Jumia Entices Local Vendors with 50% Lower Commissions, But Does it Address Perennial Woes?

Jumia Market
Vendors at a past event

Jumia Market

E-commerce site Jumia has not been doing very well over the last couple of months. The corporation, which operates in multiple states in Africa has been trying to hone its operations to overcome a series of setbacks that can primarily be traced to the NYSE listing and the events that followed afterward.

Towards the end of 2019, Jumia stopped operations in Cameroon and Tanzania. It was hardly a surprise to those in the know of the company’s struggles, and there were fears that the same axe was heading to Kenya.

While the local market is filled to the brim with e-commerce businesses, we can authoritatively say that none of them is actually making a killing as is the case with their global rivals such as China’s AliExpress. Nevertheless, this does not imply that the sites do not try; they haven’t just figured out the local space, and this can be reflected in friction that exists between them and customers, and by extension, their margins.

Jumia’s local operations are still alive, although their general vibrancy has been somehow muted. The company says that it wants local manufacturers to sell their wares through the platform because it has extended the 50 percent reduction on commissions for locally produced products.

“We are committed to Buy Kenya, Build Kenya – and as such want to do our bit to support local manufacturers. Through the Jumia Local program, we offer them reduced commissions to help them compete with imported goods,” said Jumia Chief Commercial Officer, Kenneth Oyolla.

Furthermore, Jumia, which has since launched an ad arm, says that it hopes that the incentive will attract more vendors to its platform, and hopes to see a 30 percent vendor rise before the end of 2020.

The issue of commissions has been one of the biggest obstacles that e-commerce sites have faced. The case of Safaricom’s Masoko sudden demise, for instance, was attributed to the platform focusing on making customers happy and forgetting that the platform relies on vendors. The vendors, apparently, were not satisfied with the manner Masoko was treating them. It has also been reported that Masoko’s huge budget made it adopt a bullish attitude, including cases where vendors were charged 25 percent of their commission. In contrast, other platforms charge much lower.

We are not sure how Jumia and its peers will solve logistical and vendor issues. The extension is, perhaps, one of the tactics that can actually appeal to thinning vendors.

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Kenn Abuya is a friend of technology, with bias in enterprise and mobile tech. Share your thoughts, tips and hate mail at [email protected]