Cracking e-Commerce in Nigeria, Africa’s biggest market, is not a task for the faint-hearted.

There is no secret that e-commerce in Nigeria is currently dominated by Konga and Jumia, two of the latter-day pioneers. But both platforms were predated by BuyRight Africa.com, a platform founded by serial digital entrepreneur, Leo Stan Ekeh over 12 years ago. However, BuyRight Africa.com was challenged by the absence of credit card and e-payment infrastructure at the time it held sway, eventually giving way after 18 m0nths.

The entry of Jumia and Konga undoubtedly ushered in new-found interest and confidence in the sector, especially among foreign investors. Coming at a time when many young, aspirational Nigerians had been exposed to online shopping in other climes, it was easy for both platforms to cash in on the excitement and buzz to deepen their footholds in the market. The foregoing is not to say either Jumia or Konga have not encountered their fair share of difficulties; however, both brands are still standing strong, despite the challenges.

Of the two, who is best placed to defend Africa’s place in the global e-commerce race?

The answer to the query above would best be resolved by examining how well Jumia and Konga have adapted well to the storied encumbrances that have hobbled other players in the Nigerian e-commerce market.

Company Profiles: This assessment attempts an objective analysis of the current status of both e-commerce players, irrespective of their previous struggles. E-commerce requires huge finances and burning of capital and both brands have learnt huge lessons along the way. Jumia was founded and is currently owned by entrepreneurs out of Europe with a bold, African ambition. On the other hand, Konga is led by young, local-based but globally renowned entrepreneurs with a keen experience of the market and with deep pockets. Both companies, at inception, embarked on considerable hype and recorded huge losses after which Konga changed its strategy.. Recently, the management of Jumia has had to cut back on its African expansion after huge losses. Jumia relies heavily on outsourcing in the areas of technology, logistics and warehousing but Konga prefers to build resources locally before expanding to African countries. Average age of employees at Jumia is 31 while Konga has an average age of 28.

Business model: In 2020, Jumia announced a tweak in its business model to focus more on its third-party marketplace. This saw the company place less attention on its first-party model which involved the company basically buying items and putting it at the disposal of shoppers. By focusing on its third-party marketplace, Jumia was hoping to grow its revenue from the collection of commission on items listed and sold on its platform. The move seemed to have an instant impact, as it generated more revenue – $24m in Q1 2021 compared to $23m in Q1 2020 — from third-party sales on its platform. On the other hand, Jumia’s first-party revenue dropped from $12m in Q1 2020 to $8m in Q1 2021 – a 35% downer. While the shift in its business model has sort of contributed to lower logistics costs (fulfilment costs dropped by 18% year-on-year to $23.7m in Q4 2020 and in Q1 2021, it dropped to $17.2m), the company’s Gross Merchandise Volume (GMV), has also dropped. Average order value has declined by 16% from $35.8m in Q1 2020 to $30m in Q1 2021 and GMV also dropped by 21% compared to 13% in Q1 2021. In analyzing how its fluctuating business model compares, it is easy to see how its rival’s stands heads and shoulders above Jumia’s. For starters, Konga pioneered the third-party marketplace structure which Jumia pivoted to in 2020. Indeed, Konga equally debuted the omnichannel structure which has remained the mainstay of its business model, one that has also been adapted by global e-commerce players such as Amazon and Alibaba, among others. The Konga omnichannel business model works a treat, as it enables the brand not only take a share of the growing fad for online shopping, while also allowing it key into the still predominant traditional shopping predilection of the average Nigerian. Since its 2018 acquisition by the Zinox Group and the subsequent operational merger between it and Yudala, Konga has cut losses by over 45 per cent and also achieved growth of over 800 per cent in the past 18 months. In addition, it has doubled down on its Pay on Delivery (POD) option, extending the service to more cities across Nigeria after initially scaling back on it after acquisition. By fusing an online platform with a growing chain of brick-and-mortar stores dotting Nigeria’s landscape which affords skeptical shoppers a chance to see and experience the product before parting with their hard-earned money, Konga’s advantageous understanding of the market finds further expression. Interestingly, shoppers who visit any of its stores can also place orders for items not available in-store and choose to have it delivered to their homes or offices, or for them to return later to self-fulfil. This brilliant business model, aligned with the marketplace structure it holds the record of pioneering, has seen Konga grow astronomically beyond the expectations of industry watchers.

