AIG’s business model was a replica of the start-up model developed by Rocket Internet, one of its main investors, which was ‘copy-build-sell’. Rocket Internet cloned successful corporations from the US and then deployed the model in emerging markets. According to experts, the copycat business model brought down market risk by importing a model that worked in one part of the world and taking it to another part with relevant adjustments to local markets being made...

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JUMIA’S STRATEGY

Jumia modified its business model to fit in with the emerging markets in Africa. Though Africa presented undeniable competitive advantages for businesses as both land and manpower were extremely cheap, the country lacked basic amenities (See Exhibit II). Notably, it suffered from low internet penetration, limited banking facilities, frequent power cuts, high levels of violence and corruption, and economic instability. One of the biggest challenges for Jumia was to operate in an environment where people were typically skeptical of online business because of experiences with fraud. Hodara and Poignonnec knew they had to overcome the problem of trust in order to succeed in Africa...

RESULTS

By adapting its business to local needs, Jumia witnessed strong growth and revenues. It generated about US$234 million in revenue during the first nine months of 2015, a 265% growth from 2014. Overall, for the year 2015, the Group’s revenues were estimated to have grown 282% over the year. Jumia’s revenue increased by 14% from € 33.0 million in the first half of 2016 to € 37.5 million in the corresponding period of 2017. According to Alexander Kudlich, Group Managing Director of Rocket Internet, “Our companies succeed because we provide all they need: Great people, functional best practices, funding and ongoing hands-on support.”..

AIG REBRANDS TO JUMIA

On August 30, 2016, Africa eCommerce Holding GmbH, the holding company of Jumia, was merged into Africa Internet Holding GmbH (formerly trading under Africa Internet Group). Thereafter, all business models of AIG were renamed around the successful Jumia brand. The move, according to the company, was aimed at bringing together all of its brands under a single brand and ecosystem with a new vision “Expand Your Horizons”...

CHALLENGES

E-commerce remained a challenging space in Africa. The rate of internet penetration was still quite low. According to Internet World Stats, the internet penetration rate in Africa was 26.9%, contributing to only 9.1% of the world users as of March 2017 (See Exhibit IV and Exhibit V). Another significant challenge was the state of the road system, which in some areas was poorly maintained or even non-existent. Of the roads in Africa, 53% were unpaved as of 2016. ...

THE ROAD AHEAD

The technological evolution of Africa, fueled by its young, middle-class generation indicated that e-commerce was set to boom in Africa. According to the McKinsey Global Institute report published in 2013, e-commerce could account for 10% of retail sales (about US$75 billion) in Africa’s largest economies by 2025 (See Exhibit VI). According to the report, in Africa, the internet penetration would increase to 50% and that the country would see 360 million smartphone owners by the end of 2025..

EXHIBITS

Exhibit I: Africa Internet Group (AIG) -Key Markets
Exhibit II: Infrastructure in Africa (2012)
Exhibit III:Jumia Group-Key Financials
Exhibit IV: Internet Penetration in Africa (March 31, 2017)
Exhibit V: Internet Usage Statistics for Africa
Exhibit VI: Smartphone Adoption in Africa (% of Connections)
Exhibit VII: Ecommerce in Africa