Brief: The closure of Jumia doesn’t mean running an e-commerce business in Cameroon is not profitable.
“I used to make at least 1,000,000fcfa turnover on Jumia a month. In fact, three quarters of my sales were coming from Jumia. I don’t know what I am going to do now. I have to start looking for another means. The closure is a big blow to me,” Mathurin, a Jumia Vendor laments.
The news about the closure of Jumia took vendors of the once largest e-commerce business in Cameroon by surprise. The rumors started coming three days before it was announced.
“In spite of the rapid growth recorded month after month and the positive feedback from our customers, we have come to the conclusion that our business model is not suited to the current economic context in Cameroon. That’s why we made the difficult decision to transfer all of our operations in Cameroon to the free online ads model starting November 19, 2019,” Kone Dowogonan, CEO of Jumia Cameroon said in an email to vendors announcing the end of activities.
“Someone in our Jumia Vendor WhatsApp Group hinted about the closure three days before this announcement. We got no response from the group admins who are employees of Jumia,” Mathurin said.
The entry of the e-commerce giant made it easier for young entrepreneurs who didn’t have exposure before to be able to make great sales as their platform helped made their products known. Many, especially locally made products saw in Jumia a means to get their products in the global market.
Since most of such businesses don’t have retail outlets, Jumia served as a digital outlet where they used to lure shoppers and gain exposure.
Jumia will continue to serve its customers and vendors through its classifieds platform, Jumia Deals which to the CEO “has been very successful”. At the time of writing this article, the main website redirects you to the classifieds platform.
The CEO in the email to Jumia Vendors said “Jumia has been operating in Cameroon for 5 years now. During this period, we managed to deliver thousands of orders to hundreds of thousands of customers and together we built e-commerce in Cameroon.”
However, words in the streets say for the past five years since its inception in the Cameroon market, Jumia has not been able to break-even. From the CEO’s statement, it is noticed that Jumia had growth as a priority and not profitability, and this has not gone down well.
Jumia’s shares dropped from its initial Wall Street public offering price of $14.50 to a record low of $5.10 on Monday. This is the second time in three quarters that Jumia’s third-quarter results have missed revenue estimates.
The online retail giant aggressively entered the market and quickly overshadowed every e-commerce business in Cameroon. Its main competitors were classifieds ads sites like Kerawa, Sellamquick and others. Cdiscount could not make it in the Cameroon market because of the authority Jumia had.
“In spite of the rapid growth recorded month after month and the positive feedback from our customers, we have come to the conclusion that our business model is not suited to the current economic context in Cameroon,” the company CEO said.
This means Jumia, even though it was the number one e-commerce business in Cameroon, it could not stand the competition from classified ads sites since it best suits the economic context of the country. He also mentioned that their classifieds division, “Jumia Deals has been very successful …”
Classifieds ads businesses in Cameroon are also facing a stiff competition from other social network market platforms. There are numerous Facebook, WhatsApp and Telegram market places where sellers connect directly with potential buyers.
Jumia has an e-commerce business model that is similar to Amazon and other classified platforms like Alibaba. It sells from its stock and takes a commission from third-party transactions that takes place on its website.
What advantage can you make out of jumia’s shutdown?
Jumia has closed down its doors, vendors and customers are mourning the loss of a promising brand. The memories of an online retail shop that succeeded in convincing many Cameroonians that they can place an order at the comfort for their homes and get the goods delivered.
Smart entrepreneurs can take this as an opportunity. Jumia has shut down its online retail department and there is a void in the market. What will fill this void? Many vendors and customers have become used to the services Jumia offered. So this void needs to be filled.
I know it’s going to be a big challenge for any local business to fulfill Jumia’s model. This is because it will have to meet with same competitive pressures that they had.
E-commerce is still at its growth stage in Cameroon and the growth has been quick. Jumia, according to the CEOs email shows that they worked more on growth than profitability. They have already done much to sensitize the market, it is now left for whoever to take the bull by the horns and continue.
Most shoppers in Cameroon still prefer that face-to-face contact when they make their purchase. On the other hand, there are some who have become used to buying online and will find it difficult to adapt again in the old ways.
In this case, there may be a potential for another similar business to satisfy the demand of such consumers. Don’t be bothered with the old names already in the business. They were there when Jumia was still in the market.
You can start a niche-base online retail shop of your own. For example, electronics came out as one of the main divisions where Jumia made great sales. I am not saying you should go for electronics (I will advise you not to).
Many e-commerce sites in Cameroon are filled with hundreds of different categories and products without any real focus. You need to have a massive budget to come up with what Jumia had before this shut down.
You will have to niche down in order to run a profitable e-commerce business in Cameroon so as to avoid certain risks tied with growth.
Hints to start a niche e-commerce business in Cameroon
Before you setup your niche-base e-commerce business, there are some basic things you will need to take into consideration.
I will be sharing with you more details on how to start, run and grow an e-commerce site in Cameroon in subsequent post.
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