Funding model: A continent-wide expansion drive has seen Jumia embark on successive rounds of funds raise in its search for investment capital. The latest is its 2019 IPO and listing on the NYSE. Prior to its acquisition, Konga enjoyed a couple of seed fund investment culminating in Naspers and AB Kinnevik acquiring 97% stake in the business. However, under its current owners, the Zinox Group, the new Konga has opted for the path of self-funding before seeking external investment. Jumia, on the other hand, is still raising funds from investors. Aligned to the foregoing is the fact that Konga believes in risking her own funding by bankrolling her many futuristic subsidiaries like Konga Health, KongaPay, Konga Travel, while also owning its assets including warehouses and logistics collaterals before heading to the market to raise money. Jumia, on the other hand, relies heavily on outsourcing the bulk of its operational structure. It also hires several foreign staff while also leveraging the competence of consultants.

Logistics: Logistics is one of the biggest pain-points of e-commerce in Nigeria by extension Africa. Indeed, the combination of a decrepit transport infrastructure and unreliable physical addressing system in major cities means that any serious player must build their own logistics superstructure. In Jumia Express and Kxpress respectively owned by Jumia and Konga, the management of both companies have attempted to answer the logistics conundrum. However, facts on the ground show that Konga is winning this battle. Following the 2018 acquisition of Konga by the Zinox Group, the new owners of the business have invested significantly in shoring up the capacity of Kxpress – with feelers indicating the presence of over 400 assets: delivery vans, trucks, cars and motorcycles – that it now handles not only Konga’s last mile deliveries but also takes up huge projects for external parties. Another way of ascertaining Konga’s edge in the areas of logistics is by comparing the higher level of confidence it reposes in its internal competencies. Jumia currently outsources over 75 per cent of its deliveries compared to 20 per cent for Konga. While Jumia Express waives delivery fees on the majority of its last mile orders, it does not have as much resources and carrying capacity that Kxpress boasts of, especially in reaching far-flung locations across Nigeria’s vast landscape.

Funding Sources/Revenue Profile: Jumia is the clear leader in terms of Gross Merchandise Value (GMV) and revenue when you total the over 15 countries it has operations in while Konga Nigeria alone is about 50% of Jumia’s total. Since listing on the New York Stock Exchange in 2019 in a highly subscribed Initial Public Offer (IPO) that later went south after a bashing from Citroen, a US-based equity intelligence research company, Jumia has been able to rely on more financial muscle from external investors to expand its marketing outreach and thus garner a larger share of the market. Institutional investors control 26.95% of the outstanding shares in Jumia. This represents a greater percentage of ownership than at almost any other company in the Internet Software/Services industry. Additionally, during the quarter ended March 2019, these large investors purchased a net $271.4 thousand shares. With its shares currently trading at $18.39 after peaking at $49.977 within the first week of trading in April 2019, Jumia has endured reduced investor appetite, but this has not deterred the likes of Baillie Gifford & Co., D. E. Shaw & Co. LP, Susquehanna Financial Group LLLP and Morgan Stanley & Co., all of whom own a combined 16.2% stake ($284,463,586), among others from investing in the company. Indeed, the aggressive expansion drive across other African markets in its first five years meant Jumia had to rely on external investment, although it eventually closed shop in some of these markets owing to huge losses. Konga, on the other hand, had a different strategy and considered Nigeria as its biggest market. Despite a much-anticipated listing on the NYSE and London Stock Exchange (LSE), Konga is yet to enjoy a single kobo of investment from external sources. At the moment, the company is funded exclusively by its parent company and new owners, the Zinox Group and commands a little below half of Jumia’s current revenue. However, this may change very soon as rumours continue to swirl of Konga huge expansion drive across major African countries commencing from first quarter of 2022.

Understanding of the market: In its new owners, the Zinox Group, Konga has a strong management team of business-savvy Nigerians, local-based but globally recognized entrepreneurs with over 30 years of outstanding and recurring success in the Nigerian technology space and with a long list of accolades and global partnerships at their disposal. Making a brilliant success of any entrepreneurial pursuit in Nigeria is no mean feat and doing it consistently for over 30 years is nothing short of a miracle. This is the calibre and track record of the entrepreneurs behind the new Konga. Little wonder Konga has been able to leverage this experience, rising from a position of near exit before its acquisition in 2018 to becoming arguably Africa’s fastest growing e-commerce brand, all within the space of three years. Jumia’s continent-wide model and its status as one of the latter-day e-commerce pioneers falls short of the level of keen understanding of the market at the behest of Konga.

