Jumia Egypt
JUMIA is an African online shopping site where people can purchase and browse
through a wide range of electronics, fashion, home appliances, kid’s items and more.
The business was founded in 2012 by Co-founders and CEOs, Jeremy Hodara and
Sacha Poignonnec with funding from Rocket Internet, and has offices
in Nigeria and Egypt.
In October 2012, Jumia announced its partnership with Mobinil the Egyptian
company for mobile services. The partnership agreement between JUMIA Egypt and
Mobinil consists of four main rules which include: The partnership agreement
between JUMIA Egypt and Mobinil consists of the following:
1. Mobinil provide JUMIA offices and staff with the latest mobile technology solutions,
specifically tailored for their business needs
2. JUMIA provide Mobinil with products and services to each of the 140 retail stores
spread all across Egypt
3. JUMIA offer products of Mobinil and telecom products to their customers (i.e.
Voice/Data lines, Broadband connectivity devices, smartphones, connectivity data
bundles)
4. JUMIA offer special rewards for Mobinil customers through the use of a loyalty
program
Jumia just celebrated the 2nd anniversary of Jumia Egypt last week. Jumia has been
online for 2 years now, and now has approximately 150 employees and revenues
are growing around 20 to 30% per month.
The reason why they came to Africa, particularly Egypt, can be explained in the
theory of Rocket Internet, which owns Jumia. E-commerce is one of the biggest
trends in business in the 21st century, and it is very big in the US and in Europe and
that’s it, but our belief and our theory is that e-commerce is going to become just as
big everywhere else in the world, especially in Africa, South America and Asia.
1
Jumia believes that there is a big business trend which is e-commerce that will take
over Africa, South America and Asia. The reason Jumia came to Egypt is because
Jumia believes that, in Africa, there are two big markets that are relevant and have
the potential of being big in e-commerce, and these are Nigeria and Egypt. And even
if the political situation in Egypt is not as stable as everyone would hope, Jumia still
remains in the market.
Rocket Internet includes both an investor and an incubator. An incubator is basically
where you place the venture in a small, comfortable environment and you give it
everything it needs to succeed. They provide the venture with the website, the
name, which will attract many to my business just because I am Rocket Internet. If it
were just “Jumia Egypt” without it, it would have been very hard. They also provide
me with the knowledge I need to know about e-commerce; so the money, skills and
knowledge transfer provided is amazing.
Jumia has many partnerships including HP, Nestle, Toshiba, Samsung, Dannon, Sony,
Unilever, L’Oreal and many others will be signed soon with Jumia. Jumia’s market
share 2014 is 28% but it declined from 36% in 2013 , and on average, have around
200 orders per day in Cairo, and targeting an average number of 10 orders per
employee
Reports are talking about many customer complaints concerning delivery time;
return policy, pricing, quality of delivered products.
2
SWOT Analysis
Strengths
1. Partnership with Mobinil
2. 2nd largest market share in the Egyptian market
3. 24-7 operations
4. Cost leadership strategies
5. Low transaction costs
6. Time saving
7. Product lines are highly diversified
8. Return policy exists
9. Online existence enables wide reach to millions of internet users
10. The availability of cash on delivery option
11. Jumia has points loyalty program
12. No physical platform exists which results in low investment costs and accordingly
high return on investment
13. Strong African presence in Nigeria and Kenya which also results in high managerial
and market experience
14. Optimistic economic views related to a new political system post 2011 revolution
15. Jumia has many partnerships including HP, Nestle, Toshiba, Samsung, Dannon, Sony,
Unilever, L’Oreal and many others will be signed soon with Jumia
Weaknesses
1. Long delivery dates
2. The customer isn’t able to check the product before buying
3. Returns are very time consuming
4. Deviation between online product images and real products received
5. The shipping costs raises the price paid by customers
6. No shipping alternatives
7. No order tracking
3
8. Jumia Egypt has no mobile application on android phones and i-phone phones
while souq.com has an mobile application
Opportunities
1. Online shopping is experiencing growth in UAE, Saudi Arabia, and Egypt Online
shoppers in the UAE, Saudi Arabia and Egypt spent $1.01bn on internet retail sites
last year, according to the research firm Euro monitor International, and this
number is forecasted to double by 2016 to reach 2 billions
2. Internet users in Egypt reaching 30 million in 2014
3. 60% of Egyptian population are young aged between 16-45 years old
4. A strong trend towards online shopping
5. Large growth in mobile usage, in Egypt there exists 112 mobile per 100 of
population (112%),
6. Large usage of social networks provides a strong promotional tools
Threats
1. Strong direct competitors (souq.com and others like Facebook pages ) and indirect
competitors (hyper markets and retailers)
