Trying to Build the Next Amazon—in Nigeria

Trying to Build the Next Amazon—in Nigeria

By Chris Kay, Chris Spillane, and Janice Kew November 21, 2013

When Gbemiga Omotoso bought a Samsung tablet last year, he handed over his cash to a man in a van. The transaction wasn’t illegal, though. It’s part of online retailer Jumia’s attempt to adapt its operation to the unique challenges of selling in Nigeria. With many of the country’s 160 million residents suspicious of paying online—yes, they get those fraudulent e-mails, too—the Lagos-based retailer wins over skeptical shoppers by accepting payment on delivery and offering free returns. “It’s very important that people know it’s not a scam,” says 29-year-old co-founder Tunde Kehinde. “Even though they want to buy, trust is still a very, very big issue.”Jumia and local rival Konga.com have taken a page from the playbook of Amazon.com (AMZN): delivering electronics, clothes, and even refrigerators to the front doors of Nigerians. Shopping locally has usually meant higher prices, less selection, and often sitting in traffic for hours to get to stores, which rely on generators to cope with almost daily power outages.

“There’s a lot of appetite for consumption, but supply is terrible,” says Jeremy Hodara, founder and managing director of Africa Internet Holdings, an investor in online businesses across the continent and a shareholder in Jumia. “It’s expensive and cumbersome to buy abroad, but if there’s no choice, that is what people do.”

In the lead-up to Christmas, Jumia aims to boost revenue by 40 percent each month through December. Items featured in the site’s holiday section range from berry wreaths to MAC lipstick to kids’ bikes for 11,995 naira ($75). On a recent November day at Jumia’s warehouse—a stadium-size building down a muddy, potholed road in a Lagos commercial district—staffers pulled items to be stuffed into delivery vans or piled onto motorbikes.

Jumia has received $75 million in funding since its inception, including seed capital from Berlin-based Rocket Internet. The company has 600 employees and also sells in Kenya, Morocco, Ivory Coast, Egypt, and South Africa. Although not yet profitable, Jumia is bringing in “a couple of million” dollars a month in revenue and increasing sales at a percentage in the “high teens,” according to Kehinde and Ghanaian co-founder Raphael Afaedor, both Harvard Business School graduates.

To combat fears of online fraud and to educate Nigerians about shopping online securely, the company has a direct sales team of about 200 who travel around major cities such as Lagos and Port Harcourt carrying tablet computers. They wear outfits bearing Jumia’s logo and hold impromptu shopping sessions in businesses, churches, and homes, showing consumers how to order and answering questions. “There are people who are open to online shopping—people who have traveled or have lived abroad,” Afaedor says. With others who are skeptical, “it takes a bit more effort to get people to change their behavior.”

Eager to win more sales from Nigeria’s oil-fueled economy, which is expected to grow more than 6 percent this year, Jumia is building its own fleet of about 200 vehicles. Almost two-thirds are motorbikes that are easier to guide through the country’s traffic jams. To keep robberies to a minimum, the last deliveries are at 7 p.m.

At some point, cash on delivery—especially for big-ticket items like fridges—may not be needed. The number of payments in the country made by mobile phone more than doubled, to 2.4 million, in the first half of 2012, while Internet payments rose 9.3 percent. For now, it’s just another quirk of doing business in an emerging market. “Here you are collecting cash and reconciling payments almost like a bank desk, here you are building a logistics company,” says Afaedor. His co-founder Kehinde is quick to ask, “How many times can you say in your life you get to build an Amazon?”

The bottom line: With a cash-on-delivery option and motorcycle deliverymen, online retailer Jumia hopes to be the Amazon.com of Africa.