The particularities of the African ecommerce ecosystem

The Paypers interviewed Sami Louali, EVP Financial Services at Jumia Group, to learn more about the particularities of the African ecommerce ecosystem

What is the story of Jumia and how do you differentiate among other online marketplaces?

Jumia is the leading African ecommerce platform, and we basically connect sellers and consumers of products and services across Africa. Jumia is built around a marketplace, a logistic platform, and a payment platform, JumiaPay. We started in 2012, in Nigeria, Egypt, Morocco, and South Africa, and the purpose was to enable businesses to increase their online sales. For that reason, we have created a set of digital tools to allow them to sell nationwide. Before, small shops, restaurants had a very local reach and now, thanks to technology and the tools that we provide, they can sell across the nation and expand their businesses.

Moreover, through our marketplace we sell a wide range of both physical (such as electronics, home and living products, fashion items) and digital (paying for TV subscription, air time, bills) goods and services. We also offer on demand services, with food delivery being one of the key ones that we provide. And I think we also stand out among online marketplaces because we are solely focusing on Africa.

Since we are operating only in this region, we understand the unique characteristics of the African market, of the different countries, and that’s what we have been focusing on over the past seven years. Therefore, we are really adapting to the local context.

How would you characterise the African ecommerce ecosystem and what impact do online marketplaces have on the African economy overall?

One of the main characteristics of the African ecommerce ecosystem is its freshness because it all started seven or eight years ago. It is a nascent ecosystem, so we are creating the market; and when we started doing this, we noticed that there was an inherited infrastructure that was not fully adapted to ecommerce. Therefore, we need to constantly be innovative and create solutions that can fill in this gap. The environment is quite challenging when it comes to payments and trust as well, so we continuously build this trust and aim to accelerate the shift from offline retail to online retail.

In Africa, the penetration of ecommerce as a percentage of the total retail market is approximately 1%, while this number is probably 13 or 14% in the US, and more than 20% in China – so we are still at the very beginning of the journey and the potential is huge. However, when the ecosystem starts to be ready (when we have a payment ecosystem, when we can process payments, when there is a strong supply chain), then it can really take off. And I think we are reaching that point in Africa, with many of the markets really starting to be ready for ecommerce.

Besides actively building this ecosystem, another impact Jumia has on the African economy overall is the fact that we are creating thousands of jobs, both direct and indirect jobs, in all the countries in which we are present. In addition, we are creating new business opportunities for local entrepreneurs and businesses.

When it comes to cross-border ecommerce, what are the main challenges for African merchants trying to sell their products and services across borders?

Right now, the main challenges for cross-border ecommerce within Africa are probably the logistics costs, as well as the taxes, customs duties, and the regulations, which make it difficult for most countries to trade across borders. However, there is the African Continental Free Trade Area that is being implemented. And even if today a Kenyan seller cannot export to Algeria or Morocco because of the costs, I think in the next five or ten years this will be possible – and it will open a huge opportunity for all businesses in Africa. The good thing with respect to our footprint is that Jumia will be greatly positioned to serve these needs because we have thousands of businesses selling in each market. Therefore, Jumia will be the platform that businesses will use to enhance their cross-border ecommerce strategy. And even if this is still the very beginning and a lot of changes with respect to the regulation and the trade market must happen, the signals that the authorities are sending are very positive.

How do you see the future of online marketplaces in Africa?

All the innovative platforms, like Jumia and many other players, will keep on empowering small businesses and consumers. Even if we are still at the very beginning of the journey when it comes to the penetration rate of ecommerce, the potential is huge, and there is no reason why it would all decelerate at some point and stop progressing. Therefore, I think the share of ecommerce will boom and it will most probably go even faster than it did in developed markets such as Europe or the US. This is because of the high rate of mobile phone penetration, with more customers now upgrading to a smartphone – as a result of the progressive decrease of the average price of a smartphone. The cost of data is also reducing very fast: there are more players in the telco industry and the usage of data is rapidly growing, thus driving cost down. Not to mention that the population is very young and prone to use digital technologies – this is another driver that will accelerate the penetration of ecommerce.

Additionally, Africa will keep attracting new entrepreneurs and I think that there will be more and more investors as well. We have many new venture capital firms investing in Africa, and this is a recent, positive trend for the ecommerce ecosystem.

All in all, we are very committed to changing the face of African ecommerce and I think the odds are in our favour.

This interview was first published in our Cross-Border Payments and Commerce Report 2019 – 2020, which provides a comprehensive overview of the major trends driving growth in cross-border payments, cross-border commerce, and marketplaces.

About Sami Louali

About Jumia