Category Archives: eCommerce

Double 11 (Singles’ Day) Festival in China

November 11 marks a huge shopping festival by Alibaba in China. Known as “Singles’ Day” or “11.11”, it is now acknowledged as the largest e-commerce day in the world. It is mainly on Alibaba platforms like Tmall and Taobao. Rival commerce sites such as JD.com and Lazada also run their own festival days during China’s long shopping season.

Singles’ Day 2019 saw another record year of sales reaching $23 billion (158 billion yuan) in nine hours. Sales hit $1 billion in the first minute and 500 million shoppers were expected to participate. This was achieved despite a slowdown in China’s economy and the ongoing trade spat with the US. Singles’ Day is three times bigger than the largest US largest shopping day – Cyber Monday which had $8 billion of sales in 2018.

Some numbers about Singles’ Day from Jing Daily.

  • On 11.11, Alibaba sells more on one day than many countries do in a year.
  • Alibaba founder Jack Ma has a plan for the company to attain $1 trillion of gross merchandise volumes in 2020 and create 100 million jobs, and serve 2 billion customers. As such the company is expanding in other countries. In 2017, Russia, Hong Kong and the US were the main markets.
  • International brands are signing on with discounts and specials, and in 2018, 237 brands, including Apple, Estée Lauder, L’Oréal, Nestlé, Gap, Nike, and Adidas has sales of 100 million Yuan ($14 million) on Singles’ Day.
  • The holiday was originally aimed at young men (bachelors), but has now evolved such that key targets for brands include China’s 400 million millennials, the “aspirational class” and women, the “she economy.” 
  • Over 80% of the Singles’ Day sales are made on a mobile device .. so retailers need to enhance the whole shopping experience by employing unique mobile features like live streaming, interactive games, virtual reality, video marketing, and digital storytelling.
  • On Singles’ Day in 2017, 1.5 billion transactions were processed by Alibaba’s Alipay.

Other Notes:

Kenya’s Safaricom, which has a partnership with AliExpress, also had some Singles’ Day promotions. They signed a deal in March this year enabling Kenyans to shop on ALiExpress and pay with M-Pesa.

The Jack MA Foundation runs an annual Africa Netpreneur Prize Initiative (ANPI) that awards a total of $1 million in prize money to ten African entrepreneurs each year.

Read more about 11.11 from Jing Daily here.

EDIT: Alibaba reported that Singles’ Day 2019 generated US $38.4 billion of gross merchandise volumes. It featured 200,000 brands and resulted in 1.3 billion delivery orders.

Social Media That Matters by Ogilvy

Ogilvy Africa and Ogilvy Social Lab held a session in Nairobi a few days ago. Speakers tackled the state of social media in 2019 in terms of technology usage, making brands stand out, and the role of influencers, among other items. 

It looked at trends in the world of media dominated by platforms like Facebook, Twitter, Amazon, Google (the four horsemen of the internet), and we learnt that we are in the middle of the biggest social experiment ever as billions across the globe use these platforms every day to network, communicate, transact, engage and get information.

Some of the highlights included:

  • People look at their mobile phone screens an average of 53 times a day – consuming information as text, images, video, and stories in bit sizes.
  • Users spend an average of 6 hours 45 minutes per day consuming digital media, with social media accounting for 2 hours and 20 minutes of that. In Kenya, one study found that young users spend 3 and ½ hours a day on social media.
  • Kenya has 8 million Facebook users and 700,000 Twitter users. It also has 1.5 million on Instagram and 2.1 million on LinkedIn.
  • But engagement is a poor predictor of business results. Brands should produce less content, personalize it and pay to promote it.

