logistics payments and losses for an e-commerce pioneer – Quartz Africa

After an initial public offering of $ 1 billion dollars on the New York Stock Exchange, what will happen next? For Jumia, the largest e-commerce operator in Africa, it will be even more work.

As e-commerce in Africa continues to be difficult – as the scale of Jumia's losses and the fortunes of other companies show – the company will double its efforts to strengthen its market power and improve its processes. operational.

Since launching its services in 2012, Jumia has recorded losses of nearly $ 1 billion and a negative cash flow of $ 159.2 million for the 12 months ending December 31, 2018. Looking through the S1 file describing its prospects for investors Jumia is still considered a company facing major fundamental operational challenges. This is because Jumia is not only a company, but also an industrial sector, especially because it is trying to do it on a large scale in 14 very different African markets.

According to Jumia executives, the immediate goal is to spur increased adoption of its market platform to grow the number of its four million active users.

"What we're really focusing on is getting customer adoption in the most effective way," says Sacha Poignonnec, co-CEO of Jumia. "When you examine the reason and the obstacles to the use of e-commerce, you have to face obstacles concerning the knowledge of its use, the quality of the product or the possibility of verifying whether the products are authentic". said Quartz Africa.

The persistent skepticism, to which Poignonnec alludes, "tells you that a lot of commitment and education still needs to be accomplished," says Juliet Anammah, CEO of Jumia Nigeria, the company's largest market. Anammah says Jumia will go beyond traditional marketing methods of spending a lot of money on billboards and commercials to promote adoption. The company is also recruiting influencers in social media and affiliates and building "Jumia Force", a network of 40,000 mandated agents across the continent who are working to win new users and earn commissions based on conversions of customers.

Low confidence

However, while pursuing its adoption, Jumia will likely face persistent concerns as it operates in unreliable markets with shopping habits and social behavior that hinder e-commerce.

For example, Tunde Salami, a government employee in Ibadan, in southwestern Nigeria, says that he's barely making online purchases, even though it's easier to do because he Fear of not getting what I ordered. This fear, he says, is unfounded. on the personal experience, but on the comments on social media. Meanwhile, Dele Ishola, a Lagos-based filmmaker who often buys online, only does it on Amazon rather than Jumia, because of price differences and product quality.

However, trust issues are not limited to potential users. Bilikiss Amusa, a Lagos-based teacher who buys every month on Jumia, cites the lack of the "cash on delivery" option on some items as reason for not buying more. This proves that the cash on delivery model, initially adopted as an alternative to online payment problems in the early hours of the day, has become an essential feature of the online shopping experience on the internet. African markets, customers are used to checking the quality of the product before paying, without relying on the process for returns and refunds.

NYSE

Anyway, Anammah says that Jumia is in no hurry to drop this option, despite the notorious frauds that evoke fraud and security, including the murder of a Jumia delivery agent in 2017. "Both that customers are not yet comfortable to pay online, we will always offer money on delivery. It's a marketing tool, "she says. Quartz Africa. However, the long-term bet is that customers ultimately accept online payments and there is evidence of a growing change: Jumia Pay, the company's in-house solution, accounted for 54% of transactions on the platform. form in the second half of 2018, said Anammah. .

To address his quality badurance issues and improve trust, Anammah explains that Jumia "is learning from other platforms and is adapting even better for Africa." The punitive measures taken by the company against sellers who deliver poor or erroneous items on its market currently include fines and write-offs. It also maintains a ranking map based on the ratings of buyers, while an algorithm ensures the appearance more often of the top-rated sellers in its market.

Based on logistics

As Jumia has discovered in its infancy, the logistics of fast delivery in cities with limited addressing systems is tricky. But after years of investing in technology and manpower, Anammah says the delivery problem has been "solved from the point of view of processes and systems." While managing a market with external sellers, Jumia badumes responsibility for all deliveries in partnership with third-party messengers and agents.

"The process and the systems to do it [deliveries] effectively, in accordance with the requirements of e-commerce, this is where we have invested, "says Anammah. This process includes ongoing training for delivery partners, the development of technologies to track routes, delivered items and delivery payments, and the use of data to determine the best routes to improve l & # 39; efficiency.

Part of the effort paid off, as Amusa said faster shipments to Lagos were the biggest improvement seen with Jumia in the past year.

However, in fragmented markets and in the wake of the company's growth, late and missed deliveries are unlikely to be fully eliminated. This reality is likely to aggravate existing trust issues, given the already low margin of error for the company. And it's a problem that Jumia could continue to face as it extends beyond primary markets like Lagos: indeed, half of the deliveries made in Nigeria last year have been carried out in secondary cities and rural areas, says Anammah.

As the novelty of the IPO dissipates, Jumia will have to face even more scrutiny as a publicly traded company as it seeks to address its long history of losses. "We are now really in a phase where we need to focus on operations and do what we know," says Anammah. Quartz Africa. "He [the IPO] it's only a beginning.

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