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E-commerce platform Jumia is betting on small towns and rural areas for growth in the local market in the wake of increased competition and slowing demand in major cities.
The firm said that the increased consumer options in major cities has seen demand for its services grow at a slower pace compared to the regions outside major cities.
Jumia Kenya CEO Vinod Goel said that the company sees substantial potential in underserved regions outside of metropolitan hubs.
He said that in last year the regions outside major towns grew at an average of 50 per cent compared to a 30 per cent in cities like Nairobi, Mombasa, Kisumu and Eldoret.
The e-commerce giant, which earlier in the month of October 2024 announced its exit from Tunisia and South Africa, aims to concentrate its resources on its more promising markets, including Kenya.
“In Nairobi, there are more options, people can walk into a mall or supermarket, and a lot of people are delivering. So this unavailability in rural areas and the price points is what makes Jumia more attractive outside Nairobi,” said Goel.
Currently, the e-commerce company says that in 2023, over half (56 per cent) of the platform’s revenue comes from regions outside major cities like Nairobi, Mombasa, Kisumu, and Nakuru, reflecting a strong appetite for online shopping in these areas.
According to the CEO, this shift aligns with Jumia’s strategy to address “retail inequality.”
Goel says that in many rural areas, up to 80 per cent of product categories are unavailable or cost up to 30 per cent more than they would in cities.
“We’re addressing these price and availability gaps as people in these regions increasingly turn to e-commerce for better options. We still have huge price gaps in those small markets and towns, they are underprivileged when it comes to the retail market,” he added.
Jumia’s focus on smaller towns and rural areas comes as consumers nationwide increasingly prioritize affordability amid economic pressures.
The platform said it has recorded steady growth among younger demographics, particularly among Gen Z and middle-income earners aged 25-35.
“Our model for setting up operations in areas with a population of 100,000 has been lowered to towns with 40,000 residents, and we may further lower it to reach populations of 20,000 as we expand,” said Goel.
Kenya has grown to be the third-biggest e-commerce market in Africa, driven by the increase in internet penetration that has made it an attractive market for investors.
Statista, a German data and business intelligence platform, has ranked Kenya as the third in the continent's e-commerce market penetration with 46.7 percent.
This is behind Egypt, which came top with a 55.4 per cent e-commerce penetration, and South Africa (49.4 per cent), an improvement from being the fourth fastest-growing.
With Kenya now one of Jumia’s most promising markets, the company says it remains focused on deepening its presence locally rather than launching into new regions.
“We don't have any plans to open a new market we assess the progress of different markets and see their readiness to be able to grow,” said Jumia regional Chief Marketing Officer, Hellen Ng'ang'a during the launch of Black Friday Campaign.
The effect of e-commerce growth was felt in the first half of 2024, where, according to Knight Frank, the industrial property sector in Nairobi experienced a notable upswing in rental rates primarily driven by heightened demand from e-commerce companies and data centre operators.
