Jumia IPO Highlights Africa’s Shifting Online Travel Ecosystem
Skift Take
Jumia is one of a few companies that deserve credit for building nascent online travel businesses in several African markets. But as Google and other tech platforms gain a continent-wide presence, they may use their pervasiveness to play kingmakers in online travel.
Jumia, an e-commerce superapp based in Nigeria, debuted last Friday on the public markets and raised $196 million. The company mainly helps 80,000 active merchants sell goods in 14 countries on the continent. Some investors called it an “Amazon for Africa.”
Unlike Amazon, however, Jumia has made travel sales an essential part of its offering. Jumia, founded in Nigeria and backed initially by Germany’s Rocket Internet, aims to become a superapp. It wants consumers to use it often to buy items like diapers. The idea is to cross-sell these shoppers into buying more expensive products, namely travel. The company’s JumiaPay and Jumia One payment and loan services may appeal to a continent that broadly relies on cash to avoid hefty bank fees.
Yet the more interesting part of Jumia Travel's story is how it and its regional competitors have had to adapt to the distinctive local and regional nuances of Africa's various travel markets and economies.
Enthusiasm Versus Realism
On its first day of trading, Jumia’s shares closed up 75 percent.
However, not everyone shared investor enthusiasm. Jumia last year generated revenue of $149.6 million, but it lost $195 million. It had only four million customers for all of its services. That’s small on a continent with 1.2 billion people.
“You can’t scale as quickly as Alibaba did in China or Amazon did in the States,” said Ndubuisi Ekekwe, founder and chairman of Fasmicro, a Nigerian investment group that focuses on technology companies but avoids consumer travel businesses.
“In Nigeria, companies like Jumia only have about 30 million potential customers, we estimate, with the necessary disposable incomes for travel, out of about 190 million residents,” said Ekekwe. “Social mobility is too static. Africa’s strongest economies typically don’t have the broad and growing middle classes you need to repeat the success of a Ctrip.”
On the supply side, Africa also typically presents challenges.
“Companies have barely scratched the surface when it comes to bringing offline travel purchases online,” said Marek Zmysłowski, a founder of Jovango who h
