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Not commonly prevalent in the news, Rocket Internet’s venture Jumia (formerly known as Africa Internet Group) has managed to stay under the radar while slowly dominating one of the largest developing internet markets in the world.

Only after speaking with a team of Jumia Vendor Success Senior Managers was I able to realize the massive potential of the continent’s top ecommerce player, and how it is not so different from Southeast Asia.

“Like every other region, Africa has its own challenges but the internet users [in Africa] are more than that of the US, UK and actually, both of them combined,” said Gaurav Jain, Head of Vendor Success, Jumia Group. “The number is behind only India and China.”

ecommerceIQ

Source: Statista, Africa has over 360 million internet users

During a knowledge sharing session held at aCommerce fulfillment center in Bangkok, ecommerceIQ spoke with the Jumia team to understand the unique properties of their ecommerce ecosystem, and uncover why the company was more similar to Go-Jek than the commonly perceived Lazada of Africa.

Africa’s ecommerce behemoth: The sum of all parts

To understand the extent and ambition of Jumia’s business goals in Africa, it’s important to know that Africa is a continent broken up into 54 countries and according to the company, consists of 1.3 billion consumers and 17 million SMEs/merchants.

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Jumia, started in 2012, was initially an e-tailer selling only electronics and fashion items when it moved into a marketplace model in 2015. It has since become the largest internet player in Africa and first unicorn leading in six regions: Egypt, Ivory Coast, Nigeria, Kenya, South Africa, and Morocco.

The company not only operates in 23 countries, but has effectively squeezed out the ecommerce players that came before them, namely Kilimall and Konga.

It’s safe to say that Jumia Group is no longer a simple, horizontal marketplace and is responsible for pumping out ventures Rocket Internet is famous for copying and pasting in developing markets: Jumia Food (foodpanda), Jumia House (Lamudi), Jumia Car (Carmudi), Jumia Jobs, Jumia Deals, etc.

But launching online services in a region where ecommerce is only 0.5% of total retail sales is not cheap.

The company posted a Sh14.9 billion ($148 million) loss before tax and other costs in December 2017 compared to Sh11.3 billion the year before.

While it doesn’t paint the entire picture, severe losses was one of multiple factors that spurred the company to create the Jumia One app combining its top services in one place. The app launched in Nigeria earlier in March and allows customers to shop online, order food, buy airline tickets and pay cable and electricity bills.

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“People like to shop on the mobile app. They prefer to have ecommerce handy so they can place an order on the go. The Jumia One app is growing, 42% to 56% in terms of mobile share.”

Other factors for launching Jumia One included:

  • It makes more sense to invest heavily into a single platform versus managing and marketing multiple brands
  • Consumers don’t have enough storage on their mobile phones to download multiple apps as mentioned by a user
  • Mobile penetration in Africa is expected to reach 50 percent in leading countries over the next five years – meaning over 300 million smartphones will be added to the market
  • The app is another revenue stream as Jumia marketplace merchants can buy advertising space for their products
  • It also allows the company to cement themselves as a strong payments player, vital for mass adoption as demonstrated by Alibaba’s Alipay

The company will dabble in micro-financing to merchants given its rich data. A win-win to give merchants more capital to invest in their online businesses and drive more traffic back to its platform.

“We know the patterns, the revenue, the number of orders. We lend out money so they can manage their shops,” comments Gaurav. “It’s a growth opportunity to accelerate their growth as fast as possible.”

“They can use mobile money, not only cash.”

The all-in-one app draws parallel to one of Southeast Asia’s unicorns. Jumia is becoming the superapp in Africa – a Go-Jek for 1.3 billion customers.

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What are then the challenges holding back Africa’s enormous potential? The typical it turns out.

Challenges in Africa mirror Southeast Asia’s own struggles

Africa’s obstacles preventing exponential growth of ecommerce are the same that plague Southeast Asia’s internet economy.

  1. People still want to visit offline stores for the look and feel to buy products
  2. Lack of trust by both customer and merchants who don’t believe in digital transactions
  3. Fragmented markets, different languages, customs
  4. Cash based society
  5. Underdeveloped infrastructure
  6. Shortage of digital talent and training/education

“They need to know that ecommerce is not a Ponzi scheme. Trust is a large issue. We show them how their products will sell, we show them the importance of visibility and assortment until they have confidence in us and they grow their business so it’s mutually beneficial,” says Gaurav.

