When Jumia launched in 2012, it’s long-term goal was to become the leading e-commerce player on the continent.
It set about that objective like typical e-commerce platforms do: acquiring vast inventory, building warehouses, and aiming to drive online sales based on the promise of ease and convenience.
Indeed, one of the company’s first steps was to hire account managers in charge of growing its inventory base across a diverse range of categories, from mobile phones and electronics to fashion, beauty and childcare. If customers wanted to buy it, Jumia, often referred to as the Amazon of Africa wanted to be able to sell it. It was similar to the way Amazon itself started first with books and CDs and then eventually an Amazon of nearly everything.
But a billion dollar IPO and nearly a decade later, Jumia is now chasing slightly different ambitions. Rather than building a business based on directly engaging in consumer e-commerce by retailing a vast inventory, Jumia is now mainly focused on enabling e-commerce for other players in Africa instead.
The first marker of Jumia’s change in business model came in 2016 when its in-house inventory was whittled down and largely replaced with a vendor marketplace. Having invested in marketing and building its brand, Jumia began to essentially lease digital real estate by allowing independent vendors to sell items on its website while earning commission from their sales.
The tweak saw Jumia significantly reduce the underlying risk of holding inventory while democratizing its supply chain. The proposition also proved attractive to vendors who saw merit in tapping into Jumia’s established e-commerce framework, from its online marketplace to its delivery and warehousing network.
The changes to Jumia’s business model have been borne out of painful lessons from its experiences as an e-commerce front-runner on the continent. One of its biggest early-day realizations was a trust deficit among customers which meant that selling the e-commerce dream was going to be tougher than expected. With customers’ buying habits favoring offline retail over e-commerce and a preference for cash over digital payments, the company’s first task, alongside its competitors, was to engineer a shift in user behavior.
It attempted to do this by building workarounds to the classic e-commerce model. For instance, a preference for cash payments saw Jumia adopt a “pay on delivery” model which allowed customers to receive and examine delivered items before paying. But that ran into its own problems with unsavory characters taking advantage to arrange robberies of delivery agents, including a tragedy which grabbed national headlines.
In cases where customers chose to pay online, the early day unreliability of digital payments in Nigeria meant online transactions were as likely to fail as they were to succeed. And when all these hurdles were passed, there was also the difficulty of running efficient deliveries in congested African cities with limited addressing systems.