  • Everything is becoming a shop – thanks to tools like augmented reality, ordinary objects like posters and benches can come to life when viewed through a phone lens – and lead to hidden videos and links to merchants as seen in Snapchat Lens, Google Lens and Shopping on Instagram. An example was cited of the Jordan shoe sale marking the 30th anniversary of Michael Jordan’s iconic dunk – people at special Nike parties who watched a geo-located augmented-reality advert on Snapchat were able to order a new release of the vintage shoes, in their size, and have them delivered to their homes in two hours. The shoes sold out in a few minutes.
  • People go to YouTube with ‘intent’ – they know what they are looking for and want to watch (usually in the evenings) and this contrasts with ‘discovery’ driven video consumption in the daytime. Also, the first seconds matter the most – there is 47% awareness created in the first three seconds of a video message.
  • The most ignored influencer is the one who works in customer care.

UNCTAD report shows an unequal digital global economy

The increased use of digital platforms in everyday lives across the world is leading to a divide between under-connected nations from hyper-digitalized societies

The Digital Economy Report released by the United Nations Conference on Trade and Development (UNCTAD) shows that China and the USA have done the most to harvest the digital economy and now dominate the rest of the world and leading to an unequal state of e-commerce. The two countries host seven global “super-platform” companies – Microsoft, Apple, Amazon, Google, Facebook, Tencent and Alibaba that account for two-thirds of the total market value of the seventy largest digital platforms with Naspers as the only African company in the group.

Google and Facebook collected 65% of the $135 billion spent on internet advertising in 2017, while, in Australia, Google took 95% of the “search advertising” revenue while Facebook took 46% of the “display advertising” revenue.

Europe’s share of the digital economy is only 4% while Africa and Latin America combine for 1%.  In Africa, progress has also been uneven with four countries – Egypt, Kenya, Nigeria and South Africa accounting for 60% of digital entrepreneurship activity. They are followed by a second tier of Ghana, Morocco, Senegal, Tanzania, Tunisia and Uganda (with a combined 20%)

The Report showed that the evolving digital economy has a major impact on achieving sustainable development goals (SDG’s) and calls for governments in developing nations to focus efforts on things like:

  • Skills development & re-education e.g. consider that in the Western world, you can do a whole university degree online.
  • Revising policies on data privacy & sharing e.g. have restricted local data sharing pools and have tariffs on cross-border data.
  • Revising competition regulations e.g. curb the tendency where platform companies tend to capture/acquire young promising companies in the developing world.
  • Taxation e.g. developing country governments should seek to tax digital platform companies.
  • Employment e.g. by setting minimum wages & work conditions for gig-economy workers.
  • Break down silos: no longer think of government as being separate from academia, private sector, civil society and tech communities.
  • Also, while the US and Europe have divergent views on data protection, it cites a survey which found that Kenyans had the least concerns about data privacy (at 44%).

Speaking at an unveiling of the Report in Nairobi, Dr. Monica Kerretts-Makau said that the world is trending towards a captive society where you have to be on a platform to transact in an economy and that presents problems and opportunities in the African context.

The 2019 issue of the Report, that was previously focused on the “information economy”, can be downloaded here.

Jumia IPO – Prospectus Peek

Edit April 12: Jumia lists on the NYSE

EDIT March 29 2019:  Mastercard Europe SA has agreed to purchase 128;50.0 million of our ordinary shares in a concurrent private placement at a price per share equal to the euro equivalent of the IPO offering price per ordinary share. Based on an assumed IPO offering price of $14.50 per ADS, which is the midpoint of the price range set and an assumed exchange rate of $1.1325 per 128;1.00, this would be 7,810,364 ordinary shares (corresponding to 3,905,182 ADSs). We will receive the net proceeds from this Concurrent Private Placement.

  • Mastercard Europe SA has agreed to purchase €50 million of our ordinary shares in a concurrent private placement at a price per share equal to the euro equivalent of the initial public offering price per ordinary share.
  • Certain of our existing shareholders have the right to subscribe for additional ordinary shares at nominal value depending upon the initial public offering price and the number of shares placed in this offering. Assuming a placement of all offered ADSs at the midpoint of the price range, these existing shareholders may subscribe for 18,157,245 ordinary shares against payment of €18.2 million.
  • The chairperson of our supervisory board, Jonathan Klein, has indicated an interest in purchasing an aggregate of up to $1.0 million in ADSs in this offering at the IPO price.

