In this interview, Sunil NatrajThe CEO of Jumia Nigeria speaks about the state of e-commerce, Jumia’s new operational strategy and the challenges of same-day delivery. Temitayo Jaiyola
Recently, Jumia has changed its business strategy, especially in Nigeria. Can you explain these changes and how the company measures growth?
Our strategy is focused on simplicity, especially in navigating Nigeria's complex macroeconomic environment. We aim to holistically streamline our operations by maintaining optimal inventory levels, ensuring seamless flow from suppliers to customers, and facilitating hassle-free returns. With efficient inventory management practices and strong partnerships with key suppliers across the country, we optimize every stage of our supply chain.
Our website offers clear and transparent ordering options such as “cash on delivery”, “buy now, pay later” and bank transfer upon receipt of the goods. This setup allows customers to pay via bank transfer upon delivery, conveniently streamlining transactions. Our goal is to simplify the entire supply chain process. We recently moved to a modern, consolidated warehouse in Isolo to centralize our operations, speed up product delivery and improve customer satisfaction.
In addition, we have enhanced our customer problem reporting process and streamlined all aspects of our operations for mutual benefit and sustainable business growth. We will continue to focus on key growth metrics such as total merchandise value and total order volume to effectively guide our business strategy.
Since launching the integrated warehouse, what are some of the key learnings and achievements you have gained so far?
Simplification has significantly improved our operations. We can now manage our operations across Nigeria from one place, delivering products to consumers faster and handling returns and complaints more efficiently. This streamlined approach has significantly improved the overall consumer experience.
With record-high inflation in the US, how has consumer purchasing behavior changed? What products are in higher demand and where are people cutting back on spending?
Amid the current rate of inflation, we are seeing a shift in consumer purchasing behavior. Rather than reducing their overall spending, consumers are shifting their purchasing priorities. For example, customers who previously opted for high-end smartphones are now opting for more affordable models. This shift reflects a change in preferences, not a decrease in consumption.
At Jumia, we are committed to providing our customers with a wide range of choices to make informed choices that suit their budgets and needs. This commitment to enrich the shopping experience of our customers remains unwavering. We are primarily focused on enhancing consumer experience in categories that are driving significant growth such as smartphones, televisions, home appliances, health & beauty, and fashion items. These categories continue to contribute to our overall growth trajectory.
COVID-19 has led to a significant growth in the e-commerce sector. How has this growth been sustained? What product categories are Nigerians more likely to purchase online? And what are the unique features that make the Nigerian e-commerce environment different from the rest of the world?
In Nigeria, West Africa and Africa, the e-commerce sector operates in an inflationary and ever-changing economic environment. As a result, consumer behavior exhibits cyclical patterns as people adapt to these economic pressures. Globally, e-commerce companies are primarily focused on core categories and our strategy is aligned with this approach. Some companies may diversify into other categories from time to time, but their core focus remains the same.
Despite the economic conditions facing Nigerians, these key categories continue to have a strong trajectory. COVID-19 has accelerated the shift to online shopping, but our sustained success hinges on offering relevant products at competitive prices. This approach has enabled us to maintain our historic user base in Nigeria. Looking forward, we look forward to continued growth in the e-commerce sector by effectively responding to the changing needs of consumers, pandemic or not.
Unique features of the Nigerian e-commerce environment include its focus on adapting to local economic conditions and offering diverse payment options such as ‘cash on delivery’ and ‘buy now, pay later.’ These features differentiate the Nigerian market from other global e-commerce environments and reflect the innovativeness and adaptability of Nigerian e-commerce.
Do you think social media is changing the e-commerce landscape, and 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 product is not available on existing e-commerce platforms such as Jumia, and the price on these platforms is perceived to be exorbitantly high compared to the social media channel in question.
However, customers benefit from the peace of mind of transacting on Jumia. They trust that Jumia offers competitive prices, genuine products, and a reliable return policy. Building this trust requires a high level of expertise and authenticity. Therefore, as long as we maintain competitive prices and product availability on our platform, customers are unlikely to migrate to social media to make purchases.
While social media acts as a supplementary channel for sales and adds credibility to online shopping, our primary focus is on generating strong traction through the platform. We see social media as an opportunity to expand our reach and enhance our supply offerings in the future.