“Sellers with offline shops aren’t used to waiting for payment. Cash flow is a problem with our vendors,” says Damola Ajayi, Head of Vendor Success, Jumia (Nigeria), when asked about his challenges. “We guarantee a 7 day payment cycle from day of shipment and even daily for our gold vendors.”

The company paved the way for other ecommerce players to come in, but currently there is no standout competitor apart from the expansion efforts of Chinese companies and the country’s predisposition for offline retail.

Creating the next 500 millionaires in Africa

What was most impressive about Jumia wasn’t its ‘superapp’ or the sheer size of the African market, it was the dedication and enthusiasm exuberated by each Jumia employee I met.

ecommerceIQ, Jumia

They understood the massive challenges ahead and were candid about how to tackle them.

Lack of vendor trust, digital skills or education?

  • Launch training 2 to 3 times a month to advise on marketing, pricing, and inventory management
  • Maintain a ‘fair’ playing field by enabling local businesses to offer COD (cash on delivery), whereas cross-border merchants don’t have this option
  • Spend heavily on marketing for its high performing vendors
  • Share insightful data with vendors on a weekly basis about top selling products across multiple categories, propose assortment and price forecasts

Lack of talent?

  • “The company brought in expats who managed senior roles and groomed locals to move up,” says Damola. “This was necessary for our early growth.”

Lack of cashless adoption?

  • Add convenience through JumiaPay allowing payment by debit card or bank accounts
  • Offering cash on delivery

ecommerceIQ

“We are able to cover the entire vendor journey,” comments Gaurav. “We offer services at every point the customer needs.”

So how are these band-aid solutions working out? At the knowledge sharing session, top performing Jumia vendors shared their experiences with me:

“If you dedicate yourself to Jumia in top product categories, mobile phones, there is no need for you to go offline. You can grow 70% [in sales] if you know what you’re doing.”

“Target the demands of the market and Jumia helps you focus. They will give you foresight.”

“We started with Jumia since 2013, we were selling a small number of products. During Black Friday, we sold 1,000 phones but for “Mobile Week” in March, we sold 15,000 Xiaomi phones, and broke the record for the Middle East.”

The company, while struggling with the perils of other companies prioritizing high growth over all else, is taking baby steps to expose its merchants to the world’s possibilities.

“We [Jumia] want to enable African customers to enjoy best products from the world at their doorstep,” shares Gaurav.

What can I say? The more the merrier.

 

Editorial comment: a quote was adjusted April 22 8:51am

Here’s what you should know.

1. Tencent’s investment in Go-Jek is ‘around $100m to $150m’

Tencent has invested around $100 million to US$150 million in Indonesian ride-hailing startup Go-Jek. Neither Tencent nor Go-Jek have confirmed the sources’ claims.

Tencent, with a current market capitalization of $341 billion, has previously bought a stake in Singapore-based gaming startup Sea Ltd, formerly known as Garena, which was valued at $3.75 billion after a March 2016 funding round.

Go-Jek, which started as a hailing app for motorbike taxis, also operates a food delivery business that a source said yields a much higher margin than ride-hailing. Its mobile payment business, Go-Pay, is growing rapidly as it is complementary with all the other Go-Jek offerings.

The Chinese giant’s investment in Southeast Asia’s biggest ride hailing startup shows its growth ambitions in the region.

Read the rest of the story here.

 

2. Indonesian edutech startup Ruangguru raises Series B round led by UOB Venture Management

Indonesian edutech startup Ruangguru today announced that it has raised an undisclosed Series B round led by UOB Venture Management.

The South Jakarta-based startup plans to use the new funding to “strengthen its team in the areas of educational content, technology, marketing and operations, and deepen its product adoption in Indonesia.”

The platform include features such as question banks, classroom management and exam simulations, and the startup claimed that it has helped the government conduct data-driven policy-making through its dashboard and insights.

The startup also offers other services such as video subscription service and tutoring marketplace. It also partners with LINE to launch LINE Academy, which allows students to take simulated online national examinations on the chat platform.

Read the rest of the story here.

 

3. Singapore’s online gaming studio, Mighty Bear lands pre-seed funding round from Rocket Internet

Singapore gaming studio Mighty Bear has raised a US$775,000 pre-seed funding round led by Global Founders Capital, the venture capital arm of Rocket Internet.

The studio says it’s out to build the next generation of massively multiplayer online mobile games. The first title, Project Loot, is still under development and due to be released in the fourth quarter of 2017.

Global Founders Capital is associated with German venture builder Rocket Internet. All three Samwer brothers – the founders of Rocket Internet – are partners in GFC.

Read the rest of the story here.

