Smartphone access, affordability key drivers of e-commerce growth — Jumia Nigeria CEO

In this interview, Sunil Natraj, Chief Executive Officer of Jumia Nigeria, discuss the e-commerce landscape, Jumia’s new operational strategy, challenges with same-day delivery with Temitayo Jaiyeola

In recent times, Jumia has changed its operational strategy, especially in Nigeria. Could you walk us through these transitions and how the company measures growth?

Our strategy is centred on simplicity, particularly in navigating Nigeria’s complex macroeconomic environment. We aim to streamline operations comprehensively by maintaining optimal stock levels, ensuring a seamless flow from suppliers to customers, and facilitating hassle-free returns. We have optimised every stage of our supply chain with efficient stock management practices and robust partnerships with key suppliers nationwide.

Our website offers clear and transparent ordering options such as ‘Pay on Delivery,’ ‘Buy Now Pay Later,’ and bank transfer upon receipt of goods. This setup lets customers pay via bank transfer upon delivery, streamlining transactions conveniently. Our objective is to simplify the entire supply chain process. Recently, we relocated to a modern integrated warehouse in Isolo, centralising our operations for faster product delivery and improved customer satisfaction.

Additionally, we have enhanced our customer issue reporting process, simplifying every aspect of our operations for mutual benefit and sustainable business growth. Our focus remains on key growth metrics, such as gross merchandise value and total order volume, which continue to guide our business strategy effectively.

Since the launch of the integrated warehouse, what have been your key lessons and take away so far?

Simplification has greatly improved our operations. We can now manage operations for all of Nigeria from a single location, ensuring faster product delivery to consumers and efficient handling of returns and complaints. This streamlined approach has significantly enhanced the overall consumer experience.

How has consumer purchasing behaviour shifted amidst record-high inflation in the country? Specifically, what products are experiencing increased demand, and where are people reducing spending?

Amidst the current inflation rates, we have observed a shift in consumer purchasing behaviour. Rather than reducing their overall spending, consumers are reprioritising their purchases. For instance, customers who previously opted for high-end smartphones now choose more affordable models. This shift reflects a change in preferences rather than a decrease in consumption.

At Jumia, our commitment is to ensure that customers are provided with a wide range of options, enabling them to make informed choices that suit their budgets and needs. This commitment to enriching their buying experience remains steadfast. We mainly focus on enhancing the consumer experience in categories that drive substantial growth, such as smartphones, televisions, household appliances, health and beauty, and fashion items. These categories continue to contribute to our overall growth trajectory.

The e-commerce sector experienced significant growth due to COVID-19. How has this growth been sustained? Which product categories are Nigerians increasingly purchasing online? And what unique characteristics of the Nigerian e-commerce landscape differentiate it from other global e-commerce landscapes?

In Nigeria, West Africa, and Africa, the e-commerce sector operates amid inflation and a constantly changing economic environment. Consequently, consumer behaviour shows a cyclical pattern as people adapt to these economic pressures. Globally, e-commerce companies focus primarily on key categories, and our strategy aligns with this approach. While some companies may occasionally diversify into additional categories, the core focus remains consistent.

Despite the economic dynamics that Nigerians continue to navigate, we have observed a robust trajectory in these key categories. COVID-19 accelerated the shift towards online shopping, but our sustained success hinges on offering relevant products at competitive prices. This approach has enabled us to maintain our historical user numbers in Nigeria. Looking ahead, regardless of the pandemic, we anticipate continued growth in the e-commerce sector as we effectively meet the evolving needs of consumers.

The unique characteristics of the Nigerian e-commerce landscape include its adaptation to local economic conditions and the emphasis on providing a diverse range of payment options, such as ‘Pay on Delivery’ and ‘Buy Now Pay Later.’ These features differentiate the Nigerian market from other global e-commerce landscapes, reflecting the innovative and adaptive nature of e-commerce in Nigeria.

Do you think social media is reshaping the e-commerce landscape? What strategies have you implemented to adapt to these changes?

People may choose to buy through social media channels if two conditions are not met: The item is unavailable on established e-commerce platforms like Jumia, and the price on these platforms is perceived as prohibitively high compared to the social media channel in question.

However, customers benefit from greater assurance for transactions on Jumia. They trust that Jumia offers competitive pricing, genuine products, and reliable return policies. Establishing this trust requires significant expertise and credibility. Therefore, as long as we maintain competitive pricing and product availability on our platform, customers will unlikely shift to social media for their purchases.

