Prospectus Summary
PROSPECTUS SUMMARY This summary highlights information contained in more detail elsewhere in this prospectus. This summary may not contain all the information that may be important to you, and we urge you to read this entire prospectus carefully, including the “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections and our historical consolidated audited financial statements, including the notes thereto, included elsewhere in this prospectus, before deciding to invest in our ADSs.Jumia
Our Mission
Our mission is to improve the quality of everyday life in Africa by leveraging technology to deliver innovative, convenient and affordable online services to consumers, while helping businesses grow as they use our platform to reach and serve consumers.
Overview
We are the leading pan-African e-commerce platform. Our platform consists of our marketplace, which connects sellers with consumers, our logistics service, which enables the shipment and delivery of packages from sellers to consumers, and our payment service, which facilitates transactions among participants active on our platform in selected markets.
We are active in six regions in Africa, which consist of 14 countries that together accounted for 72% of Africa’s GDP of €2 trillion, and 74% of African consumer expenditure of €1.4 trillion in 2018, according to the IMF and Euromonitor, respectively. Though still nascent, we believe that e-commerce in Africa is well positioned to grow. In 2018, less than 1% of retail sales for countries measured in our footprint in Africa were conducted online, compared to nearly 24% in China, according to Euromonitor.
We intend to benefit from the expected growth of e-commerce in Africa through the investments that we have made and the extensive local expertise that we have developed since our founding in 2012. Through our operations, we have developed a deep understanding of the economic, technical, geographic and cultural complexities that are unique to Africa, and which vary from country to country. We believe that our deep understanding has enabled us to create solutions that address the needs and preferences of our sellers and consumers in the most comprehensive and efficient way. We possess extensive local knowledge of the logistics and payment landscapes in the markets in which we operate, which we consider to be a key component of the success of our company. In addition, we take full advantage of the mobile-centric aspects of the African market by having adopted a “mobile-first” approach in our product development and marketing efforts, which allows us to expand the audience for our goods and services, increase engagement and conversion and reduce our consumer acquisition costs.
On our marketplace, a large and diverse group of sellers offer goods in a wide range of categories, such as fashion and apparel, smartphones, home and living, consumer packaged goods, beauty and perfumes and other electronics. We also provide consumers with easy access to a number of services, such as restaurant food delivery, hotel and flight booking, classified advertising, airtime recharge and “instant delivery.” On our platform, we had 81 thousand Active Sellers as of December 31, 2018 and a total of 4.0 million Active Consumers as of December 31, 2018. We believe that the number and quality of sellers on our marketplace, and the breadth of their respective offerings, attract more consumers to our platform, increasing traffic and orders, which in turn attracts even more sellers to Jumia, creating powerful network effects. Our marketplace operates with limited inventory risk, as the goods sold by sellers via our marketplace are predominantly sold by third-party sellers, meaning the cost of inventory remains with the seller. In 2018, approximately 90% of the items sold on our marketplace were offered by third-party sellers, while we sold the remaining 10% of items directly in order to enhance consumer experience in key categories and regions.
Our logistics service, Jumia Logistics, facilitates the delivery of goods in a convenient and reliable way. It consists of a large network of leased warehouses, pick up stations for consumers and drop off locations for sellers and more than 100 local third-party logistics service providers, whom we integrate and manage through our proprietary technology, data and processes. In certain cities, where we believe it is beneficial to enhance our logistics service, we also operate our own last-mile fleet. In 2018, Jumia Logistics handled 13.4 million packages, and over 92% of our deliveries in 2018 were made by fully integrated partners using our technology and processes.
Traditionally, consumers across Africa rely on cash to transact. We have designed our payment service, JumiaPay, to facilitate online transactions between participants on our platform, with the intention of integrating additional financial services in the future. We introduced JumiaPay in four markets, including Nigeria in 2016 and Egypt in 2018, through agreements with locally licensed sponsoring banks. JumiaPay has been adopted rapidly by consumers. In the fourth quarter of 2018, 54% of orders placed on our platform in Nigeria and Egypt were completed using JumiaPay. Our payment service app, Jumia One, also allows consumers to complete online payments, such as airtime recharge or utility payments, and provides our sellers with access to attractive financing solutions offered by our financial partners. As of the date of this prospectus, we do not monetize our payment services. In the future, we may decide to do so, including by opening up our payment services to third parties.
Our operations benefit from centralized decision-making and a uniform technology platform coupled with coordinated local presence. Our unified, scalable technology platform has been developed by our technology and data team, which is predominantly located in Portugal. This technology platform covers all relevant aspects of our operations, from data management, business intelligence, traffic optimization and consumer engagement to infrastructure, logistics and payments. We constantly collect and analyze data to help us optimize our operations, make our consumer experience more personal and relevant, and enable us and selected sellers and logistics partners to make informed real-time decisions. Our local teams in each of our countries of operations have access to, and may benefit from, the centralized data collection and analytics and are empowered to use the insights gained from our platform in order to take action locally.