Here’s what you should know today.

1. Indonesia’s payments startup Kioson raises funding from gadget distributor

Kioson, a direct competitor of Grab owned Kudo has raised a round of investment from MKNT, an Indonesian stock exchange listed firm that distributes gadgets, prepaid phone vouchers and SIM cards.

MKNT now owns 4.94% of Kiosan.

The online-to-offline model established by startups like Kioson and Kudo in Indonesia is seeing some traction. They both work in a similar way. Kioson equip local store owners with an app through which they can order and resell phone credit or physical goods from online stores. The store owners become ‘agents’ that bridge the online-offline gap, and make money on commission.

Kioson’s app offers a wide range of services. It integrates with online shopping portals like Tokopedia, Elevenia, and Berrybenka, lets customers settle bills for electricity and water, order TV subscriptions, apply for loans, or make money transfers.

Through its partnership with MKNT, Kioson will boost its inventory of telecommunication products and services.

Read the rest of the story here.

 

2.  Delivery Hero seeks $4.9 billion valuation as IPO price set

The company and current owners will sell as much as 996 million euros in stock for 22 euros to 25.50 euros apiece, according to a statement. Rocket Internet owns about 35% of the company.

Shares of Rocket Internet have been rebounding in recent months on expectations of a successful IPO of Delivery Hero, which seeks more funds to compete in the cut-throat restaurant-meal delivery market.

Delivery Hero expects trading to begin on the Frankfurt stock exchange on June 30. The offering is for about 39 million shares, including an over-allotment, and the company said it will have about 172 million shares outstanding after the IPO.

Delivery Hero operates a variety of brands including Lieferheld, Foodora and Foodpanda, through which it either brokers deliveries from restaurants or brings the food to customers’ homes itself, by bicycle.

The food delivery sector is notorious for stiff competition, with rivals spending big on marketing to dominate a country because usually, the winner takes all.

Read the rest of the story here.

 

3. Recommended Reading: The direct to consumer landscape

So what’s the direct to consumer model. Well it’s an innovation in supply chain which typically involves skipping out the middle man, so stock goes from factory to consumer. Traditional retailers being skipped out, which is just music to their ears. Not. This theoretically results in better prices for consumers and higher margins for startups.

The world is changing and the big boys are still waiting for the bus while everyone’s ordering a diverse and inclusive Uber. In short, they need to stay relevant and buying kids is a safer strategy.

Read the rest of the story here.

 

 

Here’s what you should know today.

1. Malaysian VC association joins forces with regional counterparts

The Malaysian Venture Capital & Private Equity Association (MVCA) is now part of the ASEAN Venture Council (AVC).  With four of ASEAN’s key VC associations now on board, the AVC could have a positive impact on growth prospects for startups across the bloc.

By linking the four national bodies together, the AVC is intended to facilitate greater knowledge sharing and collaboration among VC firms and early-stage businesses throughout the region.

This could lead to a boost in tech investment throughout Southeast Asia

While VC funding more than doubled quarter-on-quarter to US$191.6 million in Q1 2017, it fell far short of the US$330.6 million invested across 65 deals a year previously.

Read the rest of the story here.

 

2. Rocket Internet sells 51% of fashion site Namshi to Dubai’s Emaar Malls for $151 million

Today Rocket Internet announced that it has sold 51%  of Namshi, its Middle Eastern Amazon clone, to Emaar for $151 million.

Emaar lost out on buying online retailer Souq.com when Amazon got ahead of the game.

Emaar Malls has long been looking to ramp up its presence on the web and said that it will use the new asset to expand its logistics and expand more brands to selling online. Emaar earlier this month also acquired Dubai-based online marketplace JadoPado, and it’s also involved in a joint venture with Yoox Net-A-Porter to expand the latter company’s business into the region.

Read the rest of the story here.

 

3. Pinterest launches a ‘Shazam for food’ feature

Pinterest has announced a new recipe-finding feature that makes use of computer vision to tell you about a dish when you point your smartphone camera at it. The company is billing the feature as a way to perform real-time “dish recognition.” The new upgrade is eerily similar to the app from HBO comedy, Silicon Valley.

This is all part of a broader artificial intelligence push in the tech industry to apply machine learning techniques to everyday life.

By training neural networks on huge mounds of data and translating that into a real-time algorithm, tech giants like Google, Facebook, and Microsoft are now developing software products that can digest and understand the world, from text to photos to even videos.

Read the rest of the story here.

 

 

 

 

Here’s what you should know today.

