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What now for Jumia?

Speculation continues to mount over the future of Jumia.
Speculation continues to mount over the future of Jumia.

Speculation continues to mount over the future of Jumia after German investment company Rocket Internet sold its 11% stake in the e-commerce site, reportedly between November 2019 and March 2020.

This – together with increasing loss in revenue, has fuelled market speculation over the e-commerce company’s ability to sustain operations.

Cyrine Ben Fadhel, a strategy consultant at Deloitte Francophone Africa who specialises in the African start-up scene, noted that Jumia's operating losses increased by 34% reaching US$250-million due to high fulfilment expenses covering warehousing, picking, packing and shipping.

Jumia is reportedly closing shops in at least three African countries, including Cameroon and Tanzania.

Market analysts and e-commerce experts argue that Jumia’s case should not be used to evaluate African players – specifically because Jumia is not an African company, but a foreign e-commerce company but with focus on African market.

Rather, it should highlight the positions of truly African e-commerce outfits such as Konga, Kilimall, Bidorbuy and others, according to Ray Umukoro, a pan-African digital economy analyst and blogger.

One Kiosk's Adeshina Adewumi said: "They need to twig their model. From day one, I have always been of the opinion that the model is not sustainable given some peculiarities we all know within Africa. There's a need to form a new emergence and twig their model perhaps that can or could restore investor confidence. Models like One Kiosk, Instacart, Cornershop are more likely to succeed in Africa with some twig for them to create a niche for themselves."

The One Kiosk model differs from that of regular e-commerce platforms which link buyers with online stores regardless of their location. One Kiosk uses geo-location and matches buyers with merchandise at 1-2 km radius working with regular brick and mortar stores across various communities to reduce cost of logistics and improve efficiency.

Adewuni maintained that Jumia's e-commerce model has been faulty from day one and not suitable for the African space but “can still get through this storm if well managed with their stakeholders.”

“In my view, it's too early to say the impact of this move on Jumia, but for sure acts like this would definitely further affect their stock price which is not good for them. How other investors react would determine their fate over the next few days, weeks and months.”

Operating from its headquarters in Nigeria and running a composite offline-online marketing similar to that of Alibaba, Konga has been tipped as ‘the next big thing’ to emerge from Africa’s e-commerce space.

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