This position is backed up by concrete facts and verifiable evidence, especially when one considers the well-documented struggles of several players in the sector.

Despite the allure and glitter that the segment holds, one requires deep pockets and a strong dose of guts and bloody-mindedness to survive in e-commerce, especially in a very challenging market such as Nigeria.

Undoubtedly, the promise of e-commerce and its potential for investors to strike gold remains undeniable.

The foregoing remains evident when you consider the predominantly youthful population that Nigeria possesses – arguably one of the most youthful in the world, the increasing exposure that education and the internet brings, growing data connectivity and teledensity rates as well as the burgeoning interest in the convenience and savvy that online commerce brings.

Also worth mentioning is the rise in social commerce among youths in Nigeria, with many turning to entrepreneurs via trading on social media platforms such as Instagram and Facebook, among others.

But despite these promising markers, a few weighty obstacles remain for potential new entrants into the market, especially from a strategy standpoint.

I was a lead panelist at a recent Consumer Trends Research/Analysis session in Nairobi, the Kenyan capital where the conversation naturally dovetailed into the prospects of e-commerce in Africa. Crucially, the Nairobi event, which witnessed attendance from key experts, opened the eyes of many to some of the pressing challenges that have deterred investors from reaping the undoubtedly immense benefits from their portfolio investments in e-commerce platforms on the continent.

One of the few take-aways from the session was the fact that the Nigerian e-commerce market is unmistakably one of the biggest in Africa. This is hardly divorced from the fact that Nigeria, despite its struggles, still remains Africa’s biggest economy.

Also, unlike in other African countries where you would nominally have one big e-commerce player, Nigeria has two giants in Jumia and Konga, both of which are understandably the dominant actors in a segment which also has a few other competitors.

But in focusing on the strengths of the Nigerian e-commerce market which remains very attractive to budding techpreneurs and other young people driven by the lure of wealth and privilege that entrepreneurship holds, it is critical to sound a cautionary note of warning: copying the strategies deployed by current market leaders, Jumia and Konga, may be an exercise in failure.

In breaking down this caution to future entrants into the market, it is essential to begin by, first of all, establishing that the Jumia strategy is a very expensive one, a suicide strategy, so to speak, that is very hard to sustain but one which, if it comes good, would turn its proponents into overnight superstars. Founded in 2012, Jumia initially raised $26 million from Summit Partners in March 2013.

At the time Jumia did not specify how it will spend the fresh capital – a subtle indication of an absence of a clear-cut strategy – but back then, Jeremy Hodara — co-CEO of Africa Internet Group (AIG), which owns Jumia — said the funding was a validation of the company’s progress.

“We are very pleased to have been given this show of confidence, which acknowledges Jumia’s success. We consider this a recognition of the huge potential of e-commerce in Africa and the strong momentum of Jumia across the continent,” Hodara had stated back then in 2013.

Flush with cash and with no apparent strategy or clarity on what to spend it on, Jumia had embarked on a massive marketing splurge to outspend and out-hire its competitor, Konga, which had also entered the market in 2012. A year later and now backed by Rocket Internet, Jumia announced it had raised €120 million ($150 million) in new funding.

The company confirmed that the round values it at €445 million ($555 million), adding that the new funding would boost its continent-wide expansion. Active in nine African markets — Cameroon, Egypt, Ghana, Ivory Coast, Kenya, Morocco, Nigeria, Uganda, and Tanzania — and also the UK at the time, Jumia’s strategy hardly altered until its rival, Konga pioneered the online marketplace structure that has become so popular today.

After initially thumbing their noses at this innovative strategy as something bound to fail, Jumia later followed suit and launched its own marketplace after Konga.

Subsequent fund raises which came from convincing its growing band of investors of the promise of investing in the potential e-commerce goldmine saw Jumia go public in 2019, listing its shares on the floor of the New York Stock Exchange (NYSE).

A high point in the company’s history, Jumia would, however, fall from grace after being touted as Africa’s first unicorn. This came after it was discovered to have cooked its books and eventually being called out by a US-based firm, Citroen Research which described its shares as worthless.

Also, it is important to cite the huge losses that have trailed Jumia from inception and which many experts see as a black hole it can never fill with the way the business is currently structured.

Till date, the Jumia strategy is one that has seen it refrain from building any form of infrastructure in Nigeria, its biggest market. Investigations reveal the same applies across the other countries in which it operates.

Hardly can the company count on owning office spaces, retail stores, warehouses or core logistical or physical presence in Nigeria. For years, Jumia has run on a cash-intensive strategy which has seen it burn through investors’ funds at a fast rate and racking up monumental losses to boot.

But while it can claim to have regularly grown Gross Merchandise Volume (GMV) – described as total value of merchandise ordered over a given period of time – it can hardly gloss over the deficits in its books.

From a revenue standpoint, Jumia currently relies on three main areas: first party revenue from direct sales business of inventory owned by the business, revenue from its marketplace (which is currently its highest earner) and other revenue, which currently includes revenue from its logistics-as-a-service activity launched in 2020.

Its recently released 2022 Q1 results show that Jumia is currently valued at about $778m, a figure which falls way short of its all-time valuation of about $5.8 billion achieved in February 2021. Also, its shares are down 32%, despite being recently up by 44%. 

And while it claims GMV has risen by 27% per year boosting revenue by 44% year on year – a nine-quarter high – Jumia still reported a total comprehensive loss of $41 million and has a net asset of just $413 million after a massive accumulated loss of $1.7 billion.

