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InterviewsAugust 26, 2020
Ecommerce in Uganda: Online Shopping During the COVID-19 Era by Ron Kawamara of Jumia
Ron Kawamara, CEO of Jumia Uganda
- Written by Sandra Francisco
- Published: August 26, 2020
Interview with Ron Kawamara, CEO of Jumia Uganda
What is a major challenge to the sector in Africa?
It is important to understand that ecommerce is at the beginning of its journey here in Africa. The biggest challenge to this is purely the game of trust. Customers in Uganda are used to physically going into stores, buying, feeling, touching, and haggling over products. They do not trust the products themselves; rather, they trust the people who sell them the products. We find that, historically, there is good reason for this. Many of the products that end up in Uganda are Chinese knockoffs with no clear consumer protections. So, customers have been hesitant to buy from a strange place where they have to prepay for a product and hope that it will be delivered. We see that mental barrier for our customers who want to touch and feel the products. Customers have been hurt in the past by the quality of products, they are used to buying from people they know, and dealing with a price that is not set- they make the price with the seller. There are structural issues as well, such as the quality of connectivity on the internet and the infrastructure to deliver items. Many of our customers find it expensive to access our services. One mbps is about 75 dollars in Uganda. It is not a lot of bandwidth. So it is costly for them to access our products online, it is costly for us to be able execute delivery in the market, which means that it is more expensive and it takes longer to be able to execute a delivery that would only take a day or two in the US or Europe. It adds an additional barrier to the customer.
What challenges have you faced as Jumia Uganda?
I have worked in about five African countries scaling Jumia. The success of Jumia in Uganda has been because we have been able to address those challenges that other people have not been able to address. Our business model here addresses key challenge points. First is building a network of thousands of pickup centers in rural areas where it is not very easy to do door delivery. This has come out of our desire to resolve logistical challenges. Our business model to accept cash on delivery for the majority of our products comes because customers do not trust prepaying for products and getting them delivered safely. The general economic and structural challenges have given us an opportunity and helped us to shape the way we do business in Uganda. The core challenge of doing business as Jumia is monetization as well. Logistics is difficult. The solution for that logistics problem, for example, allowing cash on delivery, means that we struggle to get good, reliable logistics providers who are willing to do cash collections. Cash collections is risky and cumbersome, so many of the big logistics providers are not able or willing to collect cash on delivery, which means that Jumia has to do it ourselves. We have to invest in technology and securing assets and logistics services. In a way, we are a product of our environment in Uganda.
What are the new challenges going forward?
After the onset of COVID, customers are now looking for basics and essential items such as food, sanitizers, medicines, things that are practical for this time. Consequently, as a business, we adapted. We made sure that we could provide this assortment and that it was locked in at the right price.
The biggest change we face now is whether we can become profitable in Uganda. Given the challenges of logistics, the lack of trust for ecommerce in our markets, the fact that we are still missing key brands and assortments that people need, are we able to take that business model and drive it home? Are we able to reach that critical mass of adoption in this market to be able to achieve profitability and level of service that both the vendors and the consumers need? Our first seven or eight years of our existence in Uganda has been dealing with putting in place the key fundamental aspects of the business. Can we get the vendors to buy into selling online and paying a commission? Can we get them to give us their assortment into consignment in our warehousing and be able to get it back and trust us to manage their stock? Can the customers trust us to be able to give them quality products with reliable and good service? Can we build the right technology for our market? Right now, we believe we have built the right business model with the right economics and we will be able to become a profitable business. We need our business to be attractive to more and more customers. What we have seen is that the earlier adopters, people who have used Jumia before, love Jumia. They come back in higher numbers. We see in our surveys that 89% of them would recommend us to their family and friends. The question is whether we will be able to get more customers to come to the online marketplace at the pace that we need to be able to prove wrong those doubters that think ecommerce cannot work in Africa. We have had some key moments in the last six months, one of which was the lockdown due to COVID-19. This was a turning point in that up to then, Jumia in Uganda was seen as a convenience service. With the lockdowns where public transport was shut down, logistics services to and out of the city into smaller Tier 2 and Tier 3 towns was nonexistent, Jumia and ecommerce became a necessity. We became a necessity for customers to be able to get vital supplies and essential goods into their homes. For vendors whose shops were locked up and for distributors who were not able to move their goods, we became a vital outlet for them to continue to make sales at a very critical time. We are more relevant than ever before in terms of what we have been able to add to our platform. Our customers see us as a safe option where you can order online cashless. We are able to deliver in a contactless way. The trust gap that we had before the COVID-19 pandemic has turned into a more trusted and safer way to shop which has really pushed our path to becoming a real driver in the ecommerce sector in Uganda.