Our business has grown substantially. As of December 31, 2018, we had 4.0 million Active Consumers, up from 2.7 million Active Consumers as of December 31, 2017. Our GMV was €828.2 million in 2018, up from €507.1 million in 2017. GMV is the primary driver of our revenue. For sales by third-party sellers, we retain commissions based on the value of goods and services that such third parties sell to consumers via our marketplace, net of cancellations and returns. We also directly offer and sell goods in selected categories where we see unmet demand or the need to better control the consumer experience. On these first-party sales, we record the full sales price net of returns as revenue and earn a gross margin equal to the difference between the sales price and cost of goods sold. Our revenue was €130.6 million in 2018, up from €94.0 million in 2017.
Our consolidated operating loss increased from €154.7 million in 2017 to €169.7 million in 2018 and our consolidated loss for the year increased from €165.4 million in 2017 to €170.4 million in 2018. As a percentage of GMV, our consolidated loss for the year decreased from negative 32.6% in 2017 to negative 20.6% in 2018. We believe that as our business continues to scale, we benefit from operating leverage. On a platform contribution basis, we generated €8.7 million and €14.3 million for 2017 and 2018, respectively. Platform contribution reflects our platform’s operating performance after expense items that are variable in nature, primarily direct fulfillment expense (freight and shipping). In addition, in Nigeria, our largest and most mature geographic market, our platform contribution after other fulfillment expense was positive 0.9% of GMV in the second half of 2018, up from negative 2.0% during the same period in 2017.
Our Market Opportunity
Attractive Fundamentals Africa represents a large and growing consumer market that is positioned for growth, driven by the following key macroeconomic facts and trends:
Increasing Internet Penetration Africa is rapidly becoming a “connected” market, representing a large opportunity for internet-based businesses. Africa had an estimated 453 million internet users across the continent, 77% of whom lived in the regions in which we operate, as of the end of 2017 according to Internet World Stats, a site of the Miniwatts Marketing Group. Some of the key factors driving this evolution are:
Evolving Shopping Trends from Offline to Online As Africa becomes more affluent and “connected,” we believe that African consumers will increasingly become aware of online shopping. Moreover, organized retail is underdeveloped across most of the continent, making the distribution of goods less efficient than in other regions in the world. Against this backdrop, we believe that e-commerce is an attractive alternative to the general lack of organized retail outlets. Across Africa, there are an estimated 17 million small and medium enterprises (“SMEs”) and merchants, demonstrating a large commerce market, accordingly to the World Bank Group Finances. We believe that the expansion and success of e-commerce solutions across Africa will be driven by the following factors:
Our Value Proposition
Our Value Proposition to Sellers
Our Value Proposition to Consumers
Our Strengths
We believe that the following competitive strengths have contributed to our success and position us well for future growth.
Strengths Related to Our Competitive Position Pan-African leader. We believe that we are the only e-commerce business successfully operating across multiple regions in Africa. Our reach and capabilities position us as the preferred partner in Africa for sellers, from individuals to large global brands, and as the preferred shopping destination for consumers.
Deep local expertise. Africa has unique economic, technical, geographic and cultural complexities that must be overcome in order to build a successful business. We operate exclusively in Africa and have invested significant resources to innovate and tailor our platform to reflect local market characteristics since our founding in 2012. We have developed a deep understanding of the needs and preferences of our sellers and consumers, and we possess extensive local knowledge of the logistics and payment landscapes in the markets in which we operate.
Trusted brand. Trust is critical in Africa, where people traditionally rely on face-to-face interaction. We believe that our targeted marketing efforts and consistent focus on delivering a high-quality seller and consumer experience have helped us to build a strong reputation and create a leading brand that consumers recognize and trust. Our brand is well known by consumers and sellers and is among the most recognizable in our regions of operation.
Integrated ecosystem driving consumer engagement. We have built an integrated consumer ecosystem around our marketplace, which allows us to maximize the lifetime value of our consumers by offering a broad selection of goods and services that address their everyday needs. This integrated ecosystem approach, combined with delivering all our goods and services under our recognized brands, allows us to have multiple touch points with our consumers, which leads to increased consumer engagement and time spent on our platform and higher consumer acquisition and engagement efficiency.
Leading seller platform that fuels powerful network effects. From large international brands to smaller local sellers, we are the go-to partner for e-commerce transactions in Africa. We offer sellers a wide variety of services, including integration to our platform, content production, pricing, sales and marketing services, payments, logistics and seller support. These services help our sellers to market, sell and deliver goods to consumers across Africa.
Powerful data insights. Our advanced technology platform enables us to collect significant amounts of data that in turn drives our proprietary algorithms, unlocking new capabilities and generating incremental value for our platform. Our data management system helps us run our business more efficiently and enables our sellers, consumers and partners to maximize the value of our platform.
Strengths Related to Our Business Model Proven and efficient business model. We operate a marketplace that has proven successful in many non-African markets. Our operations center predominantly around our e-commerce marketplace. We typically hold limited inventory.
