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Jumia quits Cameroon ; Was their business model inappropriate?

jumia has left cameroon for a lapse of time.

Cameroon no longer counts as one of the African countries Jumia will operate in. At least to a certain extent. On Monday November 18, 2019, the pan African ecommerce giant, dubbed the “Amazon of Africa”, announced that it was suspending its e-commerce operations in Cameroon. The reason being that the central African country was “not suitable” for their transactional portal. 

Jumia’s announcement was met with a plethora of criticism from the Cameroonian masses and tech enthusiasts. Not only because the announcement was followed by the employees being laid off, but because “the company had failed to develop a business model that could answer the market’s demands” as many have expressed.

Rebecca Enonchong a Tech entrepreneur, CEO of @AppsTech said “#JumiaIsNotAfrican, JUMIA is simply a badly run business that is incapable of understanding its market, refuses to act as a good corporate citizen, and thinks Africans are simply a commodity, a means to an end. No business with that attitude can succeed in the long term.” she equally added that “the only thing giant about Jumia is their funding and ego”.

When I asked Digital Gong Technology ‘s CEO Mbaapoh Zonepoh what he thought of Jumia’s purported wrong business model, he couldn’t agree more. He explained that the main thing is copying a business model that is strictly western and implementing in Cameroon without thorough analysis. We need to rethink the eCommerce business model that will work for Cameroon and most African countries.” 

These reactions raises the multi-billion dollar question: What is Jumia’s business model, and how unrealistic is it to the African and Cameroonian continent?

Jumia was launched in Lagos in June 2012 and expanded to five other African countries: Egypt, Morocco, Ivory Coast, Kenya and South Africa. In 2014, the company launched offices in Cameroon, Uganda, Tanzania, Ghana, Algeria and Tunisia, and by 2018 it was present in 14 African countries. Jumia began as an e-commerce store with main sales being electronic devices, and soon expanded and became the everything store we have today, with brands that encompass travel booking service: Jumia Flights, Online takeout service: Jumia Food and classified services: Jumia Deals.

 For how much we love to have things easily classified, Organisations like Jumia have complex business models that are hybrid. Rather than rely on a single type of model, they are dependent on the mixture of those models, unlocking value in the long term. 

However, Jumia’s detractors have criticised the latter’s model to be a replicate of Amazon’s, not adapted to the African scene. To truly understand the business model of Jumia, we can start with Amazon’s business model. 

AMAZON’S BUSINESS MODEL

Often regarded as the largest marketplace on earth, Amazon operates its business with many mixed parts. Investopia describes the model as thus:  “First, the company sells goods directly. A percentage of products are offered to buyers through Amazon’s online storefront with a small markup, and inventory is kept in the company’s large network of warehouses. Most consumers visit the company’s site assuming its products are less expensive and readily available for purchase and shipping. 

In addition to direct sales, Amazon provides a platform for other retailers to sell products to buyers. Products sold through amazon’s partner retailers are often less common items or those with a higher purchase price, allowing Amazon to avoid holding slow-moving inventory that could dilute profit. While amazon does not assess a fee for its retailer partners to list sites for sale, the company does retain a portion of the sales price as commission. 

Amazon also maintains a subscription-based business model through its Amazon Prime service, as well as a small electronics product line. Under a prime account, customers pay an annual fee to secure free two-day or same-day shipping on eligible items and have access to streaming media, such as digital music or movies. Amazon also generates revenue from selling it’s e-reader, Kindle, and the e-book and mobile application purchase offered to Kindle owners.”

JUMIA’S BUSINESS MODEL

Jumia is modeled after Amazon and replicates the latter’s commissions, asset sales, subscription plans, ads, usage fees, licencing and rent or lease. Other similarities and overlap between the two companies include: mobile shopping, shipping, online credit card payment, the ability to create an account for repeat customers, and wish lists for people who have set up accounts as explains Soumyasen.com. Jumia has also adapted to the use of social media like instagram, facebook, twitter like their Amazon counterparts.

 A minor difference is that Amazon sells a bunch of its products directly, while most of the goods sold on Jumia come from third-party sellers according to MarketWatch. Thus like Amazon, Jumia also maintains a subscription based business through Jumia Prime, it sells at a low price, does not request fee for its retailer partners to list sites for sale, but does retain a portion of the sales price as commission. 

