Emerging Markets Business Summer 2017 | Page 68

68 CREATING A MARKET EMB T H E A FR I C A N A M A Z O N AT A GLANCE WITH JULIE T A N A MM A H I Juliet Anammah, Chief Executive of Jumia Nigeria. n 2012, with the support of Germany’s Rocket Internet, Nigerian e-commerce startup, Jumia, was born. Like all Rocket Internet investments, it didn’t claim to be a reinvention of the wheel; Jumia’s founders—a team of Nigerian entrepreneurs and Rocket backers—openly admit the site was created in the image of online retail powerhouse, Amazon. Designed as a secure and easy-to-use one-stop shop for retail, Jumia was to be to the African market, what Jeff Bezos’ American giant had become to the global e-tail space. The goal was lofty; at that time, African e-com- merce was essentially non-existent. Yet, consumer appetite was anything but. A year after Jumia’s launch, McKinsey & Company identified a growth opportunity in food and consumer goods in Nigeria alone to the tune of US$40 billion between 2008 and 2020. It was a tantalizing figure that quickly translated to sizeable revenues for the start-up, with Jumia Nigeria witnessing a 118 percent y-o-y increase in revenue to almost US$142 million in 2015. Now in its fifth year, Jumia counts as the largest e-commerce company in Nigeria, with phones, beauty and perfume, clothing and homeware counting amongst its best-selling categories. Starting life with a staff of three, the firm owned by Jumia Group (formerly AIG), employs more than 3,000 people today and operates 10 lines of services in 40 countries on the African continent, from Egypt to Angola, Côte d’Ivoire to Kenya. Yet, with impressive statistics that also include more than nine million visitors to Jumia Nigeria site per month, it’s easy to gloss over the challenges that the company has overcome to earn its market-leading position. Let’s not forget that to dominate Africa’s e-commerce landscape, the startup first had to create one. And even then, as the world of business continues to remind us, nothing can be taken for granted. Restructuring of Rocket Internet business and Nigerian currency devaluation contributed to a 56 percent drop in revenue for Jumia in the first half of 2016. It was against this developing backdrop of growth and potential on the one hand and challenge and turbulence on the other, that Juliet Anammah stepped out of a 13-year career at Accenture and into the CEO role at Jumia Nigeria in October 2015. Here, the Nigerian national explains how Africa’s e-commerce frontrunner is staying ahead, and what factors are both helping and hindering the continent’s online ecosystem. Emerging Markets Business (EMB): Jumia has risen against a backdrop of rapidly growing e-commerce in Africa. What is driving this growth? Juliet Anammah (JA): Africa’s young and tech savvy population has a lot to do with it, but the other part of the equation is the fact that traditional retail hasn’t grown as fast as it should. In the US, they have one mall for every 389 people. In Africa you have one mall per 60,000 inhabitants. So, there’s a gap in terms of supply and demand, and a huge population that is hungry for shopping opportunities. There are a number of factors contributing to this gap. For instance, access to land is a big issue, and even then when you have access, ensuring that the land has the building permits and all the available titles to it is a challenge. This means it can take three to five years, from the point where you identify the location, to building the shopping mall. These are the issues driving e-commerce in Africa. Then you have places like Nigeria, where you add one more factor, and that’s the smartphone penetration rate. A couple of years ago, a smartphone was going for roughly US$280. Today, a smartphone is about US$100, which really makes them accessible to a larger population of consumers. EMERGING MARKETS BUSINESS SUMMER 2017 ISSUE NO. 3 69 EMB: How would you describe Jumia’s business model and what factors influence it? JA: Our business model is shaped by the conditions inside Nigeria. The country entered recession in recent months. This has led to a continued spike in inflation and thus a declining purchasing power for the entire Nigerian population. The price of imported goods has also tremendously increased. In response to this, we have shifted from a retail to a marketplace model. A pre-paid mindset doesn’t work in countries like Nigeria, where people don’t necessarily trust that their order will be delivered. While this move has decreased our net revenue temporarily, it is a long term strategy for growth. Specifically, it will allow us to eventually stir out of the Nigerian recession unaffected for a number of reasons. First, we are more lenient: we do not hold stock as much, thus our needs in working capital have lessened and we are less hit by depreciation. Second, we rely on local sellers, which is the right model at the moment to counter any FX crisis and devaluation side effects. These factors mean we are positioned for growth. When the time comes to scale drastically, this business model will prove most successful as we will be able to grow through our partners instead of injecting a lot of investment in our working capital. EMB: After a tough year, what else is shaping Jumia Nigeria's growth strategy for 2017? JA: Jumia has put in place two main initiatives to make sure we provide long-term solutions to this problem. The first is a Seller Center through which we focus on working with local sellers. We now have more than 13,000 such sellers on Jumia Mall Nigeria. The second initiative is Jumia Local, which we launched on Independence Day in Nigeria, with the aim of promot- ing products and brands that are assembled and manufactured in Nigeria. Jumia Local represented more than 40 percent of our sales during this last In just just five five years, years, Lagos-based Lagos-based Jumia Jumia has has built built a thriving a business thriving and business kick-started and kick-started an e-commerce an e-commerce landscape landscape across Nigeria across and Nigeria the African and continent the African at large. continent In a at part large. of the In world a part where of the brick-and-mortar world where brick-and- retail outlets mortar fail to satisfy retail rising outlets consumer fail to satisfy demand, rising Jumia consumer is reaching demand, out to African Jumia consumers, is reaching not out just to online African but, consumers, crucially, not offline just too. online Here, but, Juliet crucially, Anammah, offline CEO too. of Jumia Here, Nigeria, Juliet Anammah, explains how CEO the of company Jumia Nigeria, is staying explains ahead and how what the company factors are is shaping staying the ahead continent’s and what e-commerce factors are shaping ecosystem. the continent’s e-commerce ecosystem. Black Friday (November 2016) confirming the appetite of locally produced goods in Nigeria. The reason that these initiatives help is that local sellers are not as impacted by currency devaluation or the FX scarcity, as all their costs are in Nairas. This allows us to focus and develop the FMCG and Fashion categories where you will find a majority of local sellers. To give a few examples, Bonvita from Cadbury, Nestle and Maggi all have factories in Nigeria where they produce their products. EMB: How do you stay competitive? JA: In the end, it’s all about customer satisfaction. There has to be a clear value proposition for the consumer, because the fact is, it’s ultimately the customer who decides whether to shop with Jumia or at the open market. With that in mind, we focus our efforts on making the buying experience as enjoyable and as smooth as possible, while also raising aware- ness of the benefits of shopping online. For us, that means customer engagement, creative marketing campaigns, promotions and events that draw in a lot of traffic and create a buzz in the market. Take the now-global festive discount shopping day, Black Friday, for instance. By introducing great offers and promotions, we broke three records across Africa during the last Black Friday, with visits to the Jumia site reaching 50 million, one million orders made and 1.4 million products sold. Also, half a million Jumia apps were downloaded in November. Beyond promotions, the main point is this: we have to demonstrate that Jumia provides convenience, wider support and quality assurance. These are the things that matter as far as brand survival and growth are concerned, and focusing on these elements is how we continue to lead the market. EMB: It is well documented that Nigeria and Africa more broadly face a number of infrastructural challenges. Which are affecting your business the most? JA: One of the biggest issues for us is logistics. When we started, not many international companies were providing last mile logistics, even fewer were reaching Nigeria’s remote areas and almost none were configured to offer cash-on-delivery. » EMBreview.org