Up Like a Rocket, Down Like a Stick.
Jumia, Africa’s first Tech Unicorn, is an e-commerce platform connecting sellers and buyers of various products and services across the continent.
Despite its quick and stunning rise to fame Jumia’s stock suffered a spectacular decline reflecting a lackluster financial performance.
By the end of 2019, not long after its IPO, Jumia had exited three of 14 markets, suspending operations in Tanzania, Cameroon, and Rwanda. By the end of 2022 after continuous poor performance, Jumia announced further service scale backs in Algeria, Ghana, Algeria and Tunisia.
Food Delivery closures in Egypt, Ghana, and Senegal were also announced and almost a complete shutdown of its logistics services throughout Africa followed. Massive layoffs were also announced.
We outline in our latest market research report five lessons that can be learnt from Alibaba’s early years of development and growth in China – lessons we believe may be useful for the “Amazon of Africa” and to all businesses out there – business lessons that can be, and should be, learnt from one Chinese bootstrapper – Alibaba.
In this post we will focus on the first two lessons that we learnt.
LESSON I: DEFINING YOUR MARKET
When Alibaba was first launched in 1998 its focus and target market was China. Over 20 years later, although Alibaba’s platform is now home to suppliers from across the globe, its target market and its focus remains very much the same — China.
Jumia, launched in Nigeria in 2012, expanded to five additional countries (Egypt, Morocco, Ivory Coast, Kenya, and South Africa) within its first year of operations.
Positioning itself as the leading African e-commerce platform — by 2014, the company launched additional offices in Uganda, Tanzania, Ghana, Cameroon, Algeria, and Tunisia.
By 2018, a mere 6 years after launch, Jumia was present in 14 African countries, and this number was expected to grow.
Jumia, a company that was just getting its footing in the Nigerian market was already seeing itself destined to take over the entire African continent. And investors across the world bought into it hook, line, and sinker.
By the end of 2019, Jumia’s teams were selling across a variety of markets, cultures, languages, and distinct economical and regulatory environments.
Its logistic networks were spanned across a continent roughly three times the size of China and its payment system had to function across 14 separate currencies and integrated with dozens of different banks and payment networks.
This lack of focus, or overly ambitious expansion, resulted in a rapid closure, a few years later, of many of its branches due to the failure to gain significant market traction.
Jumia found out the hard way that operating in the Arab-speaking Egypt and the Swahili-speaking Tanzania while coordinating sales activities and logistics across a vast continent is by no means an easy task.
While it is easy, in retrospect, to point out the unrealistic business ambitions of Jumia and its leadership, one must understand that there many factors in Jumia’s favor.
For one, Jumia was first to market.
LESSON II: BEING FIRST TO MARKET
Although most of Alibaba’s competitors claimed its main competitive edge was it being first to market, this was no further than the truth. In fact, Alibaba was not first to market at all.
Online marketplaces such as eBay, Made-in-China, and HC360 were already operating in China before Alibaba launched its marketplaces. Numerous payment providers such as UMPAY, Smartpay, Yeepay, PayEase, IPS, PayPal, and many others were already operating in China before Alibaba’s payment arm, Alipay, was launched.
The key difference between the new entrant and most other market incumbents was that although all were struggling in a market that was essentially developing 50 years behind most other developed markets, only Alibaba was actively and successfully trying and implementing low-tech innovation and stop-gap solutions in a market that resembled then what the African market is today.
Many of Alibaba’s initial competitors have ceased operations long ago, some, such as Yeepay, have managed to carve out a niche for themselves in the Chinese market, but none of these initial incumbents managed to rival this e-commerce behemoth (the only one that did so was Tencent, but that’s a whole different story).
Download a complimentary issue of our latest Maverick Analysis Report which outlines five key lessons that can be learnt from Alibaba’s early years of development and growth in China – lessons we believe may be useful for the “Amazon of Africa” and to all businesses out there – business lessons that can be, and should be, learnt from one Chinese bootstrapper – Alibaba.