Jumia Is Chasing Unusual Growth Areas In Africa’s Rural Markets
Africa-focused e-tailer Jumia is looking to boost its effort at cutting losses and tapping new growth frontiers by opening up to rural markets, a move that might be considered unusual territory for Jumia which before now has largely served Africa’s major cities.
Jumia has agreed to sell the products of French retailer Leroy Merlin in West Africa as part of a plan to expand its reach and half its losses by the end of 2023.
According to CEO Francis Dufay, Jumia will target high-growth rural regions and smaller cities in Ivory Coast and Senegal to market the French company’s equipment and DIY products.
Dufay emphasised that more than half of Africa’s 1.4 billion people reside outside of major cities or in rural regions where agriculture is the main economic driver. This indicates that in locations where shops are not as effective, there is a high demand for the kinds of goods Leroy Merlin sells, Bloomberg reports.
“Jumia is pushing into these areas, we have the right suppliers and assortment of products, and a light logistics model to address those smaller pool of consumers,” he said. “This would be much harder to do for bigger supermarkets and shops for instance.”
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Due to the less competition, the company may expand into smaller cities at a fraction of the capital expense required for larger ones, according to Dufay. The partnership enables Leroy Merlin to serve African clients without having to open physical stores, he added.
Jumia revealed that the pilot phase saw about 40 percent of the Leroy Merlin products offered on its platform in Francophone nations get purchased by buyers outside of Abidjan, the capital of the Ivory Coast.
“While we are facing big headwinds, we are building these new markets in smaller cities, and plan to drive margins with that,” Dufay said while adding that there are a few other countries it hopes to also take this product to, including Kenya where it’s likely to face competition from Copia Global, a company that has made significant progress in unlocking e-commerce for rural and peri-urban dwellers.
French businessmen Sacha Poignonnec and Jeremy Hodara ran Jumia for a decade before moving on last year, and Dufay was recently confirmed as CEO having initially taken the reins in an acting capacity at Jumia, a company often referred to as the “Amazon of Africa.”
In a continent with a young, increasingly tech-savvy population that has taken to smartphones and tech solutions that plug gaps in infrastructure and services, Jumia has made an effort to be the industry leader in the e-commerce space — largely building out its own infrastructure to make it work.
This has come at a steep cost that has made it hard for the business to turn profitable. The company has been struck by losses and pressure on its share price since it went public in New York in 2019. Dufay has been keen on crashing costs, which has included a headcount reduction that terminated 900 employees, as revealed in Jumia’s most recent results.
