Nigerian Retailers Building Their Own Amazon in Africa

When Gbemiga Omotoso bought a Samsung tablet computer last year, he handed over his cash to a man in a van. There was nothing shady, though, about the transaction. It’s part of online retailer Jumia’s attempt to adapt to the unique challenges of selling in Nigeria.

With many of the country’s 160 million residents suspicious of paying online -- yes, they get those dodgy e-mails, too -- the Lagos-based retailer wins over skeptical shoppers by accepting payment on delivery and offering free returns.

“It’s very important that people know it’s not a scam,” said co-founder Tunde Kehinde, 29. “Even though they want to buy, trust is still a very, very big issue.”

Jumia and local rival Konga.com have taken a page from the playbook of Amazon.com (AMZN): delivering electronics, clothes, and even refrigerators to the front doors of Nigerians. Shopping locally has usually meant higher prices, less selection, and often sitting in traffic for hours to get to stores, which rely on generators to cope with power outages almost daily.

“There’s a lot of appetite for consumption, but supply is terrible,” said Jeremy Hodara, founder and managing director of Africa Internet Holding, an investor in online businesses across the continent and a shareholder in Jumia. “It’s expensive and cumbersome to buy abroad, but if there’s no choice, that is what people do.”

Berry Wreaths

In the lead-up to Christmas, Jumia aims to boost revenue by 40 percent each month through December. Items featured in the site’s holiday section range from berry wreaths to MAC lipstick to kids’ bikes for 11,995 naira ($75).

On a recent November day at Jumia’s warehouse -- a stadium-size building down a muddy, potholed road in a Lagos commercial district -- employees pulled items from the shelves, then stuffed them into delivery vans or piled them onto motorbikes.

Jumia has received $75 million in funding since its inception, including seed capital from Berlin-based Rocket Internet. The company has 600 employees and also sells in Kenya, Morocco, Ivory Coast, Egypt, and South Africa. Although not yet profitable, Jumia is bringing in “a couple of million” dollars a month in revenue and expanding at almost 20 percent monthly, according to Kehinde and Ghanaian co-founder Raphael Afaedor, both Harvard Business School graduates.

Shopping Securely

To combat fears of online fraud and to educate Nigerians about shopping online securely, the company has a direct sales team of about 200 in cities such as Lagos and Port Harcourt.

They wear outfits bearing Jumia’s logo and hold impromptu shopping sessions in businesses, churches, and homes, answering questions and using tablet computers to demonstrate how to order.

“There are people who are open to online shopping -- people who have traveled or have lived abroad,” Afaedor said. With others who are skeptical, “it takes a bit more effort to get people to change their behavior.”

One person they will be delivering to again is Omotoso. The 31-year-old technician in Lagos was won over by the service after buying the tablet and plans to use it next for Christmas shopping -- and now he’ll pay by card.

“They are making life very easy for us Nigerians,” he said, adding that he doesn’t have time to tackle daily gridlocked traffic to shop for Christmas treats. “They also have quality, they don’t just sell anything.”

Eager to win more sales from Nigeria’s oil-fueled economy, which is expected to grow more than 6 percent this year and 7 percent in 2014, according to a Bloomberg News survey of economists, Jumia has a fleet of about 200 vehicles.

Almost two-thirds are motorbikes, which are easier to guide through traffic jams. To thwart robberies, the last deliveries are at 7 p.m.

Building Amazon

At some point, cash-on­delivery -- especially for big-ticket items like fridges -- may not be needed. The number of payments in the country made by mobile phone more than doubled to 2.4 million in the first half of 2012 from the same period a year earlier, while Internet payments rose 9.3 percent, according to the central bank of Nigeria.

For now, it’s just another quirk of doing business in an emerging market. “Here you are collecting cash and reconciling payments almost like a bank desk, here you are building a logistics company,” said Afaedor. His co-founder Kehinde is quick to ask, “How many times can you say in your life you get to build an Amazon?”

To contact the reporters on this story: Chris Kay in Lagos at ckay5@bloomberg.net; Christopher Spillane in Johannesburg at cspillane3@bloomberg.net; Janice Kew in Johannesburg at jkew4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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