While social media serves as a supplementary channel for sales and enhances the credibility of online shopping, our primary focus remains on driving strong traction through our platforms. We see social media as an opportunity to expand our reach and enhance our supply offerings in the future.

Why has achieving 24-hour delivery or same-day delivery in Nigeria remained a challenge?

Everything is theoretically possible, but for these services to be feasible, there must either be a high demand for them or consumers willing to pay for express services, understanding the premium attached to such deliveries. Worldwide, express delivery typically comes at a high cost, often considered extravagant. Currently, in our country’s context, we face significant obstacles in this regard. Given the limited demand for express services and the associated high costs, it becomes difficult for any company to implement on a large scale. While technically feasible, the expense involved at present makes it a costly endeavour.

Logistics plays a critical role in e-commerce, and recently, operating costs have increased due to factors such as distance and overall logistics expenses. How is your company managing these challenges, and what are your long-term strategies to address them?

Our philosophy is centred on simplicity—doing simple things well across Nigeria. One of our key initiatives has been establishing pick-up stations throughout the country. These stations operate similarly to efficient post offices of the past: you visit, provide your order number or identification, pay via bank transfer, and collect your parcel promptly.

Pick-up stations offer several advantages. They are open for extended hours, allowing you to visit at your convenience, plan your day effectively, and retrieve your parcel without the complexities often associated with home deliveries. Unlike home deliveries, where rider scheduling issues can occur, pick-up stations streamline the process, ensuring a smoother experience and providing strong value to our customers.

This approach simplifies logistics and helps us manage costs effectively in the current economic climate, where operating expenses have increased significantly. Ultimately, delivering to pick-up stations is more efficient and cost-effective, providing greater overall value to consumers.

How do you leverage mobile apps, data analytics, and artificial intelligence technology to enhance customers’ experiences and drive sales?

I cannot give you the specifics because it is a trade secret, but I will share certain things we do. For example, data analytics helps us target consumers and determine what they want to buy. We ensure that we are giving them what they want to see and sending the right choices to them. They understand that we have an amazing deal of products they can be interested in. We can also ensure that our website is decorated properly and our merchandise is properly arranged with the help of artificial intelligence and data analytics because we know what consumers want.

For example, the recommendations you get from the consumer who bought X and who also bought Y come through AI, data analytics, and user analysis. So, these are a few of the simple things we do, and we do this across the spectrum. We can also track partners who are likely to defer on cash and things like that; these things help us ensure that we have a proper rule of business, which is our criteria.

The crucial part of e-commerce is usually getting quality products. What is Jumia doing to protect customers and ensure they get value for their money? What initiative are you championing on the industry side to ensure that quality products are sold, not just any product?

This has two parts: proactive and reactive. On the proactive part, we ensure that we stick firmly to certain product guidelines for merchandising and have a thorough due process for every item uploaded to the website. We collaborate with the Standard Organisation of Nigeria (SON) and the National Agency for Food and Drug Administration and Control (NAFDAC) to ensure that banned substances are not allowed into the system, which is a continuous process.

We spoke about using artificial intelligence. We continuously scan our catalogue to ensure things do not slip through the cracks. Sometimes, we have multiple other checks. We make sure that all silos have vigorous quality checks, which are done at the warehouse.

We have multiple avenues for customer recourse in terms of reacting to issues. Customers can complain if they receive a product that does not meet expectations. We prioritise customer satisfaction and have a stringent review process in place. If complaints are valid, we ensure prompt refunds and engage with customers to address their concerns comprehensively.

How do you see the general e-commerce landscape evolving in another 5 to 10 years? What trends are you most excited about? What trend do you think will shape the space?

E-commerce is set to grow rapidly in this country. We are fortunate to be in a time where technology is also growing. Mobile phone penetration is growing rapidly, and technology is getting cheaper because the cost of accessing a mobile phone has dropped significantly. You are getting technology that used to be maybe $2,000 for today $1,000 in the palm of your hand, transactions are getting enabled, bank transfers are the rule of the day-to-day, and credit cards are even with us. These are all fascinating mechanisms for us.

Technology advancements, particularly in smartphone accessibility and affordability, have significantly eased transactions and boosted confidence in online shopping. As technology becomes more accessible, it fosters greater comfort and trust among users engaging in e-commerce. Banking services are also expanding rapidly, driven by cultural and economic trends, further enhancing the global e-commerce landscape. These developments collectively contribute to the growth and evolution of e-commerce on a global scale.

The government is strongly focused on building infrastructures that help us get products to consumers faster. People are looking for cheaper alternatives, and e-commerce always presents the value of being cheaper. All of these will combine to help the e-commerce industry grow in multiples.