Why is it a challenge to achieve 24-hour delivery or same-day delivery in Nigeria?
In theory, all of this is possible, but for these services to be feasible, either the demand must be high or consumers must understand the premium that such delivery entails and be willing to pay for express services. Around the world, express delivery is typically expensive and often considered a luxury. Currently, in our country's context, we face significant obstacles in this regard. Given the limited demand for express services and the high costs associated with them, it would be difficult for any company to implement on a large scale. Although technically feasible, the expenses involved currently make it a costly endeavor.
Logistics plays a vital role in e-commerce, but recently operational costs have increased due to factors such as distance and overall logistics costs. How is your company addressing these challenges and what is your long-term strategy to address them?
Our philosophy is focused on simplicity – doing simple things well across Nigeria. One of our key initiatives is the establishment of collection stations across the country. These stations work just like the efficient post offices of old: you visit, present your order number or identity card, pay via bank transfer and collect your parcel in no time.
Pickup Stations offer several benefits: Extended opening hours allow you to visit at a time that is convenient for you, plan your day efficiently, and pick up your parcels without the complex procedures that are often associated with home deliveries. Unlike home deliveries, where there can be issues with courier scheduling, Pickup Stations streamline the process, ensuring a smoother experience and providing greater value to customers.
This approach simplifies logistics and allows us to effectively manage costs in the current economic climate where operational expenses are increasing dramatically. Ultimately, deliveries to collection stations become more efficient and cost-effective, providing greater overall value to consumers.
How can you leverage mobile apps, data analytics and artificial intelligence technologies to improve customer experience and increase sales?
I can't give you the details because it's a trade secret, but I'll tell you some of the things we do. For example, data analytics helps us target consumers and determine what they want to buy. We make sure we're giving them what they want to see and sending them the right choices. They understand that we have a lot of great products that they might be interested in. And because we know what consumers want, with the help of artificial intelligence and data analytics, we can also make sure that the website is decorated properly and the products are well placed.
For example, recommendations from consumers who bought X and also bought Y are obtained through AI, data analytics, user analytics. These are just some of the simple things we do, and we do it across a range of areas. We also track things like partners who may be deferring cash payments. These things help us ensure that we are following the right business rules – our standards.
In e-commerce, the most important thing is usually getting a quality product. What efforts is Jumia making to protect its customers and ensure they get value for their money? What efforts are you driving on the industry side to ensure that quality products are being sold, not just any product?
This has two parts: proactive and reactive. The proactive part involves strictly adhering to certain product guidelines for commercialisation and carrying out thorough due process for every item uploaded on the website. We are working with the Standards Society of Nigeria (SON) and the National Agency for Food and Drug Administration and Control (NAFDAC) to ensure that no banned substances enter the system and this is a continuous process.
I mentioned the use of artificial intelligence. We are continuously scanning our catalog to make sure nothing is overlooked. In some cases, we also do multiple other checks. There is a thorough quality check in every silo, and this is done in the warehouse.
We have multiple avenues of redress for our customers when it comes to addressing issues. Customers can file a complaint if they receive a product that does not meet their expectations. We prioritize customer satisfaction and have a rigorous review process. If the complaint is valid, we will promptly issue a refund and work with the customer to comprehensively resolve the concern.
How do you think the overall e-commerce landscape will evolve over the next 5-10 years? What trends are you most excited about? What trends do you think will shape the space?
E-commerce is growing rapidly in this country. We are fortunate to live in a time when technology is also growing. Mobile phone penetration is growing rapidly, and the cost of accessing a mobile phone has dropped dramatically, making technology cheaper. Technology that used to cost around $2,000 now fits in the palm of your hand for $1,000, enables transactions, bank transfers are commonplace, and credit cards are widespread. All of these things are attractive to us.
Technological advancements, especially the accessibility and affordability of smartphones, have made online shopping transactions much easier and more reliable. As technology becomes more accessible, it fosters a greater sense of security and trust among e-commerce users. Additionally, banking services are expanding rapidly, driven by cultural and economic trends, further strengthening the global e-commerce landscape. These developments collectively contribute to the growth and evolution of e-commerce on a global scale.
Governments are focusing on building infrastructure to deliver products faster to consumers. People are looking for cheaper alternatives and e-commerce is always presenting the value of being cheaper. All this combined will grow the e-commerce industry multi-fold.
