Jumia - Scale up Course Report_Final

Chinedum Ikeagu Jumia
EMBA- S1 Sept 20, 2020

IE Business School - Madrid

Jumia’s Mission Re-imagining the “Amazon” of Africa on e-Bay.
Statement Africa faces different challenges ranging Jumia was first launched 2012 in Nigeria

“ To improve the quality of from economic, health, poverty and even and Pakistan simultaneously and was
everyday life in Africa by
leveraging technology to brain drain. However, despite these known as then known as Kaymu in Nigeria
deliver innovative,
convenient and affordable challenges; there are opportunities to build and Azmalo in Pakistan. It is worth nothing
online services to
consumers, while helping businesses in the continent as it remains the that as at 2013, Pakistan and Nigeria have
businesses grow as they use a population of 206m and 180 million
our platform to reach and last frontier of the unchartered continents. people with a median age of 22.8 and
serve consumers”. The e-commerce sector of the digital 18.1 years respectively. Kaymu or Azmalo
economy remains one of the most (Jumia) was seen as clone of e-Bay’s
Jumia’s Playbook untapped. So many startups are testing the Model. The duplicity of between Kaymu
waters in the African markets, not minding and Azmalo was obvious from the
Jumia’s playbook was the high risk and the complexities of doing business models and strategy execution.
business in the continent. Most African Even the marketing artefacts of both
designed on facts from countries rank poorly in the World Bank companies could not hide the
Group report - Doing Business 2020. undifferentiated ventures.

Euromonitor reports that only 1% According to the report; Africa
underperforms in common areas such as
of retail transactions in Africa trading across borders, getting electricity Value Proposition
and even registering a company. Sub-
was conducted online Saharan African is obviously the weakest- Jumia had a multi-pronged value
performer on the ease of doing business proposition targeted at both sellers and
compared to 24% in a place ranking; well below the global average. consumers

China. The opportunity for Jumia is one of such ambitious startup
ventures that was emboldened to sail the
growth was enormous. Jumia’s sharky waters of African markets by
replicating e-Bay’s business model within
marketplace platform had the African continent. It was founded by Sellers Consumers
non-Africans, Jeremy Hodara and Sacha Access to a large Integrated ecosystem
about 81 thousand Active Poignonnec, who were former and growing
McKinsey consultants, along with Tunde consumer base Selection, price and
Sellers as of December 31, 2018 Kehinde and Raphael Kofi Afaedor from Unique data convenience
Nigeria and Ghana respectively. The team Product quality and
with nearly 4.0 million Active envisioned and created Jumia as a Brand building consumer protection
platform where sellers and buyers connect. Secure and
Consumers as of the same Infrastructure convenient payments
support Reliable and timely
period of time. Jumia identified Financial services delivery

that 90% of the transactions in

their market place was sold by

third party providers while 10%

was sold directly by Jumia to

enhance customer experience.

Procergy

InteDigixal

Jumia’s Growth Strategy Jumia’s Platform !- integrated platform, comprising of Jumia Logistics, Jumia Travels, Jumia foods, Jumia One, JumiaPay and

Jumia Marketplace, seamlessly connecting sellers and consumer to transact with each other.

Drive economics of scale by The company operated an integrated platform•, comEcfofpimcriiesminnetgrcaoenfdJmupmraorivkaeenLt obgpuilsasitnciceess,s JtmhuamotdiaePhl:aoyldeas-nd
developing Jumia logistics: Jumia Marketplace, seamlessly connecting sellers alinmditceodnsinuvmenertotroy.transact with each other.
The companies plans to adopt
different strategies to improve • Scalable, asset-light logistics: e-commerce
the reliability of deliveries.
fulfillment and express last mile delivery
JumiaPay: Jumia developed
its own payment platform to service .
enable the users adopt the
Jumiapay as the primary • Efficient, Centralized operations:
platform for transactions. This
was done believing that Organized knowledge an information
adoption of JumiaPay will
endear customers to Jumia spread among operating network
growing ecosystem.
• “Mobile first” in mobile-centric market:
Maintain Lead across product
Categories: Jumia was set to Deep knowledge of shopping habits of
build for the long term
leading in different services, mobile consumers in the regions
categories and markets while
scaling consistently to Due to the potential business opportunities • Founder-Led management team: The
improve margin and attain ahead of Kaymu, it secured an undisclosed original founders are driving the vision and
profitability amount as seed funding from external mission of Jumia.

The Initial Public Offering investors. The company grew from 10 staff
Jumia positioned itself for employee base to 60 in the same year
growth, considering the within a period of 9 months. The company Jumia flaunted what it defines as the Gross
opportunity it saw in Africa initiated a first level fast scale up from an Merchandize Value(GMV) as the primary
which has a population of early stage startup despite these logistical driver of their revenue. As at 2018 the GMV
about 1.2 Billion people challenges of moving goods within was €828.2 million which was significant
however with low penetration countries where they operated. It was able increase from €507.1 million in 2017.
of digitals technology and to establish the “marketplace” model as However, the primary revenue was
internet. Jumia was already meeting point for buyers and sellers. It does commissions generated from the third
operating in about locations not own much physical warehouse for party sellers that comprises majority of
covering 55% of the African goods storage but manages supply and their monthly transactions. The GMV
population in year 2017. Africa demand connections through digital remains a debatable measure of value for
also has young population platform. an e-commerce venture as it does not
with an average age of 19.4 Jumia quickly accelerated the expansion of represent asset or inventory. Despite these
years and mobile penetration its services to 14 African countries although book definitions the company had a
rate of 73% expected by year they were not market leaders in all of the 14 strong communication channel to
2022. With this information on countries where they operated between convince the public otherwise and Jumia
hand, Jumia considered it fit north and sub-Saharan Africa. The continued its upward trend growth.
to test the waters and launch
the initial public offering (IPO) company then received funding valued at With the growing size of the business and
in 2018. €300M from the MTN Group and within 3 the need to raise more capital to bolster
years Jumia had scaled and spread so fast the marketplace playbook and
to operate in 35 different countries with developing the logistics part of the
focus on developing nations where logistics business which was believed to be the
infrastructure is prevalently inadequate to one of the bottle necks to growth; Jumia
support the e-commerce business model. decided to go for an Initial Public Offering

Jumia believed that they have strengths in 2019. According to the founders; there
related to their business model which will was no better place to list the company
drive their growth after the IPO. but the New York Stock Exchange(NYSE).

The IPO Phase and post IPO Jumia

Jumia’s IPO drive promoted it to be the
“Amazon of Africa” despite that the
business model is a disconnect from the
Amazon model but more of e-Bay’s model.
Some analyst and critics didn’t see the
potential for Jumia to succeed in the post-
IPO phase. The shares were listed at $25.46
per share and it quickly rose to over $40 per
share. On that high note the share price
plunged to less than $5 per share within 9
months. Like it or not; Jumia has amazingly
scaled up!