Broadcasting
Techpreneurs Must Avoid Jumia, Konga Strategies to Survive
By Prof. Evans Stevenson
E-commerce in Nigeria has often been touted as a difficult terrain and not for the faint-hearted.
This position is backed up by concrete facts and verifiable evidence, especially when one considers the well-documented struggles of several players in the sector. Despite the allure and glitter that the segment holds, one requires deep pockets and a strong dose of guts and bloody-mindedness to survive in e-commerce, especially in a very challenging market such as Nigeria.
Undoubtedly, the promise of e-commerce and its potential for investors to strike gold remains undeniable. The foregoing remains evident when you consider the predominantly youthful population that Nigeria possesses – arguably one of the most youthful in the world, the increasing exposure that education and the internet brings, growing data connectivity and teledensity rates as well as the burgeoning interest in the convenience and savvy that online commerce brings. Also worth mentioning is the rise in social commerce among youths in Nigeria, with many turning to entrepreneurs via trading on social media platforms such as Instagram and Facebook, among others.
But despite these promising markers, a few weighty obstacles remain for potential new entrants into the market, especially from a strategy standpoint.
I was a lead panelist at a recent Consumer Trends Research/Analysis session in Nairobi, the Kenyan capital where the conversation naturally dovetailed into the prospects of e-commerce in Africa. Crucially, the Nairobi event, which witnessed attendance from key experts, opened the eyes of many to some of the pressing challenges that have deterred investors from reaping the undoubtedly immense benefits from their portfolio investments in e-commerce platforms on the continent.
One of the few take-aways from the session was the fact that the Nigerian e-commerce market is unmistakably one of the biggest in Africa. This is hardly divorced from the fact that Nigeria, despite its struggles, still remains Africa’s biggest economy. Also, unlike in other African countries where you would nominally have one big e-commerce player, Nigeria has two giants in Jumia and Konga, both of which are understandably the dominant actors in a segment which also has a few other competitors.
But in focusing on the strengths of the Nigerian e-commerce market which remains very attractive to budding techpreneurs and other young people driven by the lure of wealth and privilege that entrepreneurship holds, it is critical to sound a cautionary note of warning: copying the strategies deployed by current market leaders, Jumia and Konga, may be an exercise in failure.
In breaking down this caution to future entrants into the market, it is essential to begin by, first of all, establishing that the Jumia strategy is a very expensive one, a suicide strategy, so to speak, that is very hard to sustain but one which, if it comes good, would turn its proponents into overnight superstars. Founded in 2012, Jumia initially raised $26 million from Summit Partners in March 2013. At the time Jumia did not specify how it will spend the fresh capital – a subtle indication of an absence of a clear-cut strategy – but back then, Jeremy Hodara — co-CEO of Africa Internet Group (AIG), which owns Jumia — said the funding was a validation of the company’s progress.
“We are very pleased to have been given this show of confidence, which acknowledges Jumia’s success. We consider this a recognition of the huge potential of e-commerce in Africa and the strong momentum of Jumia across the continent,” Hodara had stated back then in 2013.
Flush with cash and with no apparent strategy or clarity on what to spend it on, Jumia had embarked on a massive marketing splurge to outspend and out-hire its competitor, Konga, which had also entered the market in 2012. A year later and now backed by Rocket Internet, Jumia announced it had raised €120 million ($150 million) in new funding. The company confirmed that the round values it at €445 million ($555 million), adding that the new funding would boost its continent-wide expansion. Active in nine African markets — Cameroon, Egypt, Ghana, Ivory Coast, Kenya, Morocco, Nigeria, Uganda, and Tanzania — and also the UK at the time, Jumia’s strategy hardly altered until its rival, Konga pioneered the online marketplace structure that has become so popular today. After initially thumbing their noses at this innovative strategy as something bound to fail, Jumia later followed suit and launched its own marketplace after Konga.
Subsequent fund raises which came from convincing its growing band of investors of the promise of investing in the potential e-commerce goldmine saw Jumia go public in 2019, listing its shares on the floor of the New York Stock Exchange (NYSE). A high point in the company’s history, Jumia would, however, fall from grace after being touted as Africa’s first unicorn. This came after it was discovered to have cooked its books and eventually being called out by a US-based firm, Citroen Research which described its shares as worthless. Also, it is important to cite the huge losses that have trailed Jumia from inception and which many experts see as a black hole it can never fill with the way the business is currently structured.
