If there’s any lingering doubt about Africa’s e-commerce space and its potential to scale, they’re probably heavily negated by the growth of Jumia, the biggest player in continent’s ever-expanding online marketplaces. In seven years, it’s managed to race up the valuation ladder; today, it’s said to be worth over $1 billion.
Jumia has quite an impressive portfolio spread. They run Jumia E-commerce, an online marketplace; Jumia Travel, a travel and tour booking agency; Jumia Food, a meal delivery service; Jumia One, a payments platform; and several other web-based businesses functioning in various parts of Africa. On the whole, they have a presence in over a dozen African countries.
If you aren’t steeped in the outworkings of startup growth models, you’ll probably be wondering how this has happened. How a company running online marketplaces for smartphones and chewing gums get valued at a billion dollars in just over half a decade of its existence? Your answer would be a lay observer’s guide through the process of scaling startups to unicorn status- unicorns being privately owned startups worth $1 billion or more.
From the very start, Jumia- which was earlier known as the Africa Internet Group –had considerable backing from investors. When it was launched in Lagos in 2012, it had support from a Germany-based incubator, Rocket Internet. Its founding members were a diverse, multi-national group of entrepreneurs, who already had an ambition of setting up shop across the continent. In that same year, they began operations in Morocco, Egypt and South Africa.
The triple-digit growth which followed after its first couple of years in business ultimately attracted interest from other investors. In 2016, it received $411 million in funding from Goldman Sachs, MTN, AXA Group, Orange, and its initial investor, Rocket Internet. AXA’s purchase of an 8% stake in the startup for $83 million practically lobbed the value of the company to a territory.
Recently, there’s been of Jumia planning an IPO (Initial Public Offering)- or the sale of its shares -on the New York Stock Exchange (NYSE). Reports suggest that the IPO puts a valuation of $1.5 billion on Jumia, which would further confirm the company’s unicorn status. Last year, it had been listed by financial intelligence platform CB Insights as one of only three unicorns in Africa.
However, Jumia does face a number of challenges. While it remains the dominant e-commerce group on the continent, its main businesses face increasing competition. This is true in its first and biggest market, Nigeria, where its rival, Konga, continues to battle it for the attention (and pockets) of the country’s consumers. The prospect of an even tougher struggle for the Nigerian turf was raised with the merger of Konga and another e-commerce company, , in 2018.
Perhaps the biggest challenge faced by Jumia is its own internal concerns. Like many other online marketplaces in Nigeria, it has struggled to make sustained profits. In fact, its losses totalled $140 million in 2017. In the previous year, it cut a large number of jobs as it remodelled from being a diverse holdings group (the Africa Internet Group) into a single Jumia brand with a number of component businesses.
Nevertheless, Jumia probably has enough room to chisel out a more profitable future for itself. Its orders have grown more than twenty times since 2013, going past the 8 million mark in the last couple of years. And with high population growth and an expanding middle class, conditions seem just about right for a continued progression to sustained profitability.
Featured image source: Jumia