Integrity/Trust: Jumia took a hard fall when its IPO was thrashed by Citroen, , as a fraud, with the firm accusing Jumia of falsifying figures in order to hoodwink investors. The debacle went a long way in casting a dark and long shadow over Jumia’s ethical visage. Added to this is the fact that the company has also repeatedly taken some huge hits over product quality and bad press over the poor conduct of some of its staff. By contrast, Konga has not only publicly positioned itself as a credible platform that Nigerians trust but has also taken some landmark strides to assure customers of its determination to live up to that promise. One of these is the stiff sanctions meted out to merchants on its platform when substandard or fake products are linked to them. Repeat offenders are blacklisted and yanked off the platform while efforts are also made to replace the offending item at zero cost to the customer. In addition, Konga’s physical presence and chain of neighbourhood brick-and-mortar stores lends an air of trust in its interaction with shoppers, many of whom are comfortable with knowing that there is a physical place they can visit to rant, to complain or to window-shop.

Payments: In JumiaPay and KongaPay, both platforms each have a standard-bearer in this field. However, a KongaPay, a Central Bank of Nigeria-licensed mobile wallet is the clear leader here. Notably, KongaPay was recently identified by Statista, a global market and consumer research data firm as the leading provider of digital payment services for e-commerce transactions in Nigeria. Statista revealed that e-wallet held about 10 percent of digital payments in Nigeria; even as it revealed that the most common service was KongaPay, which accounted for four percent of the payments, while PayPal followed with three percent. KongaPay has recorded significant growth since the landmark acquisition of Konga by Zinox a little over three years ago. The platform has witnessed an impressive 700% growth in number of existing wallets, with projections indicating a rise to over 1.1 million wallet holders by the end of 2021 and expected to gross over four million in the next two years.

Subsidiaries: Jumia boasts several subsidiaries within its fold. They include Jumia Express, its logistics arm; Jumia Food, a food delivery service; JumiaPay, its payment platform and Jumia Travel, which recently partnered with Travelstart. Of the lot, Jumia Food is the most popular subsidiary of Jumia. For Konga, it can call on its CBN-licensed KongaPay; Konga Travel, an award-winning IATA-certified travel agency which has acquired all the statutory certifications and launched a number of physical stores within a space of three years; Kxpress, through which it has simplified logistics and last mile delivery; Konga Health, a recently launched digital health care distribution chain which has signed an agreement with the umbrella body of private medical doctors in Nigeria and Konga Food, which is still in the pilot phase. The management of the new Konga has transformed each of these subsidiaries into lean, efficient and revenue-earning, standalone entities, with their impressive growth rate contributing to taking Konga to the path of profitability.

Customer Services: A random survey or observation of the feedback both brands elicit from customers on social media lends further credence to this. Jumia has often taken hits from disgruntled shoppers owing to poor product quality from an unregulated marketplace, with its customer experience team often failing to rein in the deluge of negative feedback that pours in as a direct result. Konga is not immune from the rantings of occasionally dissatisfied customers, but it has definitely fared better due to a considerably less products return rate and a target-driven Customer Experience Team.

Marketing: Jumia has spent a fortune and still investing considerable sums to build its brand identity and perception in the market. Estimates indicate that Jumia spends nearly 1000 times more than Konga in marketing. On the other hand, the Konga African strategy, according to an ex-staff of Konga, is not hype, but instead is focused on first building a sustenance culture, structure, technology, distributed warehouses, digital logistics and subsidiaries across verticals before spending huge on marketing. This has seen Konga spend significantly less on marketing than its competitor.

Profit: Jumia has been in business for over nine years, but it is still struggling to shift the business from its current status as a loss-making venture. The company has struggled to make its continent-wide business strategy work, despite attracting considerable investment. Also, years of heavy expenditure on marketing and overheads coupled with glaring strategic deficiencies in how it has tackled Africa’s biggest market has seen the company struggle to shed the toga of being a loss-making venture. On the other hand, Konga, under the management of its new owners, has cut losses drastically, from an initial $49m in its first year after acquisition to virtually near zero. Feelers from the management of the firm also indicate that Konga, within a space of three years after its acquisition by the Zinox Group, has turned profitable in what would be a first for any e-commerce player on the African continent.

 

By Kelvin Mulungwe (e-Live Consultant)