Till date, the Jumia strategy is one that has seen it refrain from building any form of infrastructure in Nigeria, its biggest market. Investigations reveal the same applies across the other countries in which it operates. Hardly can the company count on owning office spaces, retail stores, warehouses or core logistical or physical presence in Nigeria. For years, Jumia has run on a cash-intensive strategy which has seen it burn through investors’ funds at a fast rate and racking up monumental losses to boot. But while it can claim to have regularly grown Gross Merchandise Volume (GMV) – described as total value of merchandise ordered over a given period of time – it can hardly gloss over the deficits in its books.
From a revenue standpoint, Jumia currently relies on three main areas: first party revenue from direct sales business of inventory owned by the business, revenue from its marketplace (which is currently its highest earner) and other revenue, which currently includes revenue from its logistics-as-a-service activity launched in 2020.
Its recently released 2022 Q1 results show that Jumia is currently valued at about $778m, a figure which falls way short of its all-time valuation of about $5.8 billion achieved in February 2021. Also, its shares are down 32%, despite being recently up by 44%. And while it claims GMV has risen by 27% per year boosting revenue by 44% year on year – a nine-quarter high – Jumia still reported a total comprehensive loss of $41 million and has a net asset of just $413 million after a massive accumulated loss of $1.7 billion.
Clearly, the biggest gainers were Jumia’s early-stage founders and investors who cashed out in time when other investors came calling. It is clear to global analysts that Africa is a tough continent and Jumia’s strategy may now be to find a buyer, but where it fails, it will be a disaster for investors.
It, therefore, came as a surprise when news recently made the rounds of a potential acquisition of Jumia by the Zinox Group, a technology conglomerate which I understand have acquired years of outstanding experience as a leading light on the continent. Such an acquisition would only make sense if the share price crashes to record lows, justifying such an investment as Jumia, today, is unarguably a loss-making venture that would require intense work to turn it around on the path of profitability. It could also be that Konga and its backers at the Zinox Group wants to use Jumia’s current network to expand to other African countries where Jumia is still recording losses.
But has its rival, Konga, fared any better?
Marginally, yes.
When it entered the Nigerian market in 2012, same year as Jumia did, Konga was also keen on raising money from investors as validation of their standing. The management of the company also burnt through a lot of cash to remain competitive in the face of Jumia’s bullish spending. So, the first few years witnessed both brands going head-to-head and racking up huge losses in the process. To its credit, Konga was a bit more conservative in its spending but that is not to say it recorded much more significant head-way than Jumia at the time.
The company, did, however, do much better in building essential infrastructure. It launched its own internally owned logistics vehicle – Konga Express – to overcome the thorny challenge of last mile deliveries, while also securing a license from the Central Bank of Nigeria (CBN) to float its own mobile money wallet known today as KongaPay. This is in addition to pioneering the marketplace structure known back then as the Konga Mall – a first in the African e-commerce market and beyond and which was later replicated by other local and international players. Konga also stood out for its investment in warehousing structures which helped it retain huge inventory.
Successive fund raises from perennial investors Swedish-based AB-Kinnevik and South African-headquartered Naspers, however, failed to save the company from almost running aground before its current owners, the Zinox Group, stepped in.
In assessing where both latter-day e-commerce pioneers went wrong in their strategies, it is easy to cite the absence of a core understanding of the local dynamics, an almost foolhardy ignorance of the complex interplay that defines the Nigerian market. Although I am not a Nigerian, I have spent enough years in the country to be able to identify the Nigerian market as a tricky customer. You need foresight, guts, experience borne out of years of navigating policy somersaults, keen awareness of the infrastructural deficiencies and influence of state actors, as well as other peculiarities that shape this market in order to make a success of e-commerce in Nigeria.
I think the Zinox Group’s experience of the Nigerian market and Konga’s strategies in investing in sustainable assets in Africa like warehouses, delivery trucks and more, instead of pouring all her money into marketing shows a commendable understanding of this tough market. It also shows that the new owners of Konga want to be in business for a long time and this could be why they have not yet hit the market to raise money.