2. Online privacy and security concerns
3. Economic slowdown since 2011 negatively affect consumer spending
4. Low threats of new entrants due to low cost and the fact there is no need for a
physical platform
5. Retail customers are price sensitive with no loyalty towards a certain retailer.
6. New political regime in Egypt with expectations of new rules and regulations
governing e-commerce
4
Marketing Mix
Product
Online hyper market easily accessed and reached offering the following product
lines
1. Fashion
2. Mobiles and tablets
3. Computers
4. Books
5. TV, Gaming and cameras
6. Kids ,babies and toys
7. Watches
8. Sports
9. Health and Beauty
10. Automotives and tools
11. Furniture and Décor
12. Entertainment
13. Pet supplies
14. Musical instruments
Promotion
Jumia Egypt uses the following promotion mix elements
1. Social media advertising especially Facebook ,Twitter ,and Google play store and
Apple store applications
2. Direct email to emails listed on the website database
3. Online advertising
4. Affiliate programs with other websites to refer customers to Jumia.com
The website performs periodical discounts and offers ,well displayed on the website
through Deal of The Day link placed on the website
5
Place
Virtual online retailer
No physical store
The website ships to and operates allover Egypt
Price
10% selling fees
Advertising fees
Ansoff Matrix
Ansoff matrix is a useful framework for looking at possible strategies to reduce the
gap between where the company may be without a change in strategy and where
the company aspires to be.
Market penetration: Market penetration occurs when a company penetrates a
market with its current products. It is important to note that the market penetration
strategy begins with the existing customers of the organization. This strategy is used
by companies in order to increase sales without drifting from the original product-
market strategy (Ansoff, 1957). Companies often penetrate markets in one of three
ways: by gaining competitors customers, improving the product quality or level of
service, attracting non-users of the products or convincing current customers to use
more of the company’s product, with the use of marketing communications tools
like advertising etc. (Ansoff, 1989, Lynch, 2003). This strategy is important for
businesses because retaining existing customers is cheaper than attracting new
ones, which is why companies like BMW and Toyota (Lynch, 2003), and banks like
HSBC engage in relationship marketing activities to retain their high lifetime value
6
customers.
Product development: Another strategic option for an organization is to develop
new products. Product development occurs when a company develops new
products catering to the same market. Note that product development refers to
significant new product developments and not minor changes in an existing product
of the firm. The reasons that justify the use of this strategy include one or more of
the following: to utilize of excess production capacity, counter competitive entry,
maintain the company’s reputation as a product innovator, exploit new technology,
and to protect overall market share (Lynch, 2003). Often one such strategy moves
the company into markets and towards customers that are currently not being
catered for.
Product Life Cycle (PLC)
The online retail product is in the growth stage
The Growth stage is the second of stages in the product life cycle, and for many
businesses this is the key stage for establishing a product’s position in a market,
increasing sales, and improving profit margins. This is achieved by the continued
development of consumer demand through the use of marketing and promotional
activity, combined with the reduction of manufacturing costs. How soon a product
moves from the Introduction stage to the Growth stage, and how rapidly sales
increase, can vary quite a lot from one market to another.
Challenges of the Growth Stage faced by Jumia
Increasing Competition: When a company is the first one to introduce a product into
the market, they have the benefit of little or no competition. However, when the
demand for their product starts to increase, and the company moves into the
Growth phase of the product life cycle, they are likely to face increased competition
as new manufacturers look to benefit from a new, developing market.
7
Lower Prices: During the Introduction stage, companies can very often charge early
adopters a premium price for a new product. However, in response to the growing
number of competitors that are likely to enter the market during the Growth phase,
manufacturers may have to lower their prices in order to achieve the desired
increase in sales.
Different Marketing Approach: Marketing campaigns during the Introduction stage
tend to benefit from all the buzz and hype that surrounds the launch of a new
product. But once the product becomes established and is no longer ‘new’, a more
sophisticated marketing approach is likely to be needed in order to make the most
of the growth potential of this phase.
Benefits of the Growth Stage for Jumia
Costs are Reduced: With new product development and marketing, the Introduction
stage is usually the most costly phase of a product’s life cycle. In contrast, the
Growth stage can be the most profitable part of the whole cycle for a manufacturer.
As production increases to meet demand, manufacturers are able to reduce their
costs through economies of scale, and established routes to market will also become
a lot more efficient.
Greater Consumer Awareness: During the Growth phase more and more consumers
will become aware of the new product. This means that the size of the market will
start to increase and there will be a greater demand for the product; all of which
leads to the relatively sharp increase in sales that is characteristic of the Growth
stage.
Increase in Profits: With lower costs and a significant increase in sales, most
manufacturers will see an increase in profits during the Growth stage, both in terms
of the overall amount of profit they make and the profit margin on each product
they sell.
8
BCG Matrix
Stars with high market share and high market growth are
1. Mobiles and tablets product category
2. Laptops
3. Watches
Cash cows with high market share and low market growth rate
1. Fashion
2. Sports
Dogs with low market share and low growth rate
1. Furniture and décor
2. Musical instruments
3. Automotive and tools
4. Entertainment
Question marks with low market share and high market growth
1. Gaming and Cameras
2. Pets supplies
3. Books
4. Kids ,babies and toys
