of commissioned agents.

According to a report by Statista, e-commerce in Africa was valued at 16.5 billion dollars in 2017. Another report by the consulting firm McKinsey, states that this value could well go up to 75 billion dollars by 2025.