Jumia bets on Kenyan e-commerce market
E-commerce is quickly gathering pace in Kenya, riding on widespread mobile money transfer services and the growing number of smartphone users. Jumia which operates in Nigeria, Egypt, Morocco and Côte d’Ivoire, is the latest entrant to Kenya’s e-commerce market.
Jumia Kenya founder and managing director, Nick Miller, says that after “cracking success in Nigeria” it was only natural for the e-commerce platform to set shop in Kenya.
Jumia is financially backed by Rocket Internet, a Berlin-based online startup incubator and e-commerce investor which has raised nearly US$2bn in the past year, according to the Financial Times.
“There were all kinds of challenges that people thought about Nigeria: the security, logistics, finding addresses, the traffic and the difficulty of doing business in Nigeria,” says Miller. “If we are able to make a successful company in Nigeria, then Kenyan could not be as difficult.”
Miller has “strong reasons” for setting up Jumia in Kenya.
“Kenya is very technologically advanced in terms of mobile money payments, in terms of smartphone penetration and the openness to new technology. [Kenya is] a technological hub and the most thriving economy in East Africa. The market at the time doesn’t have serious competition as opposed to Nigeria.”
Jumia Kenya sells clothing, jewellery, accessories, cosmetics and electronics online. It charges a delivery fee of KSh 200 ($2.3), but offers free delivery in the capital Nairobi for purchases amounting to more than KSh 5,000 ($57).
Miller says Kenya’s market is dynamic and there is proven interest for online shopping.
“Amazon.com doesn’t exist in Africa but it is one of the top 10 websites in Kenya. It is surprising. A lot of Kenyans who have relatives abroad are buying online with Amazon, asking the goods to be shipped to relatives who bring them to Kenya next time they visit. That shows that Kenya is very open to online shopping.”
According to Miller, there is “a gap in the market for certain products”. He says that in recent years there has been increasing demand for international brands which is attributed to Kenya’s growing middle class and tech savvy young professionals. Although some of these international brands “may be sold on the black market”, Miller says the “authenticity is not known”.
“There is a huge growth of retail market here in Kenya – a lot of new malls, a lot of ongoing construction – but still there is a lack of certain brands that you can’t get in Kenya,” he says. “Instead of having to ship an item to an address in the UK and then wait a month for a relative to come visit, Jumia allows this group of people to buy locally. We ship a lot of [international] brands that don’t exist here.”
Since it began operations in March, the company has recorded an increased number of customers each month.
The firm recently launched an Android app to tap into the growing number of consumers using smartphones.
“It is going great,” Miller says. “The belief is that in Kenya we have a huge potential and therefore there is real investment at the beginning in order to reap down the line. We are not here for short-term gains.”
Fear of scams
However, the platform, which has a team of 40 staff in Kenya, faces some difficulties.
“People have this fear of e-commerce. There have been so many scams in the past. The only other big e-commerce player [in Kenya] is a company that [does] consumer-to-consumer [buying and selling]. It’s their model. It’s just that [with] that model you cannot always guarantee how genuine the products are. It is more open to scams and it gives a bad image. The main challenge is to convince and educate the Jumia customer that this is not a scam.”
To overcome this, Miller says the firm is focusing on offering quality services and educating customers.
The Italian-American managing director who grew up in the UK also faced difficulties adapting to the Kenyan market when he arrived in January.
“You know, understanding how business works here in Kenya [and] the different nuances, coming into a new market as an outsider, you are not known to anybody. It takes time to adapt to the market, but what I found is that Kenyans are extremely open-minded and willing to try new things.”
As attractive as Kenya’s online retail market is, a number of high-profile companies have not been successful. Miller does not expect the same for Jumia.
“Rocket Internet has had so many years of experience doing this. They have really been able to gain experience in e-commerce that is unrivalled in the world.”
Rocket Internet, which is involved with other e-commerce platforms across the world, also enjoys cost advantages.
“That kind of economies of scale means that you can launch an app for the Jumia group and you can share the costs across the portfolio of companies. Those people [who have failed] don’t have the kind of leverage and scale that we have.”
Miller says there will always be companies that do well and companies that fail.
“No matter how appealing the market is, you still need to know that you can easily make bad decisions. There is real opportunity for e-commerce and online businesses. Right now, if you are a very smart manager and you have a good idea, there are many great reasons why you can be successful.”