Leading e-commerce platform in Africa Jumia has signed a partnership deal with French retailer Leroy Merlin as it focuses to sell its products in rural areas in a few West African countries to expand its reach.
The partnership deal between the two firms will see Leroy Merlin enter Francophone countries such as Cote d’Ivoire and Senegal via Jumia’s e-commerce portal.
According to Jumia CEO Francis Dufay, more than half of Africa’s 1.4 billion strong population lives outside big cities or in rural areas where the economies are driven by agriculture. This means there is strong demand for the kinds of products Leroy Merlin offers in areas that are not well served by retailers.
In his words,
“Jumia is pushing into these areas, we have the right suppliers and assortment of products, and a light logistics model to address those smaller pools of consumers. This would be much harder to do for bigger supermarkets and shops for instance.
“While we are facing big headwinds, we are building these new markets in smaller cities, and plan to drive margins with that. Jumai is considering taking the model to Kenya, Ghana, and Nigeria next.”
Investors King understands that Jumia is hoping to cut its losses by 50 percent by the end of the year. The e-commerce giant is reported to have hedged its bets on rural markets across the continent, of which the deal with French retailer Leroy Merlin plays a big part.
The e-commerce giant platform was built to help consumers access millions of goods and services conveniently and at the best prices while opening up a new way for sellers to reach consumers and grow their businesses.
Listed on the New York Stock Exchange (NYSE) in 2019, is currently operating in 11 African countries. The Jumia platform consists of a marketplace, which connects sellers with consumers, a logistics service, which enables the shipment and delivery of packages from sellers to consumers, and a payment service, JumiaPay, which offers a safe and easy solution to facilitate online payment transactions.
As of 2023, Jumia’s home market, Nigeria, accounted for the majority of the visits, around 31 percent of the total, followed by Morocco and Egypt with shares of 17 percent and 14 percent respectively.
Alibaba Eyes Gulf Expansion, Seeks Partnerships in Saudi and UAE Markets
Alibaba Group Holding Ltd., the prominent Chinese e-commerce giant, is actively pursuing expansion into the Gulf region, notably in Saudi Arabia and the United Arab Emirates (UAE).
Alibaba’s president, Michael Evans, revealed the company’s strategy during a panel discussion at Dubai’s World Government Summit, highlighting a commitment to local partnerships as a key aspect of their approach.
Evans underscored Alibaba’s recent endeavors in Saudi Arabia, indicating a concerted effort to deepen its presence in the region’s burgeoning e-commerce landscape.
The move signifies Alibaba’s strategic pivot towards collaborative ventures following a period of strategic realignment prompted by government scrutiny and leadership changes.
The Gulf’s growing ties with China, driven by mutual economic interests and investment diversification initiatives, present an opportune moment for Alibaba’s expansion efforts.
However, geopolitical complexities, including heightened US scrutiny of China-linked entities, add a layer of challenge to Alibaba’s Gulf aspirations.
As Alibaba seeks to reclaim its leadership position in the global tech industry, the pursuit of partnerships in Saudi Arabia and the UAE underscores the company’s adaptive approach to international expansion.
The success of these ventures could potentially reshape the Gulf’s e-commerce landscape and deepen economic ties between the region and China.
Shoprite Shuts Down Kano Branch Due to Financial Challenges and Unfavorable Business Climate
Retail Supermarkets Nigeria Limited, the owners of the renowned Shoprite Mall, announced the closure of its Kano branch, located in the Ado Bayero Mall, effective January 14, 2024.
The decision was conveyed through a circular signed by the supermarket’s management, attributing the shutdown to the current financial strain experienced by the mall in the state and the challenging business climate prevailing in Nigeria.
The circular expressed regret over the necessity of the decision, hinting at the impending layoff of all employees associated with the Kano branch.
While the closure raises concerns about the impact on the local workforce, underlying factors contributing to the move have been brought to light.
Among the primary reasons for the planned relocation is the exorbitant monthly rent of N66 million paid by Shoprite to Ado Bayero Mall.
Also, the supermarket bears the cost of independent electricity from the Kano Electricity Distribution Company (KEDCO), along with expenses for fueling and maintaining its standby generator.
When considering these substantial costs alongside staff salaries and other operational expenditures, the total financial burden becomes staggering, exceeding N1 billion annually.
Several sources within the mall have attested to a decline in customer patronage over the past two years, mainly attributed to the economic downturn affecting the purchasing power of the average Kano resident.
Shop owners within Ado Bayero Mall voiced concerns about the high cost of leasing space, with some revealing quarterly fees ranging from N3 million to N4.5 million.
The closure of Shoprite in Kano not only poses challenges for employees facing job uncertainties but also raises questions about the sustainability of businesses surrounding the mall.
Concerns about the impact on neighboring plazas and enterprises have prompted intervention efforts, with Deputy Senate President Barau Jibrin scheduled to meet with Shoprite’s management in a bid to prevent the exit and explore potential solutions.
As Kano braces for the repercussions of Shoprite’s departure, the incident underscores broader challenges facing businesses amid Nigeria’s economic realities.
Jumia to Shut Down its Food Unit to Focus on Core Goods and Jumia Pay
In a strategic maneuver aimed at streamlining operations and maximizing growth potential, Jumia, the prominent e-commerce giant, has announced the imminent closure of its food delivery service, Jumia Food, across several operating countries by the end of December 2023.
This decisive move underscores Jumia’s commitment to refocusing efforts on its core physical goods business and the expansion of the Jumia Pay platform across its 11-country operational landscape.
“The more we focus on our physical goods business, the more we realize that there is huge potential for Jumia to grow, with a path to profitability. We must take the right decision and fully focus our management, our teams, and our capital resources to go after this opportunity. In the current context, it means leaving a business line, which we believe does not offer the same upside potential – food delivery,” said Francis Dufay, Chief Executive Officer of Jumia.
Despite constituting 11% of Jumia’s Gross Merchandise Value (GMV) in the first nine months of 2023, Jumia Food faced challenges in achieving profitability.
The total value of food sold on Jumia Food stood at $64 million, showcasing its significant scale but not translating into sustained revenue.
The decision to shutter Jumia Food aligns with Jumia’s strategic shift towards profitability, which has seen a decline in Quarterly Active Consumers and Orders.
This shift involves focusing on viable categories and reducing consumer incentives.
While Jumia Food contributed to Jumia’s GMV, the move to cease its operations signifies a commitment to concentrating resources where the company sees the most substantial growth potential.
Notably, the company has expressed that some employees from Jumia Food may transition to roles within the core physical goods segment.
The announcement of Jumia’s strategic shift comes concurrently with Bolt Food’s decision to exit Nigeria and South Africa, attributing economic downturns, high inflation, and intense competition as key factors.
This dynamic reflects the evolving landscape of food delivery services in Africa.
In contrast, other players in Nigeria’s food delivery market, such as Chowdeck, have reported significant growth. Chowdeck recently celebrated the achievement of delivering food worth over ₦1 billion ($1.2 million) in a single month.
Its success has been attributed to strategic partnerships and a capital-efficient model.
The African food delivery market is witnessing both challenges and opportunities, with companies adopting diverse strategies to navigate the complexities.
Jumia’s decision to exit the food delivery segment signals a determined effort to prioritize sustained growth and profitability in its core business areas.
As the African e-commerce landscape evolves, companies like Jumia are making strategic decisions to ensure long-term success.
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