Sam Chapatte, CEO of Jumia Kenya, has outlined plans for Jumia Advertising in Kenya, seeking to leverage the company’s reach among higher value, internet enabled Kenyan consumers. The company claims to have access to around 2-3m unique visitors each month.
According to Chapatte, initial tests have show promising click thru and conversion rates. Jumia is pitching the proposition to advertising agencies and brand owners in Kenya and looking to recruit a business development team.
Post IPO Jumia has spent much of the past months under severe investor pressure, amid concerns its e-retail operations were subject to widespread fraud, and concerns its costs were too high and the window for the business to become profitable was too distant. Since the IPO, after an initial bounce, its share price has fallen dramatically. To mollify investors and contain costs, Jumia has exited Cameroon, Rwanda and Tanzania. It has trimmed its headcount in Kenya. We think it will also exit Senegal and Uganda.
At the time of the IPO, Trendtype argued that the real value of Jumia’s business wasn’t the online retail offer, which is expensive to operate and fraught with operational challenges. Rather, the value is the customers, who can be leveraged for a whole range of activities that don’t involve Jumia buying physical stock, holding its own stock, or delivering its own stock. In that sense, advertising is a great idea.
But: Jumia is too diversified. It operates in too many countries. It is trying to do a lot of things at once. Does Jumia Kenya have the in-house capabilities to offer a coherent advertising business? It’s too early to say, but it does need to make more of a transition to being a customer-centric data business. It has worked hard for those customers, and its relationship with them is a USP.
A risk for Jumia is that in maintaining its thin presence across multiple markets and working overtime to sweat its customer base, it misses how customers in immature markets such as Kenya want to buy stuff. This is what Jumia also needs to fix: building trust-based relationships with consumers and finding a way to have a more physical presence for those customers. Lurking in the wings, Copia has secured $46m of funding to drive its expansion in Kenya.
Copia’s model uses a network of 5,000 agents (up from 3,700 in April 2019), who are mostly local shopkeepers and business owners. These agents earn a commission by providing the point of “aggregation of orders and delivery distribution” for customers who have purchased goods via Copia’s online platform or app.
Copia’s average order values are around $10, compared to around $66 for Jumia. Copia is much better at onboarding the long tail of mass market consumers on lower incomes. Copia’s model is also better suited to repeat business too.
In Nigeria and Kenya, Jumia’s two prime markets, it also needs to address this aspect of its business – recruitment and repeat business.
Jumia can accomodate a business model in which it builds more of a physical presence and has a network of pickup/drop off points which help eliminate costs and complexity of final mile delivery.
The challenge is consumer trust. Jumia’s investors are demanding quick wins, assets to be sweated, costs contained. The strategic picture for Jumia is that its value sits in the size of its customer base AND the quality of its customer relationships. We can’t see much in the new advertising business that delivers more trust although it could deliver more customer data and a route to customer intimacy. It won’t deliver more routes to customer recruitment, which Jumia will need to challenge Copia effectively.