Perhaps, that is why it hardly came as a surprise when Konga, which was almost comatose and on the verge of exiting the market at its point of acquisition, is today and under new ownership, the first e-commerce firm to achieve profitability in Africa.
The lesson for aspiring entrepreneurs in Africa here is simple.
Copying the strategies that made Jumia and Konga popular may seem like an easy deal but it may not be sustainable in the long run. Hype is good and necessary. However, it is very important to thoroughly understand your market, while situating your strategies within the context or existential realities of the society and not just relying on importing foreign concepts or business school models. In the same vein, you must put in the hard work to fill the content or deficiency gaps, while also making efforts to own your own infrastructure, especially considering the country’s challenges in this area.
Prof. Evans Stevenson, a Kenyan-born e-commerce researcher, writes from Abuja.
Broadcasting
Everything You Should Know About Jumia Nigeria’s Black Friday Platinum Partner – Xiaomi
If you have been a fan of innovative tech that is stylish, high-performance, and budget-friendly, you have likely heard of Xiaomi. As the platinum partner of Jumia Nigeria’s Black Friday campaign this year, Xiaomi has taken the spotlight, and there’s no better time to experience all they offer than during Jumia’s Black Friday. today—Xiaomi’s Exclusive Brand Day!
Why Xiaomi? Quality Tech at Unbeatable Prices
Xiaomi has become a household name worldwide for a reason. Known for delivering high-quality gadgets at accessible prices, Xiaomi is committed to making cutting-edge technology accessible to all. Whether you are looking for a feature-packed smartphone, smart home devices, or accessories, Xiaomi products bring together powerful performance and sleek design—without breaking the bank.
Exclusive Deals and Discounts on Xiaomi – Only on Jumia Black Friday!
As Jumia’s Black Friday Platinum Partner, Xiaomi is offering exclusive discounts on some of its best products from November 1st to 30th. Here’s a look at what’s on offer:
- Xiaomi Smartphones: Known for their gorilla screens, incredible battery life, sharp cameras, and user-friendly interfaces, Xiaomi smartphones are a game-changer. With Black Friday discounts, you can snag top models at unbeatable prices, allowing you to upgrade without the hefty price tag. With a wide range to pick from their quality smartphones, you might get a little confused, so here are some recommendations to inform your choice:
- If you’re looking for a device that can accommodate long hours of screen time without getting you worried about the battery life, then the XIAOMI Redmi 14C 6.88” 6GB RAM/128GB ROM Android 14 is your best bet!
- Phone storage means everything to you, then you want to run now to the Jumia website to purchase the XIAOMI Redmi Note 13 6.67″ 8GB RAM/512GB ROM Android 12 at the best price ever!
- If you want the newest smartphones from their portfolio, then you can lookout for the launch of the Xiaomi Poco C61 & Xiaomi Poco C75.
- Wearable Tech and Accessories: For fitness enthusiasts and remote workers, Xiaomi’s accessories like the XIAOMI Redmi Buds 6 Lite can help you stay connected on the move.
Don’t Miss Out – Shop Xiaomi on Jumia’s Black Friday Now!
With flash sales, and amazing discounts running all day on Jumia till 30th of November, today is the day to head over to Jumia, browse the amazing Xiaomi deals, and treat yourself to quality tech that is built to last. Make the most of Jumia’s Black Friday before the deals disappear—happy shopping!
Broadcasting
Economic Hardship Forces 243,000 Nigerians to Drop DStv, GOtv Subscriptions
The South African pay-TV operator MultiChoice Group disclosed that its Nigerian unit, MultiChoice Nigeria, lost 243,000 subscribers on its Digital Satellite Television (DStv) and General Entertainment on Television (GOtv) services from April to September this year.
The company revealed these figures in its Interim Financial Results for the period ending 30 September 2024, which were released on Tuesday.
MultiChoice attributed this decline to Nigeria’s high inflation rate, which exceeds 30%, driven by the rising costs of food, electricity, and fuel, causing many customers to disconnect.
In its financial report for March 2024, MultiChoice had earlier reported an 18% subscriber loss in Nigeria.
The company further reported a 566,000-subscriber loss in the Rest of Africa operations over the past six months, with Zambia and Nigeria contributing the largest shares to this decline.
“With the Rest of Africa business having seen a decline of 803k subscribers in 2H FY24, this rate of decline slowed to 566k in 1H FY25,” stated MultiChoice.
