Jumia: Bigger? Better?

This morning reports of Rocket Internet-owned Africa Internet Group's re-consolidation of all the startups under its wing into Jumia branded companies surfaced and the reactions that followed are quite interesting.

In the past six months, AIG has raised over $400 million in funding and was even touted by some as Africa's first billion-dollar unicorn.

However, over the same period, parent company Rocket Internet has struggled with plummeting share prices (its shares dropped 25% in that time) and investor confidence in the company has dwindled considerably.

Furthermore, AIG's champion company, e-commerce giant Jumia, also experienced a 37% drop in revenue. Add the shutdown of African operations for one of AIG's many startups, EasyTaxi, and you begin to see a trend.

So why has the company decided that a Jumia rename of all the startups it controls is the next best thing to do? Well, that can be anyone's guess.

Industry insiders and stakeholders have approached the subject with some very interesting views:

Paul Cook, founding partner at Silvertree Internet Holdings & Managing Partner of the Ringier Africa Deals Group (RADG), which owns Nigeria’s leading online deals platform, DealDey, said, “For AIG, this probably represents a dose of reality, as it looks at the cost of trying to build multiple consumer brands. The brand merge allows them to unify marketing cost in one brand, and probably also helps them portray the resulting entity (with its large losses) in a more favourable light to investors. For the rest of the ecosystem, it emphasises that Jumia is a threat to most online verticals. This is, however, also an opportunity: it's possible to be good at lots of things, but not fantastic at all of them at once. So the opportunity is for more focused competitors in specific industries to compete on a better product for that specific industry - and i expect niche players to win in quite a few of these verticals. That said, it also emphasises that it is expensive, hard work to build brands and change consumer behaviour, so online start-ups need to be very careful that they have cost-effective ways to reach consumers. And partnerships are often key.”

ALSO READ: Hellofood, Lamudi, Carmudi, Jovago, Everjobs, Vendito & Kaymu OUT - Jumia becomes ONE-STOP-SHOP

Looking at it critically, I support Paul's view on the matter - to some extent. AIG has indeed been way in over their head with the way they have gone about their business. In a market like Africa, where macroeconomics is king and the business environment is rife with regulatory hurdles and not enough internet penetration, building multiple consumer was always going to be very difficult. AIG decided to go the traditional Rocket Internet way to mitigate the shortcomings of the markets it was operating, raising round after round of funding.

I noticed that this wasn't really having any effect on any of the businesses which the Group controlled - I even asked Jovago founder and ex-CEO, Marek Zmyslowski, what his thoughts were at the Mobile West Africa event earlier in the year. Zmyslowski suggested that perhaps the over $400 million raised by AIG this year alone was going into marketing and operating costs. At the time, I didn't really understand what he meant, but now I understand what he was alluding to. Indeed, this move could help the companies streamline their overhead and pull in resources.

For a company that has spent as much time in the African tech ecosystem, I expect that AIG/Jumia/Rocket Internet would've pursued this strategy sooner. Not all hope is lost though, if the IPO reports are anything to go by. Jumia is now positioned to take full on advantage of its presence in so many markets and stand to gain from the experience which it has amassed in those markets.

I, along with the rest of the rest of the African tech community, will be watching.