Why Owners Of Jumia Sold Off Their Firm

Why Owners Of Jumia Sold Off Their Firm


Jumia is rated as one of the thriving e-commerce brands in Nigeria. It became a household brand within two years. The owners’ decision to sell all their equity to some global investors has sparked interest, writes ADEDEJI ADEMIGBUJI.

Emotions ran high the day co-founders of Jumia Raphael Afeador and Tunde Kehinde broke the news to their young team of 500 experts at their Ogba, Ikeja, Lagos campus that new owners are taking over the business.

Inside the long horizontal office dormitory built beside their 90,000-square foot-warehouse, the largest campus in West Africa, where young men with an average age of 23 attend to thousands of online shoppers at the speed of light, Afeador, noted: “Jumia was an exciting one and a-half-year journey for us. We are extremely proud of Jumia and wish all the best to the company and all the people here.”

If Afeador’s message was not clear enough, his partner, Kehinde put the message succinctly. “As we move on to start our own businesses, we owe a lot to every member of the team, together we made history, together we have built Nigeria’s first and biggest online retail brand; a fate we never would have achieved without you.”

The meeting ended an era in Jumia, which has won several local and international awards for pioneering Nigeria’s first e-commerce website.

In a brand life cycle, the growth stage is a level when sales start growing exponentially.

During that stage, brand managers or investors often chart a new strategic direction to increase distribution to further enhance sales, according to netmba.com. As a strategic option, a company may also improve the quality of their product brands, adding various flavours or features as the success could attract one or more companies, more competitors into the market with their own competing brands; in effect, some competitors may try to lower prices to gain marketing share.

However, for the Jumia co-founders, to increase market share and sustain its leadership position against growing competition in Nigeria’s rising e-commerce market, bringing venture capital appears to have become the option. This option necessitated the founders’ exit to build a new brand. Experts are wondering what could have pushed founders of such high networth company to sell the brand to African Internet Holding, which is owned by a controversial German e-commerce cloning king.

The total global investment in Jumia later saw MTN, Rocket Internet and Millicom International Cellular acquire 33.3 per cent equity each in Africa Internet Holding, a partnership that will expand MTN online retail and other essential digital services on the African continent.

To marketing experts, the brand is reputed to have rebuilt trust among online shoppers who in the past were skeptical about online transactions. Also, considering the growing rate at which banks are adopting online transactions payment, just as the online payment system is beginning to encourage consumers to shop online, brand and marketing professionals wonder why the founders are letting go of their gold mine. The brand success, however, has drawn rising interest to venture into their own online platform to push sales. Konga.com, Dealdey, tafoo among thousands of market followers have become major competitors to Jumia.

While the allure of impressive growth of the industry, whose total worth in 2014 is project at N150 billion, the Millicom President/Chief Executive Officer (CEO), Hans-Holger Albrecht, said: “We are pleased to welcome MTN as a strategic partner to accelerate the growth of our online alliance in Africa. It is a significant vote of confidence in its future. Between us we have more than 220 million mobile customers in the continent with very limited overlap.”

However, after announcing their departure from Jumia, Kehinde told The Nation that they no longer have stake in the company, a decision that spark debate among marketing communication experts. Under the new arrangement, the co-founders have parted ways to start up new businesses.

Kehinde is venturing into logistic business while Afaedor’s next move remains unknown for now. “We have left Jumia going to a month now and we no longer own a stake in the company. Afeador and I have also parted ways but a time will come when I will talk about my new business, a logistics management company. For now, everyone will do his businesses separately,” he said.

Now that the new investors have taken over, announcing Nicolas Martin and Jérémy Doutté of AIH as Chief Executive Officers (CEOs) of Jumia a few months ago, marketing communication experts, who spoke with The Nation, assumed that many factors could be responsible for the sale of the Nigerian e-commerce brand by its co-founders.

The Marketing Services Director, Nestle Nigeria Plc, Mrs Iquo Ukoh said: “Before you talk about a brand, you talk have to talk about the business. If the owners decide to sell, maybe, they have seen something more profitable. Maybe they are moving to a more profitable venture that could have better value. They might be going into something bigger than Jumia in terms of value and profit because I know that these guys are good business people. So, they could have decided whether to sell the brand at maturity or growth stage, however, they might feel the value of selling it at growth stage is better for them.”

Looking at how the vision of a brand builder defines its future, the former Chairman of Nigeria Institute of Public Relations (NIPR), Lagos Chapter, Mrs. Nkechi Ali-Balogun, feels bad about the sale of Jumia. She said such a local brand that has assumed a national brand trademark should still reside with the founders because the vision of the founders repose trust on brands.

However, she cautions that the move might have to do with the goal of the founders from the outsets. “I thought Jumia is good initiative as a local brand but I’m not impressed that the young guys that founded it have sold it to foreign investors. However, it depends on the challenge that propelled them to sell it. It might be for profit, if that was the initial goal.

“They brought e-commerce to awareness; create a run for competitors such as Konga and the rest. Building a brand has to do with integrity, trust but how equipped are the new owners in meeting up the trust they have built. The impact of founders of businesses has a lot of influence on the life of a brand reputation. But when consumers are aware of your dented image they won’t patronise you.”

She also raised issue of safety of credit cards under the new investors, which if negativ,e will rob-off on the brand. “There is a trust issue because for me to give my ATM pin to new people could be difficult because you are dealing with faceless people. E-commerce is a faceless business,” she said.

While the Managing Director of Quadrant Company, Mr. Bolaji Okusage, affirmed that Jumia was incubated with venture capital and abi nitio set up for sale, there are fears that the company might witness job loss for some of the Jumia team. But Jeremy, a new Co-CEO, told The Nation that would not be the case.

“We support our local entrepreneurs to build up their businesses and employ many people who one day will also be founders – in fact we want that over 50 per cent of all our previous employees start their own businesses. Currently, we are creating an ecosystem, supporting startups to have more customers and visitors by building up trust in online companies and all startups in general. We accelerate the online industry in Nigeria,” he said.

This article was originally published in The Nation

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