The loss included 298,000 in Zambia and 243,000 in Nigeria, while other markets experienced a minor decline.
Extreme inflation and currency instability have negatively impacted the group’s profits, with MultiChoice Group CEO Calvo Mawela commenting, “We are making good progress in addressing the technical insolvency that resulted from non-cash accounting entries at the end of the last financial year.”
Mawela noted that the group’s net equity position is expected to recover by November.
With regard to Zambia’s losses, the company attributed them to extensive power outages caused by drought, leaving some regions with up to 23 hours of daily outages.
The company also cited competition from streaming services and changes in viewer preferences as pressures on its traditional pay-TV model.
To adapt, MultiChoice invested an additional ZAR1.6 billion in its streaming service Showmax, which reported 50% year-over-year growth.
Mawela added, “Showmax strategically positions the business to actively participate in the streaming revolution as it gains momentum across Africa.”
Broadcasting
Echefu Launches LUFT TV, another Pay TV after Failed TSTV Project
Bright Echefu, founder of Telecom Satellites Limited (TSTV), has announced the launch of LUFT TV, a new pay TV service, years after his initial venture, TSTV, left many subscribers in limbo.
Echefu stated during the unveiling in Abuja that the new pay TV will accommodate customers’ needs and guarantee to offer the best entertainment in Nigeria and throughout Africa.
He said its satellites are already present throughout West Africa, suggesting that LUTF TV is accessible to West Africans.
Echefu, on the other hand, spoke about TSTV, which has been off the radar since 2020, and said it is not dead.
He alluded to the impending onboarding of TSTV customers to LUFT TV.
“Some time ago, we had TSTV. TSTV will be returning. It’s not dead, no. I just want to announce that TSTV is not dead. And, very soon, TSTV subscribers will be able to access LUTF TV. So we haven’t lost anything,” he explained.
He promised that the new Pay TV is dedicated to promoting local values and content while telling Nigeria’s tales, from gripping dramas and memorable music to exhilarating sporting events, among other things.
He claims that LUTF Pay TV is a movement that aims to unite people, inspire them, amuse them, and provide TV that speaks to their individuality rather than just a service.
Engineer Abdullahi A. Sule, governor of Nasarawa State, praised Echefu as “a focused individual with a great mind” during his remarks at the event.
He said his knowledge of Pay TV was comparable to that of Globacom and MTN in Nigeria.
Many Nigerians were encouraged by TSTV’s alluring offers when it joined the market on October 1, 2017, according to thenews-chronicle.com.
It was hailed as the nation’s first and only entirely Indigenous pay-TV provider. It was claimed that its choice to debut on the nation’s Independence Day was a proclamation of “freedom” in the pay-TV sector. However, following the launch, the company vanished.
On October 1, 2020, it returned to provide Nigerians with the greatest Pay-TV experience. Nevertheless, users who purchased the company’s decoders constantly complained about its sporadic service.
With no explanation to customers other than sporadic apologies for “technical glitches” during its active days, TSTV fully vanished from the public eye again in March last year and has stayed silent ever since.
The Economic and Financial Crimes Commission (EFCC) has filed a fraud complaint against TSTV, which is presently worth N380 million.
The EFCC is pursuing a civil loan case against Mr. Tanimu, MD of Kalsiyam Global and a former Minister of Special Duties and Inter-Governmental Affairs, according to Echefu, who refutes the accusation.
- Broadcasting2 days ago
Echefu Launches LUFT TV, another Pay TV after Failed TSTV Project
- E-Business2 days ago
Nigeria, Ghana Africa’s Digital Hubs Hardest Hit by Cyber Attacks – Report
- E-Business1 day ago
Kaspersky Identifies New Stealthy Ransomware
- News2 days ago
Senate to Increase EFCC Budget to Fuel Anti-Corruption Drive
- E-Financial2 days ago
NDIC Begins Auction of Defunct Heritage Bank’s Landed Assets
- News2 days ago
TETFund Puts Education Tax Revenue @N1.5trn in 2024
- Telecom2 days ago
Ericsson Deepens African Agenda with Schools Project
- Telecom1 day ago
Airtel Nigeria Reinforces Commitment to Youth Empowerment Hosts UNICEF GenU 9JA Steering Committee Meeting