As Amazon and Temu push into Africa, Jumia retreats to core markets

As global businesses pivot toward Africa, Jumia, the continent’s homegrown e-commerce leader, is carving its own niche. Dominating with over 24% of Africa’s e-commerce market, Jumia has solidified itself as a central figure in the region’s online shopping landscape.

In a historic move for Africa’s tech ecosystem, Jumia went public on Nasdaq in April 2019. The company’s 2021 Black Friday campaign saw its gross merchandise volume (GMV) reach USD 150 million, a 30% jump year-on-year, with a 39% increase in orders, totaling 4.3 million.

However, Jumia recently chose to scale back, pulling operations from South Africa and Tunisia. This strategic retreat followed a close analysis of each market’s growth potential and profitability—the South African and Tunisian markets account for only 3.5% and 2.7% of total orders, respectively, and contribute minimally to GMV.

“We believe it’s the right decision,” CEO Francis Dufay said in a CNBC interview. “It enables us to refocus our resources on the other nine markets, where we see more promising trends in terms of scale and profitability.”

These nine core markets—namely Nigeria, Egypt, Kenya, Morocco, Algeria, Ghana, Ivory Coast, Senegal, and Uganda—represent Jumia’s best prospects for growth, aligning with a leaner, targeted strategy amid fierce international competition.

For years, foreign companies have eyed Africa’s e-commerce potential, especially in wealthier markets like South Africa and Nigeria. Yet, Jumia’s recent pullback underscores the continent’s e-commerce challenges, particularly in areas where infrastructure gaps and low disposable income curb expansion.

Adapting to local realities

Jumia, dubbed Africa’s answer to Amazon, is an e-commerce powerhouse, but not a purely African creation. Founded in 2012 by former McKinsey consultants Jeremy Hodara, Sacha Poignonnec, Tunde Kehinde, and Raphael Kofi Afaedor—two of whom are Nigerian—Jumia was incubated by Rocket Internet, a European investment firm.

Operating across 11 African countries, including Nigeria, Kenya, Egypt, and South Africa, Jumia offers a comprehensive platform that allows third-party sellers—a model much like Amazon’s. Thousands of sellers reach millions of consumers through Jumia, with each market site operating in local currency and managed independently with distinct frontend and backend systems.

Jumia’s reach is substantial: over 100,000 sellers, 1.1 billion monthly visits, and 80% of African online shoppers. Jumia now serves 8.4 million active users and oversees more than 38.9 million annual orders.

Beyond online shopping, Jumia has rolled out services like Jumia Logistics, JumiaPay, Jumia Travel, and Jumia Food, creating a broad ecosystem that includes logistics, payments, travel booking, and food delivery.

Yet, profitability remains elusive. Since its founding, Jumia has recorded losses annually, marking 11 years of red ink as of 2023. Even with revenue and GMV upticks in Q2 2022, a restructuring led to layoffs as Jumia trimmed down in pursuit of fiscal health.

Entering 2023, Jumia faced a fresh set of challenges. Currency devaluations in nine out of ten of its active markets weighed on GMV, contributing to double-digit declines in total orders, GMV, and active customers. The company halted first-party grocery, logistics, and food delivery in select markets, which reduced order volumes but freed resources for core initiatives.

Despite financial improvements in early 2023, customer engagement remains a concern. Retaining active users in competitive and price-sensitive markets will be a critical piece of Jumia’s path forward.

The promise of African e-commerce

Despite these hurdles, Africa’s e-commerce market holds promise. In 2021, African e-commerce users reached 334 million with a penetration rate of 27.9%. By 2025, user numbers are expected to hit 519 million, reaching a penetration rate of 39.5%. Mobile e-commerce dominates, with mobile shopping accounting for more than 50% of the market in countries like Morocco, Kenya, and Nigeria.

The continent’s e-commerce industry is still grappling with structural issues such as inadequate infrastructure, payment challenges, and high broadband costs.

Nevertheless, major global players are making inroads with an eye on the long game. They bring the patience and capital to wait for Africa’s market to mature.

In August 2022, Amazon launched local domains for South Africa and Nigeria. This May, Amazon’s South African site went live—marking its first venture into Sub-Saharan Africa. Amazon’s South African site includes 20 curated product categories with local and international brands, plus incentives like free shipping, easy returns, and next-day delivery, all designed to entice local consumers.

Meanwhile, Temu, a cross-border platform by Pinduoduo, has also expanded quickly in Africa. Earlier this year, Temu launched its South African site, signaling its entry into the African market.

Jumia’s path forward

As foreign competition ramps up, Jumia appears somewhat outmatched. While it has raised USD 885 million in six funding rounds, its recent valuation stands at USD 520 million. Observers wonder if Jumia, despite its first-mover advantage, can match the global giants pushing into Africa.

The company’s recent leaner approach might signal a prudent recalibration, emphasizing core markets where it holds a competitive edge. If Jumia can use this advantage to drive profitability, it may just carve a path toward sustainability—one that proves first-mover gains can evolve into long-term growth.

KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Lin Qingqing for 36Kr.