Can the rural markets unlock profits for African e-commerce?

“Treasure hunts make a lot better tales when there’s [actually] treasure on the finish.” – Eric Berlin.

E-commerce is likely one of the most generally adopted tech sectors in Africa. Since Jumia emerged as Africa’s first unicorn in 2016, many extra companies have emerged to cater to the market. Nonetheless, one problem has lingered: income are onerous to return by. Many e-commerce corporations have struggled to be worthwhile, sustainable, scalable, or all of sudden. Some have even shut down or exited the market altogether.

Now, Jumia, the poster baby for African e-commerce, is taking its treasure hunt to rural markets in Nigeria. This unorthodox technique means convincing rural dwellers that they will purchase something with their cell phones, and Jumia will convey the product to them. In accordance with Massimiliano Spalazzi, CEO of Jumia Nigeria, “That is in step with the grasp plan to be worthwhile.” Since 2022, Jumia’s Nigeria arm has been stretching its presence in rural and semi-rural markets.

Jumia has reached out to cities resembling Modaleke in Osun, Nkpor in Anambra, Owo in Ondo, Offa in Kwara, and Keffi in Nassarawa, the place e-commerce was beforehand untapped. The corporate is partnering with third events in these cities to arrange fulfilment centres that function pick-up stations for the shoppers. In accordance with its Rural Space Report, Jumia has established over 250 pick-up stations in Nigeria, even within the remotest and unlikely elements.

“The enterprise of e-commerce is extraordinarily related to those that don’t have entry to retail,” Abdesslam Benzitouni, Jumia’s International Head of Communications & Public Relations, informed Ventures Africa by way of a name. Most Nigerians (52%) reside in city areas. However specializing in them alone leaves 48% of the inhabitants underserved. “Retail penetration is low in most African international locations. You will have one store to about 20,000 individuals. In the meantime, the ratio is 1:2000 and even 1:1000 in some elements of Europe and the US,” Benzitouni stated. However how does Jumia plan to make this occur?

Extra gross sales, much less spending

Jumia has gained a status for its heavy advertising presence through the years. From billboards to social media and even in-app advertisements, it has run an omnipresent marketing campaign to drive consciousness. However billboard advertisements should not very environment friendly in changing its authentic goal market: Nigeria’s center class. Jumia has realized this reality and has determined to spend much less on it. In This autumn 2022, it minimize down its promoting finances by 40%. As a substitute, it’s going to give extra consideration to JForce —its 43,000-strong unbiased gross sales consultants.

JForce brokers are native entrepreneurs who educate and onboard customers on Jumia, together with these with restricted publicity to training or know-how. They’ve a stronger deal with in-person activations and door-to-door campaigns, making them extra environment friendly. In return, Jumia pays them commissions for each order they facilitate. These commissions vary from 1.5% to eight% and are based mostly on the places from which the orders are accomplished.

Using extra pick-up stations can also be a part of Jumia’s technique to drive extra gross sales. “It simply helps when individuals can see some bodily presence,” Benzitouni stated. “As a substitute of increasing to new international locations and creating new providers, we’ll deepen our presence in rural communities.”

Rural markets should not full strangers to e-commerce

Jumia’s try at breaking into Nigerian rural markets is likely to be the nation’s first. However Jumia shouldn’t be working with out templates to comply with. It had accomplished it earlier than in Cote D’Ivoire, the place, in response to Benzitouni, Jumia ran a “profitable pilot.”

“Lots of people in rural communities wish to purchase many issues from the cities, and vice versa,” he stated. “We wish to be the channel or that to occur.”

African rural markets should not unfamiliar with e-commerce. The mannequin it’s now adopting is similar to what Copia International is doing in Kenya and Uganda. Copia recruits small enterprise homeowners and trains them to be brokers and Copia advocates of their areas. These ‘recruits’ use native shops as pick-up places for purchasers. This fashion, Copia earns the market’s belief and may ship items profitably, though deliveries are free.

Nonetheless, breaking into rural markets, or any market in any respect in Nigeria, isn’t any straightforward feat. In 2021, solely 7% of all purchases in Nigeria have been made on-line. Jumia is aware of this. “Once we tried out rural markets in Cot D’Ivoire, we needed to think about the truth that rural residents don’t have as a lot buying energy as these within the cities. Most of their spending is on fundamental consumption, however even that’s one thing to work with,” Benzitouni stated. So the agency is relying on its skill to supply low-cost supply providers to maintain rural customers.

If Jumia cracks this market, it might arguably be the largest upturn within the historical past of Nigerian e-commerce. Extra companies will diffuse their deal with Nigeria’s shrinking center class to rural and sub-rural communities. However will these methods be sufficient to win?