Despite the similarities, Jumia’s co-founder and chief executive Sacha Poignonnec, insists that Jumia’s aim is not to become the Amazon of Africa, but rather, its focus was in Africa: “The company is tailored for the specific needs of the African consumers and sellers. We only do Africa – we do not do everywhere else.” he told the Mail and Guardian in April, 2019, debunking all claims that Jumia wasn’t suitable for the African continent. 

Beyond the similarities in business models between the two companies, Jumia tried to differentiate itself in few areas in Africa and Cameroon. Jérémy Hodara, the co-CEO of Jumia mentioned that Jumia was keen to the obstacles Africa was facing  for the business of ecommerce“The starting point was to think that what everyone sees as problems or obstacles would be “normal” for us. People want to pay when they see the product? The logistics doesn’t exist? There isn’t enough trust? This will be our business model!  he told La Tribune.

How Jumia adapted its business model in Cameroon

Jumia adapted its e-commerce model to the Cameroonian market in quite simple ways. First, the one with the most attention is it’s concept of pay at delivery, where the customer wouldn’t have to pay until the product is shipped to their door. This concept, although risky, was due to tackle the lack of trust within Cameroonians for online transactions.

Jumia also built partnerships with mobile payment providers, like MTN Mobile Money and Orange Money to match the preferences of Cameroonian consumers, since the use of banking services among the consumers is still relatively very low. Just 10% of the population aged at least 15 had a bank account in 2017. This was revealed by the finance ministry (Minfi) in a “FinScope” survey, which aimed at assessing the levels of access to and use of financial services across the country. 

Another significant challenge for Jumia’s  e-commerce operations in Cameroon was the state of the road system, which in a majority of areas is poorly maintained or non-existent. According to official statistics, there are about 50,000 km of roads in Cameroon, of which 5,000 km are paved. The road density is estimated at 7 km for each 1,000 km sq. The road network both paved and unpaved is poorly maintained.

With logistics being one of the main challenges of e-commerce, Jumia decided to create its own fleet of trucks rather than rely entirely on different logistics partners. It also worked to build their fleet of motorbikes, called JumiaForce, that could easily navigate the congested roads and provide door to door delivery to the consumer. 

The measures Jumia implemented to suit Cameroon, didn’t seem adequate in the long run as the e-commerce giant had to shut down its activities, (or part), afterall. As a reason for their departure, an anonymous source at the company told Reuters that Jumia had chosen to prioritize growth over profitability, so Jumia was quitting “to have time to study the market”

To Mbapooh Zonepoh, Ceo of Digital Gong- a Douala based digital marketing agency, the lack of digital transformation is the main drawback to e-commerce business in Cameroon, regardless of other hindrances like logistics, banking and finance.For e-Commerce operations to work in Cameroon we need full digital transformation. If we all transform ourselves digitally, then we will be more receptive to digital activities like e-commerce.” he said, stressing that “if someone can’t make out a simple difference between an Email address and website, or a browser and search engine, what more of buying an item online?”

According to him, Jumia needed to grasp certain aspects peculiar to the African like the checkout process (buyer’s journey or purchase funnel) and language used:“Words like checkout, add to cart; any layman in Cameroon is not used to such words. We either need to introduce our own words or educate the users on the terminologies. For instance, someone could be more familiar to ‘basket’ or ‘market bag’  than ‘cart'” he explained. 

To Conclude

The best way for Cameroonians to respond to Jumia would be to have a full-blown knowledge and use of digital services. I think that Local governments can work to provide an environment that would lead Cameroonian consumers transition to the digital economy, and allow digital activities to thrive. Now as to whether Jumia adopted an erroneous business model in Cameroon and Africa, the model seems to work better than Amazon’s and Alibaba in the continent.

According to Chinese state-run news organisation China daily, while Alibaba serviced 4.2 million African customers through its AliExpress services since it entered the continent, Jumia has serviced 4.3 million users and 81 thousand active sellers in the 14, now 13, countries it services since it started. And although Amazon is available in 11 countries on the continent, neither Amazon nor Alibaba have gotten their start successfully in African countries like Jumia.

ABOUT THE AUTHOR:

Tadbet Averra

Tadbet Averra  is the Public Relations Officer and Content Manager at digital Gong Technologies, a branding, strategic and creative digital marketing agency in Douala, Cameroon. She’s provided content marketing  and strategy advice  for the agency and its clients. She also holds a Bsc degree in Journalism and Mass communication. 

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Digital Gong Technologies is made up of a group of passionate technologists, marketing strategists, learners, and creatives, putting out efforts to increase customer satisfaction and retention by intersecting Marketing, Technology, and Design.

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