What are your competitive advantages in the new COVID era?
Indeed, this is an unprecedented time and we know very well that business as usual will never happen again. People are more cautious about how they shop and what they shop for has also shifted. Before this, Jumia Uganda was highly driven by electronics and appliances. After the onset of COVID, customers are now looking for basics and essential items such as food, sanitizers, medicines, things that are practical for this time. Consequently, as a business, we adapted. We made sure that we could provide this assortment and that it was locked in at the right price. We were able to sign very important agreements with manufacturers to make sure that these products are available in Uganda. So, the platform is much more relevant for the consumer today than it was before COVID. We also realized that we had left out the informal market, those men and women who sold fresh produce and food items at markets. Following the lockdown of the city here in Kampala, many of them could not sell. We partnered with the UN to make sure we can bring those informal markets online and they are now becoming an important part of our assortment offered to our customers. Jumia supports more vendors who are not big distributors. Young men and women and people with disabilities who work in the markets can also now participate in online business following COVID-19. We realized that there is a huge need for a wide assortment of options from food to clothes to electronics to appliances. That is our competitive advantage in this era. We have the widest assortment of any entity in Uganda, the best pricing, and the highest coverage because we are able to deliver to every part of the country. We are well-set for this post-COVID world.
What is your market share in the sector in Uganda?
Jumia is the leading ecommerce platform in Uganda. We are the largest by all measures. We have the highest number of assortment, vendors, and customers. We are the pioneers of this space. When we started here eight years ago, there was no one in the online space. The online space is still small. Only about 1% of all transactions in Uganda happen online, versus about 20% in Europe or North America. Jumia is investing a lot in technology, teams, logistics, warehousing. It is growing fast, especially now that people realize they can buy online and they want to stay home and stay safe.
What is going to be your strategy to develop yourself to deal with this boost in growth?
We are doing the right things. We are giving our customers a great, addictive service by negotiating top prices for them and giving them the assortment of products that they need. We find that our customers are really responding to this. Customers that have used Jumia come back and are happier. We are comfortable with our strategy growth. We do realize, however, that we are going against the tide of how people are used to shopping. They first feel the product, negotiate price, then buy. We are countering this by allowing customers to do the same, but online. They can pay cash on delivery, order online, and pick items up from pick up centers. We are replicating how the customers used to shop. When we give customers these options and a good experience, they come back and we continue to grow and be relevant. The three ways to remain relevant are the assortment we provide, the experience we give, and the convenience.
What are your current projects?
This market has challenges. One of the biggest is payment. Most people in Uganda do not have access to banking so paying online is a challenge. We have launched our own proprietary payment solution called JumiaPay that allows customers to pay using all kinds of schemes from mobile money to VISA Mastercard and other aggregators that are available in the market. It is a game changer for us. Our customers can pay us in many ways, but our vendors can also receive payment in their restaurants or shops with ease. Expanding the ecosystem of persons who can transact with each other and pay us seamlessly without cash is the next step. JumiaPay works in partnership with the local banks and telecos and it is something that the government is pushing in order to increase the financial inclusion in the country. When people are able to transact digitally it is cheaper, more efficient, and a win-win for all stakeholders. It is a very high priority for us as a business to minimize our cost and to help our vendors transact with us and the customers in a more seamless way. Another area that is a challenge in many ways in Uganda is logistics. The network of roads and railways is not consistent. There is no real investment in terms of building efficiency within the logistics sector. We have invested already in a network of pickup stations and hubs for delivery. We are now opening this network we have created to our vendors and customers. Jumia Uganda is now not only delivering products to our customers, but from factories to wholesalers, distributors to retailers, businesses to customers. We see logistics as a space that needs a lot of innovation and investment and we will continue to do that in 2020.