Posted March 15 Reading the F-1 filing for Africa Internet Holding GmbH, the Africa e-commerce company that will now be known as Jumia Technologies AG after it applied to list its shares on the New York Stock Exchange (NYSE) under the symbol “JMIA”.

Not much about the management at Jumia has been shared since Rocket Internet was dissected in Bloomberg story on their formula for Africa.  “Rocket sends three people to a different country to start a business: a CEO, a CFO, and a COO. The CEO builds the team, does the marketing, and drives sales. The CFO manages the revenue growth and cash burn. The COO makes sure we have a big enough warehouse and that the packages get delivered… and .. (the brothers) didn’t feel bad about copying. They had this feeling like they have to make Germany great again, so they only care about building big companies.

Why Africa?: The company (Jumia) is Africa Internet Holdings, registered in Germany. Jumia sees Africa as a market with 1.2 billion people (Jumia is in countries with 55% of this population), GDP of $2 trillion and 453 million internet users (Jumia is in countries with 77% of these internet users) and (they) believe that this younger generation, born into an “online” world, is increasingly seeking access to a wider choice of food, consumer goods and entertainment options as it becomes increasingly connected to, and aware of, global consumer trends.

They now have 4 million active customers, 81,000 active sellers, handled 13 million packages in 2018 and had 54% of transactions done on Jumia Pay which they introduced in Nigeria in 2016 and Egypt in 2018.

Ownership: The company was incorporated in June 2012. Shareholders in December 2018 were Mobile Telephone Networks Holdings – MTN (31.28%), Rocket Internet (21.74%), Millicom (10.15%), AEH New Africa eCommerce I (8.86%), 6.06% each for Atlas Countries Support and AXA Africa Holding, Chelsea Wharf Holdings (5.51%), CDC Group (4.04%), Rocket Investment Funds (3.48%) and Goldman Sachs (2.83%). A new shareholder, Pernod Ricard, came on board investing €75 million cash in January for 7,105 shares which became 5.1 million shares in a capital increase in February 2019 and they are entitled to more shares if an IPO happens within 18 months of their investment.

Governance: Jumia has 2 Co-CEO’s – Jeremy Hodara and Sacha Poignonnec who are both co-founders of the Company. There is also Antoine Maillet-Mezeray, the CFO – and the three, who all reside in Germany, comprise the management board of the company.

As part of the IPO, a supervisory board has been formed and it includes Gilles Bogaert (CEO Pernod Ricard SA), and Andre Iguodala, an NBA player with the Golden State Warriors. Other are Blaise Judja-Sato Jonathan D. Klein, Angela Kaya Mwanza (UBS Private Wealth), Alioune Ndiaye  (CEO Orange Middle East and Africa), Matthew Odgers (MTN Group) and John Rittenhouse.

Employees: The Company has a total of 5,128 staff including 1,213 in Nigeria, 572 in Egypt, 686 in East Africa and 183 in South Africa. Also, an ESOP (stock option plan) was set up in 2019 that will award options to key management of Jumia. The three members of the management board had total compensation of €1.04 million in 2018, and the two co-CEO’s each have 2.2 million shares as underlying options that were granted in 2016.

Assets: The Company has no real estate. It is headquartered in Berlin where they lease office space along with other spaces in Dubai and Portugal. They also have leased warehouses in Lagos, Cairo, Nairobi, Casablanca, Abidjan, and Cape Town.

Significant subsidiaries are CART (Nigeria), ECART Ivory Coast, ECART Kenya, ECART Morocco and Jumia Egypt.

