Nigeria startup seeks to tap potential of Internet access surge

Online retail is clicking in Africa’s biggest market

AFP-JIJI

The headquarters for this Internet startup is cheekily nicknamed “Graceland” and its co-founders are young Harvard graduates with grand plans who have rapidly expanded the business over the past year.

Silicon Valley? Not even close. This emerging world Internet company, called Jumia, is now located in Nigeria, and the creators of the business say there is no better place to pursue their strategy.

Nigeria, Africa’s biggest market of 160 million people, has seen Internet access expand rapidly in recent years, opening opportunities for companies to exploit. While major obstacles in Nigeria remain for any business, from deeply rooted corruption to a lack of electricity and widespread fraud, both online and elsewhere, the potential is enormous.

Online retailers such as Jumia, which is present in a handful of other African countries, are seeking to unlock the possibilities, developing plans that cater specifically to the local market.

“I doubt there are many markets in the world with 160 million people, a growing middle class and nothing in terms of organized retail,” said Tunde Kehinde, a 29-year-old Nigerian who graduated from Harvard and co-founded what would become the country’s branch of the online retailer. “And so for us, that’s the vision that Jumia has: to help build organized retail here in the largest country in Africa.”

In one year of operation, Jumia Nigeria has grown from around 10 employees to 450. It now offers 50,000 products, including clothes, phones, electronics and even cigars, and says the site receives 100,000 visitors each day.

A number of other sites are pursuing similar strategies in Nigeria, including Dealdey.com and Konga.com. According to recent figures, they have good reason to do so.

Thanks in large part to the widespread use of mobile phones, Internet access grew to 46 million people in 2011 compared to 11 million in 2008, according to figures from the nongovernmental organization Freedom House. Research firm Euromonitor International says online sales in Nigeria nearly doubled over the course of a year, from 1.7 billion naira ($10.5 million) in 2011 to 3 billion naira last year.

Jumia Nigeria has not yet made a profit, but its co-founders believe it is only a matter of time.

The company was created with capital from German firm Rocket Internet and telecom firm Millicom. Kehinde and his Harvard classmate Raphael Afaedor, a 36-year-old Ghanaian, had earlier worked to launch two online retail sites in Nigeria and felt they were the perfect people for the job.

Rocket Internet, an aggressive investor in startups that says it has created 15,000 jobs in more than 40 countries, has also launched Jumia branches in Morocco, Egypt and Kenya. In South Africa, it goes by the name Zando. It is also planning launches in various French-speaking West African nations.

“In Africa, you have a situation where there are very few options for quality e-commerce sites” coupled with the fact that traditional retail, such as supermarkets and malls, are underrepresented in many countries, said Jeremy Hodara, CEO of Rocket Internet for France and Africa. Nigeria offers “enormous” opportunity, said Hodara, but “the execution is very complex.”

The costs of doing business locally add up quickly.

Despite its status as Africa’s biggest oil producer, Nigeria does not generate nearly enough power for its population, forcing companies to employ large and expensive generators. Real estate prices in upscale areas can be prohibitively expensive, with the oil-driven economy throwing many things off balance. Most people in the country still live on less than $1 per day.

Fraud and corruption continue to be a major concern, and anyone who has ever received an email from a “Nigerian prince” would certainly think twice about buying something online from the country.

But Jumia has sought to address concerns such as those, particularly through cash-on-delivery, which allows customers to physically inspect their purchases before handing over any money. Payments can also be made by card if customers choose to do so.

The company promises deliveries, even to the most remote areas of Nigeria, in a maximum of five days. It delivers through a combination of its own couriers and an arrangement with DHL.

In the upscale Lekki district in Lagos, the economic capital of some 15 million people, Dera Meka recently was excited to receive her first Jumia delivery — a pair of shoes ordered online and paid for in cash. She said shopping online allowed for more choice, but perhaps most importantly, she could avoid the epic traffic jams that all Lagos residents dread.