Are you pushing more towards the consumers or vendors?
This question is more like a chicken and egg issue. You need the customers to make the vendors happy and you need the vendors to make the customers happy. Our model is commission based, so our true customer is the vendor. Our goal is to make sure that we create a revenue stream for our vendors. The only way we can create value for those vendors and for Jumia is to build a fantastic platform that customers will enjoy ordering on, a fantastic delivery experience, and a fantastic overall customer experience around our brand. Therefore, we are focused on both customers and vendors. You cannot have one without the other. Customers in Uganda are very savvy. They know what they need and they are not shy to say what they want with their wallets. We invest a lot of our time and consumer insights into understanding what our consumers need and we give this information and analysis to our vendors so they can optimize their offer and make it exactly what customers require from them.
What has been the impact of the IPO and the stock exchange listing?
Jumia has had a huge impact on Uganda in many ways. When we opened, ecommerce was not something that was happening in Uganda. We had to hire people who had no experience in the IT systems we were using, no experience in commercial negotiations, no experience in delivery. We had to train and grow these people. The impact on the job market created a lot of entrepreneurs who have gone on to create their own businesses. We have seen the impact on our vendors, many of whom are small sellers who do not have a shop and who sell only on Jumia, as well as with the whole ecosystem of logistics companies that meet only on Jumia. The IPO was important beyond that. I have been with Jumia from the beginning and we never looked at technology as a way to create value in Africa. For so long, what we saw was that value was created from extractives like infrastructure development. We never believed or saw that we could use technology that creates value for the vendor and the customer. The IPO validated for us that it is not just the impact we have here in Uganda for our vendors and customers, but the international investors, people who are purely focused on making money, can see that you can use technology to create value in Uganda and in Africa. It was great validation for the whole ecosystem of startups in Africa that we are part of. The symbolic nature for me was exciting, our vendors and teams were excited, and we continue to be excited. It is a point of high remark for what is possible in Africa beyond the traditional industries that we think of when we look at investment on the continent.
What has been the impact of MTN selling its shares?
MTN is a partner that has been with us since the beginning. We do not know what their future plans are. As of now, they are very important shareholders. But like all shareholders on the stock exchange, what they do with their stock is up to MTN. On our end, we are focused on growing the value of that share and we are confident that it will continue to be attractive to investors and an attractive proposition globally.
Project yourself to the medium term, three years’ time. What is your vision for Jumia Uganda?
Jumia in three years’ time will be a place customers can trust to get everything they need for their lives: services and products at the price point and convenience that you cannot find anywhere else. It is going to be a place where vendors are reliably making very strong increment revenues. It is going to be a brand that is trusted for the quality and level of service that is superior to other competitors in the market. It will be a big factor in improving the everyday lives of Ugandans. Customers will be able to save money and save time and vendors will be able to make more revenue and be able to reach more people. We are going to continue to be a strong impact in the labor market, training young people who can go on to become entrepreneurs and start their own businesses. We are going to help the government understand the potential of innovation and ecommerce, data protections, and help them see that the value chain is important for taxations. We hope to have expanded the ecosystem of payment solutions and logistics solutions. We see our role in this as very important. Jumia is not me or the shareholders. It is Ugandan sellers selling to Ugandan customers. I see unlimited potential in that. We continue to optimize this for our customers and our vendors and continue to create value for our partners, logistics providers, payment supporters, and everyone within the value chain.
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