Financials: For 2018 they had revenue of €130 million. Of the revenue, €66 million from West Africa, €37.8 million from North Africa, €15 million from South Africa and €10.8 million from East Africa (Kenya, Uganda, Tanzania, Rwanda – up from €4.6 million in 2017. In February 2016, they had exited Tanzania and sold their four Tanzania subsidiaries to co-CEO Hodara who wanted to run them himself.

In 2018, the goods they sold cost €84 million and Jumia also spent €94 million on administrative expenses (including €48 million on staff), €50 million logistics, €47 million on selling and advertising, and €22 million on IT expenses (including 12 million staff)

As a result, in the year 2018, they lost €169 million, compared to a loss in 2017 of €153 million. As at December 2018, the company had cash of €100 million and accumulated losses of €862 million.

Taxation: There are potential tax liabilities that have not been assessed over and above the €30 million in pending and resolved matters.  Their effective tax rate was 0.5% in 2018 and 7.4% in 2017.

The company has accumulated tax losses of €358 million including €145 million in Nigeria, €61 million in Egypt, €39 million in Kenya (~Kshs 4.5 billion), €28 million in South Africa and €25 million in Morocco.

Jumia Filing Matters: 

  • Filing costs about not confirmed but there will be a $12,120 SEC registration fee and an estimated $15,500 FINRA filing fee.
  • The public offer price is not known, but the maximum value after the listing is estimated to be $100 million.
  • Underwriters are Morgan Stanley, Citigroup Global and Berenberg
  • Ernst & Young auditors since 2014 and have provided two years of audited results.

Growth Strategies: 

  • Leverage their e-commerce platform to grow the consumer base in each market.
  • Drive consumer adoption and usage through increased consumer education as they continue to strive to deliver a positive online shopping experience
  • Increase the number of sellers and level of seller engagement
  • Develop Jumia Logistics in to better serve consumers and drive economies of scale.
  • Increase the adoption of JumiaPay.  They have agreements, through partners, in Nigeria, Egypt, Ghana, and Ivory Coast to offer JumiaPay, but they don’t offer the full JumiaPay wallet range of services possible, which would require additional eMoney permissions in every country (e.g. Morocco would require €1 million in core capital and €450,000 for Ivory Coast). In Kenya, where they currently operate as a direct lender, they are preparing a new licensing application for JumiaPay.

Risks cited in the Jumia offer:

  • One caution cited is that (US) investors may have difficulty enforcing civil liabilities against us or the members of our management and supervisory board – (as) we are incorporated in Germany and conduct substantially all of our operations in Africa through our subsidiaries.
  • We do not expect to pay any dividends in the foreseeable future.
  • We have broad discretion in the use of the net proceeds from this offering and may not use them effectively.
  • We face competition, which may intensify.  Current competitors include Souq.com in Egypt (affiliated with Amazon), Konga in Nigeria and Takealot, Superbalist and Spree, which are all part of the Naspers group, in South Africa. Also .. some of our competitors currently copy our marketing campaigns, and such competitors may undertake more far-reaching marketing events or adopt more aggressive pricing policies.

€1 = Kshs 115 (Kenya shillings)

EDIT
Nov 19, 2019; Jumia shuts down in Cameroon

Nov 28, 2019; Jumia closed in Tanzania: Regarding Tanzania, Jumia had ceased operations in 2016 and sold four subsidiaries – AIH General Merchandise Tanzania, Juwel 193, ECart Services Tanzania and Juwel E-Services Tanzania to Jeremy Hodara, their co-CEO for €1 each. Later in 2018, he decided to sell the Tanzanian entities, which had revenues of €238,000 thousand and net losses of €3,088,000, and Jumia Facilities (Dubai) bought a 51%, leaving Hodara with 49%.

December 9, 2019: Jumia Food to close Rwanda operations. Jumia will no longer be able to accept cash on delivery and can only process pre-paid orders and no orders will be processed after 9th January 2020 at which point all customer accounts will be closed. (via New Times Rwanda)

December 9, 2019: Jumia Travel to be taken over by Travelstart, part of drastic company changes. (via TechCabal)