The battle of Konga vs Jumia has begun. As the Nigerian ecommerce game becomes ever more competitive, the biggest companies have been founded, have grown incredibly, and have suddenly found themselves on the brink of direct competition with one another.
In this article, we hope to give a clear-eyed analysis of the Konga/Jumia divide:
With both operating very similar business models and engaging the same target market, many are asking the question, what differentiates the two?
To answer that question, we will look at a few different angles of the story of Konga vs Jumia.
In this Konga ecommerce and Jumia review, we will discuss:
- The business models of Konga and Jumia
- Konga and Jumia Profitability
- In Konga and Jumia Capitalisation
- Kong and Jumia: Which is better for entrepreneurs?
So first, we’ll look into the way these companies operate, and what exactly they do.
Ecommerce has experienced a significant growth over the years, the idea of online shopping before the advent for the two giants was almost a fairy tale. Gradually, with increased internet penetration, eCommerce a lot of new players are beginning to arise and there seems to be a race for third place.
However, as an emerging market, it was expected that eCommerce would be met with some resistance in Nigeria.
Ordinarily, the eCommerce Amazon-style is a low margin, high volume game. To remain in the game, players have to out compete their competitors, and what other ways to do that than outspending them?
However, loyalty in the context of the Nigerian market is a luxury and major eCommerce outfits like Jumia and Konga soon began to succumb to these macroeconomic challenges by resorting to promotional incentives like promises of Payment on Delivery (PoD) and free last mile delivery.
And while this was great news for customers who were so happy about cashing in on this no risk offer by the e-giants. This offering became a high barrier of entry which starved new comers from any opportunity of gaining market share, because now they would have to offer Pay on Delivery option as well.
Up to June last year, Kinnevik had invested a total of SEK 209 million ($24 million) in Konga. For a company whose burn rate is excessively high (₦40 million monthly advertising spend as estimated by a close source), it says a lot that the company isn’t profitable. More importantly, it is revealing of what the new CEO’s actual job description is — to lead Konga to profitability lest Kinnevik pulls the plug finally — and also why Konga hasn’t raised any new fund in over 2 years.
Still coinciding with the period of poor trajectory by the company, the new CEO, Shola Adekoya, found himself staunchly defending Konga’s latest policy; especially seen when he stated that, “the restructuring which also entails workforce reduction is a prudent and necessary step for a long-term success of the company.”
Jumia is the flagship ecommerce company of German internet company incubator, Rocket Internet – in Africa. Jumia Nigeria initially began operations in June 2012 under the brand name Kasuwa, later merging with another Rocket Internet ecommerce start-up, Sabunta to birth Jumia.
According to a founding employee, who asked for anonymity, Kasuwa was founded with a $10 million dollar investment from Rocket Internet – the South African Managing Director Dr. Hendrik Harren co-founding it with a Ghanaian Notore Industries regional head, Raphael Afaedor.
“Among the ventures I founded is Africa’s most successful e-commerce venture: Jumia Nigeria,” Hendrik proudly says on his LinkedIn profile.
The recent layoffs within the industry, the Jumia consolidation, and the not so heart-warming 2016 quarterly reports of the Africa Internet Group (parent company of Jumia) and Kinnevik have made a few people predict doom and gloom when it comes to eCommerce in Nigeria.
In as much that I understand that Nigeria may not yet be able to support more than one major eCommerce player at the moment, I believe that we are yet to scratch the surface.
We need to understand that Konga, Jumia, VConnect, e.t.c are eCommerce marketplaces, thus leaving out lots of room for niche eCommerce sites to spring up and claim their territories – provided that their approach is strategic and well executed.
Online marketplaces like Konga and Jumia have their advantages in that it is easier for you as a retailer to open up a storefront on them instead starting your own eCommerce store. In addition, these platforms act as powerful marketing engines. However, they have their own inherent disadvantages which would have bad effect you as a retailer on the long run.
This post is about identify how eCommerce marketplaces affect retailers negatively, and how they can leverage and piggyback eCommerce marketplaces to grow their own eCommerce stores.