Africa's E-Commerce Giant Sets Sights on This Promising Market

(Bloomberg) -- Africa’s leading online shopping platform, Jumia, wants to make Egypt its biggest market on the continent, and it’s turning to an unexpected corner for help: the country’s vast network of unlicensed vendors.

Often touted as Africa’s answer to online retail giant Amazon, Jumia wants 10-fold growth in revenue from Egypt and six-fold growth in the number of products offered on its platform to 12 million by 2021. To help achieve that, Jumia Egypt’s Chief Executive Officer Hesham Safwat says he’s urging the government to regulate informal retailers by offering them tax incentives and cheap loans that would allow them to market their goods online.

“I personally take it as my biggest challenge,” Safwat said in an interview at his office in Cairo. “Imagine if only 50 percent of this informal market becomes formal, we would be able to add them to our platform, and new products categories will emerge to online consumers.”

Cash-Driven

Egypt’s 96 million consumers are gradually discovering online shopping as an alternative to their traditional cash-driven retail outlets. Only 5 to 8 percent of Egyptian internet users have made a purchase online, mostly in cash, Safwat said. The unofficial economy accounts for at least 37 percent of Egypt’s total domestic output, and informal retailers don’t pay taxes or face quality controls, which means their products are off-bounds for Jumia.

With shareholders including Orange SA, MTN Group Ltd., Millicom International Cellular S.A, Berlin-based Rocket Internet SE and Goldman Sachs Group Inc., Jumia has served 1.5 million customers since its Egypt debut in 2012. With 48 percent of the market share, it’s the leader against competitors such as Amazon’s Souq.com. Egypt is currently Jumia’s second- biggest market after Nigeria, out of 23 African nations it operates in.

The allure of online retailers such as Jumia for consumers has been that it allows them to pay for the goods in cash upon delivery -- a key benefit in a nation where most don’t have bank accounts or credit cards. In addition, the websites of many retailers are under-developed, particularly in comparison to their Western counterparts, whereas Jumia and Souq provide a more accessible browsing experience.

Jumia’s sales in Egypt grew 190 percent in 2017 from the previous year as consumers, struggling with inflation inflation hovering around 30 percent for most of 2017, looked for cheaper products and retailers turned to Jumia to reach a bigger audiences, Safwat said, without giving revenue figures. That’s in line with the year-on-year 42 percent sales growth to 507 million euros that the Jumia group posted across Africa.

“They need to expand across the country, but the logistics are expensive,” Safwat said. “E-commerce can connect them so that they can expand and grow with the least possible cost, which is a great advantage.”

©2018 Bloomberg L.P.

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