Clearly, the biggest gainers were Jumia’s early-stage founders and investors who cashed out in time when other investors came calling. It is clear to global analysts that Africa is a tough continent and Jumia’s strategy may now be to find a buyer, but where it fails, it will be a disaster for investors.

It, therefore, came as a surprise when news recently made the rounds of a potential acquisition of Jumia by the Zinox Group, a technology conglomerate which I understand have acquired years of outstanding experience as a leading light on the continent. Such an acquisition would only make sense if the share price crashes to record lows, justifying such an investment as Jumia, today, is unarguably a loss-making venture that would require intense work to turn it around on the path of profitability.

It could also be that Konga and its backers at the Zinox Group wants to use Jumia’s current network to expand to other African countries where Jumia is still recording losses.

But has its rival, Konga, fared any better?

Marginally, yes.

When it entered the Nigerian market in 2012, same year as Jumia did, Konga was also keen on raising money from investors as validation of their standing. The management of the company also burnt through a lot of cash to remain competitive in the face of Jumia’s bullish spending. So, the first few years witnessed both brands going head-to-head and racking up huge losses in the process.

To its credit, Konga was a bit more conservative in its spending but that is not to say it recorded much more significant head-way than Jumia at the time.

The company, did, however, do much better in building essential infrastructure. It launched its own internally owned logistics vehicle – Konga Express – to overcome the thorny challenge of last mile deliveries, while also securing a license from the Central Bank of Nigeria (CBN) to float its own mobile money wallet known today as KongaPay.

This is in addition to pioneering the marketplace structure known back then as the Konga Mall – a first in the African e-commerce market and beyond and which was later replicated by other local and international players. Konga also stood out for its investment in warehousing structures which helped it retain huge inventory.

Successive fund raises from perennial investors Swedish-based AB-Kinnevik and South African-headquartered Naspers, however, failed to save the company from almost running aground before its current owners, the Zinox Group, stepped in.

In assessing where both latter-day e-commerce pioneers went wrong in their strategies, it is easy to cite the absence of a core understanding of the local dynamics, an almost foolhardy ignorance of the complex interplay that defines the Nigerian market.

Although I am not a Nigerian, I have spent enough years in the country to be able to identify the Nigerian market as a tricky customer.

You need foresight, guts, experience borne out of years of navigating policy somersaults, keen awareness of the infrastructural deficiencies and influence of state actors, as well as other peculiarities that shape this market in order to make a success of e-commerce in Nigeria.

I think the Zinox Group’s experience of the Nigerian market and Konga’s strategies in investing in sustainable assets in Africa like warehouses, delivery trucks and more, instead of pouring all her money into marketing shows a commendable understanding of this tough market.

It also shows that the new owners of Konga want to be in business for a long time and this could be why they have not yet hit the market to raise money.

Perhaps, that is why it hardly came as a surprise when Konga, which was almost comatose and on the verge of exiting the market at its point of acquisition, is today and under new ownership, the first e-commerce firm to achieve profitability in Africa.

The lesson for aspiring entrepreneurs in Africa here is simple.

Copying the strategies that made Jumia and Konga popular may seem like an easy deal but it may not be sustainable in the long run. Hype is good and necessary. However, it is very important to thoroughly understand your market, while situating your strategies within the context or existential realities of the society and not just relying on importing foreign concepts or business school models.

In the same vein, you must put in the hard work to fill the content or deficiency gaps, while also making efforts to own your own infrastructure, especially considering the country’s challenges in this area.

Investigations show Jumia’s shares currently trading at $5.89 on the floor of the New York Stock Exchange (NYSE) after it spiked by 14.8 percent on Friday May 13, 2022.

The spike came after investors increased their buying interest in the firm after a series of trending media reports suggested that Chairman, Zinox Group, Leo Stan Ekeh may be seriously considering an acquisition of Jumia after quietly ramping up shares in the business.

Although there has been no formal confirmation or denial of Mr. Ekeh’s interest in Jumia by Zinox, the development has contributed to shoring up the value of Jumia shares which rose 14.8 percent on Friday, opening at $5.13 per share and closing at $5.89 per share.

Consequently, market capitalization of the e-commerce firm rose above $588 million backed by the double-digit percent increase in its shares.

The recent jump in its stock price notwithstanding, Jumia shares have depreciated by over 50 per cent since the start of 2022.

Experts attribute the development to investors fleeing tech stocks with high price and earnings multiples in favour of more fundamentally strong companies in the oil and gas and industrial sectors. Jumia also reported losses after taxes of about $227 million in its 2021 annual income statement and has only $413 million in net equity.

A Jumia takeover by the Zinox Group, although still in the realm of speculations, would see the tech conglomerate become the biggest e-commerce owner on the continent and would echo moves of a similar groundbreaking acquisition which it pulled off with Konga in 2018.

Ekeh acquired Konga from its previous owners – South African headquartered Naspers and Swedish firm, AB Kinnevik – with the firm on the verge of a near exit from the market.

Three years later, Konga, now under new management, turned profitable, becoming the first e-commerce firm in Africa to achieve this feat.

Ekeh is also reported to be supporting a massive upscale of critical investment in Konga in the areas of technology, logistics and massive regional warehouses in Lagos, Port Harcourt, Abuja and Onitsha, among others.

Konga, which has made a success of its revolutionary fusion of online and offline, has also continued to attract concrete interest from a horde of potential investors amid rumours of an expansion of its operation across Africa.