1. Hong Kong-based Lynk raises $4m Series A round

Hong Kong-based Lynk is an online service that connects enterprise users to experts in a variety of fields.

Lynk operates on a software-as-a-service model, where business customers pay the company for access to its pool of mentors.

Lynk claims to have over 35,000 experts across 70 countries and a “growing number of industries.” They include C-level executives, scientists, engineers, independent consultants, and specialist advisers.

Lynk will use the funding to expand its market coverage and continue developing its tech. It will also hire more people across its various territories – at the moment the company has offices in Hong Kong, Singapore, and Mumbai. The startup is also looking to enter the Chinese market.

Read the rest of the story here.

 

2. Jack Ma predicts decade of pain ahead

“In the next 30 years, the world’s pain will be much greater than its happiness,” Ma told a Chinese entrepreneurial conference over the weekend. “Social conflicts over the next 30 years will hugely impact every industry.”

Ma has lately become a mix of futurist, business seer, and conference-circuit speaker. Last year, in a letter to Alibaba shareholders, Ma imagined the difficult future for old businesses.

“Throughout history, technological disruptions have followed similar trajectories: 20 years of technological disruption followed by 30 years of further rapid change as new technologies are applied throughout society

The somersault changes the Internet brings will create millions of jobs, as Alibaba has, Ma told the entrepreneur conference this weekend, but only if changes are made to the world’s education systems.

Read the rest of the story here.

 

3. Rocket Internet narrows losses, boosts sales at key startups

Rocket Internet increased sales and shrank losses at some of its biggest startups, bringing the company closer to a target of having three of its main investments break even by the end of this year.

Adjusted losses before interest, tax, depreciation and amortization narrowed at businesses including HelloFresh, Global Fashion Group and Dafiti, Rocket said Tuesday.

Overall, Rocket reported a loss of 741.5 million euros for 2016, weighed down by impairment charges and deconsolidation of subsidiaries.

Investors have long hoped for initial public offerings by Rocket’s startups so they can recoup their investment. One candidate is Delivery Hero, a food-delivery company about 37% owned by Rocket. Delivery Hero said yesterday it is considering an IPO after reporting a 79% increase in full-year.

Rocket expects to start five to eight companies this year after launching and incubating 8 last year in industries including logistics, said Oliver Samwer, Rocket Internet founder.

Read the rest of the story here.

 

Here’s what you need to know.

1. Rocket-backed Global Fashion Group still not profitable

Global Fashion Group, the umbrella group that holds Rocket Internet-backed online fashion businesses worldwide, saw its revenue hit the US$1 billion mark in 2016, but it was still bleeding cash.

GFG recorded a net revenue of $1.09 billion last year, a 26% jump from $862 million in 2015.

Profitability remained elusive for the group as it posted $136 million in operating losses. However, the losses were much less than what was posted in 2015.

The pressure is on for the fashion group to further cut its losses or break even, otherwise it’s likely to continue to hurt Rocket.Rocket’s 2016 full-year numbers are expected to come out later this month, but its nine-month report pegged its losses for the period at nearly US$700 million due to the slump in GFG’s value.

Read the rest of the story here.

 

2. Vietnam’s Appota raises Series C, valuation closing in on $50m

Appota Group, a Vietnamese mobile-based platform company, announced that it has closed an undisclosed Series C round from Korea Investment Partners and Mirae Asset Venture Investment.

Appota is best known as a mobile game publisher and ranks in the top-three for Vietnam.

However, the company is also pursuing adtech and fintech. It has a mobile advertising platform called Adsota and mobile payments platform named Appota Pay. The company plans to accelerate both with the Series C.

Read the rest of the story here.

 

3. AdAsia, an ambitious one-year-old ad tech startup, raises $12M for expansion 

AdAsia, a one-year-old online advertising startup based in Singapore, has closed a $12 million Series A round from Japanese investor JAFCO.

The company grossed $12 million in sales between April and December 2016, growing at 20-30 percent each month. On the tech side, the Series A will be used to develop AdAsia’s machine learning and artificial intelligence capabilities within current and future ad products by establishing a development center in Vietnam.

Read the rest of the story here.

 

4. Starbucks is testing out a mobile order only store

The coffee giant is looking for ways to make mobile ordering work better, and in pursuit of that goal it’s going to trial a location that exclusively serves mobile order customers, within its own Seattle HQ.

All mobile orders from building employees, which include 5,000 people, will be routed to the new location, and it’ll feature a different design, with a prominent pick-up window that also offers a view to baristas preparing the orders.

Read the rest of the story here.