Sub-Saharan Africa’s different way of doing e-commerce – Facebook pitches in with Marketplace in a 37-country roll-out

27 August 2021

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Outside of South Africa, Sub-Saharan Africa’s e-commerce sector can sometimes seem like a mirage: now you see it, now you don’t. The Covid-19 pandemic has tilted the table a little towards adoption but the jury’s still out as to whether it will last. Russell Southwood looks at the latest Facebook Marketplace roll-out announcement in the broader context of the overall market.

E-commerce in Sub-Saharan Africa is messy and not a big shiny creature like Amazon. You can talk about Jumia being a unicorn but that’s ‘money in’ and it doesn’t really capture the dynamics of the market.

People pay cash at the front door and even before Marketplace went live, Africans in many countries were using Facebook and WhatsApp to buy and sell things. A seller puts an advert up on a platform, a buyer sends a WhatsApp message or rings. They agree to meet and exchange cash for the purchased item. It’s kind of clunky but it clearly works.

What Facebook Marketplace does is try and organize it to make it easier for the buyer. People can find what they're looking for by filtering their results by location, category and price, making finding exactly what you want near you easier. The big win for Facebook is that it potentially gets more small and medium-scale sellers advertising because it gets the ‘critical mass’ of buyers, something that’s much harder if you’re an individual seller.

Initially Marketplace was rolled out in the big African online markets – South Africa, Nigeria and Kenya – with a side bet in Ethiopia. This week it has rolled it out into another 37 countries: Benin, Botswana, Burkina Faso, Burundi, Cape Verde, Central African Republic, Comoros, Democratic Republic of the Congo, Djibouti, Eritrea, Eswatini, Equatorial Guinea, Guinea, Guinea-Bissau, Gabon, Gambia, Ghana, Liberia, Lesotho, Malawi, Mali, Mauritania, Mauritius, Namibia, Niger, Republic of the Congo, Rwanda, Sao Tome and Principe, Senegal, Sierra Leone, Somalia, South Sudan, Tanzania, Togo, Uganda, Western Sahara and Zimbabwe.

Meanwhile back on 10 August, Jumia announced its second quarter 2021 results. Having cut back on advertising for a period, it is now adopting “a ‘full funnel’ approach particularly on Facebook that goes beyond direct- response ads and includes more brand awareness campaigns with more engaging video content targeted towards relevant audiences.” So Facebook is both a competitor on marketplace activity but also a winner on advertising spend from both Marketplace and Jumia.

Jumia has launched a new grocery channel that had almost 100,000 products by the end of June 2021:” Through our on-demand platform, Jumia Food, consumers can make ad-hoc purchases of grocery and FMCG items from convenience outlets and supermarkets for delivery within one hour. We are also piloting the use of dark stores or micro fulfillment centers located in high population density areas for the fulfillment of grocery orders.” A lot of that is in the future tense so beloved by VC-driven start-ups and of course, it’s too early for Jumia Food customer numbers.

Trying to make itself useful to donors, it has added an agricultural and farming products category in Cote d’Ivoire and reports that that agricultural sprayer pumps and poultry feeders are among the best selling categories. As with Jumia Food, this feels like something that hasn’t yet arrived but sounds good.

Annual active customers have edged up from 6.8 million in the same quarter last year to 7 million in the quarter ending 2021. However, each of those customers in either quarter is only making an average of 1 or slightly more than one order. So for example, 7 million customers generated 7.6 million orders but the revenues fell from US$251 million to US$223.5 million in the quarter ending 2021.

The strategy of improving margins by getting customer to use its own payments platform – Jumia Pay – has gone from 23.5% of Gross Merchandise Value to 25.3% in the quarter being reported. It’s an increase but it will take a long time to radically shift the needle at this rate.

Since a significant part of Jumia’s revenues comes from sellers on its platform, it has surely has to wonder whether Facebook Marketplace will only make its road to profitability just that little bit harder.

In Brief

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