Scalable, asset-light logistics. We believe that Jumia Logistics is the leading e-commerce fulfillment and express delivery service in Africa. It seamlessly integrated more than 100 logistics partners across Africa as of December 31, 2018, offering sellers on our marketplace the benefits of a distributed and scalable logistics service and consumers more rapid access to the goods that they desire. Jumia Logistics is technology and data-centric and asset-light.
Efficient, centralized operational footprint. We centrally manage our operations, allowing for efficient decision making and planning. Our global technology center in Porto, Portugal, provides the centralized, unified technology backbone for our operations in our six regions.
Proprietary technology infrastructure. We have built a highly reliable and scalable technology infrastructure that can handle the large transaction volumes generated on our platform, and we continue to invest in technology to support the strong growth of our business and the ongoing evolution of our services. We believe that our comprehensive platform supports our ability to handle significant increases in traffic and the number of consumers, sellers and orders throughout the Jumia ecosystem.
“Mobile-first” approach in a mobile-centric market. Our “mobile-first” approach to product development and marketing allows us to expand the audience for our goods and services, drive up engagement and convergence and reduce our consumer acquisition costs. We believe that we have developed a deep understanding of the shopping habits of mobile consumers in Africa and deliver the mobile experience to our consumers through three types of mobile technologies: native applications, progressive web applications and light browsers.
Founder-led management team. Our management team is led by our original founders, which gives us an outstanding combination of stability and a strong entrepreneurial corporate culture. Our corporate culture is central to our success and is based on core values shared by everyone at Jumia.
Our Growth Strategies
The key elements of our growth strategy include:
Continue to grow our business and leadership position across our current markets. We intend to leverage our e-commerce platform to continue to increase our consumer base in each of the markets in which we operate in order to continue growing our business. Favorable trends in our markets and a growing awareness of the Jumia brand, position us to unlock this potential and to increase the volume of transactions conducted on our platform.
Drive consumer adoption and usage of our marketplace through increased selection and consumer education. We will continue to focus on selection and convenience, critical drivers of consumer adoption and continuing loyalty in e-commerce, in order to further improve the attractiveness of our marketplace to consumers. Additionally, by delivering a positive online shopping experience and educating African consumers through targeted educational marketing campaigns, we intend to increase the number of consumers regularly transacting on our marketplace.
Continue to increase the number of sellers and level of seller engagement while increasing the monetization of our services. We intend to continue to invest in our seller platform, educate sellers on how to best leverage their online presence, improve the quality and usage of the data and marketing tools used by sellers and expand our seller financing program in order to continue to attract more sellers to our marketplace, assist these sellers in growing their businesses and encourage them to increase their assortments and decrease the prices of the goods that they sell. We also intend to increase the adoption of our seller services, such as marketing, data and business support services, leading to higher monetization.
Further develop Jumia Logistics in order to better serve consumers and drive economies of scale. We intend to use various strategies to increase the reliability of deliveries and shorten delivery times in order to increase convenience and ease of use of our marketplace and drive consumer loyalty. Increased economies of scale will enable us to reduce the delivery fees that we currently pass on to consumers and sellers. We also intend to expand Jumia Logistics to serve external consumers.
Increase the consumer adoption of JumiaPay. We plan to increase the consumer adoption of JumiaPay by making it available in more markets and leveraging the high level of trust that our consumers have for Jumia. We also aim to use JumiaPay as the cornerstone of our wider financial services platform that will be capable of providing consumers and sellers with a wide variety of investment, financing and insurance options from third-party financial institutions.
Build for the long term. Our current focus is on maintaining a leading position across existing product categories, services and markets while continuing to scale our business in order to improve our margins and reach profitability. However, we believe that attractive opportunities exist beyond our current areas of operations, such as expansion to new product categories, services and adjacent geographies, in some of which we have already started building our brand through expense-light classifieds websites that may provide us with additional avenues of growth in the future.
Selected Risks Associated with our Business, Operations and Financial Position
Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors.” You should read these risks before you invest in the ADSs. We may be unable, for many reasons, including those that are beyond our control, to implement our business strategy. In particular, risks associated with our business include, but are not limited to, the following:
Corporate History
We have historically conducted our business through Africa Internet Holding GmbH, incorporated on June 26, 2012 as a limited liability company (Gesellschaft mit beschränkter Haftung) under German law. On December 17 and 18, 2018, our shareholders resolved upon the change of our legal form into a German stock corporation (Aktiengesellschaft) and the change of our company name to Jumia Technologies AG. The change of legal form and company name became effective upon registration with the commercial register of the local court (Amtsgericht) in Berlin, Germany, on January 31, 2019. The legal effect of the conversion on Africa Internet Holding GmbH under German law is limited to the change in the legal form. Africa Internet Holding GmbH was neither dissolved nor wound up, but continues its existence as the same legal entity with a new legal form and name. Upon this change, the historical consolidated financial statements of Africa Internet Holding GmbH included in this registration statement became the historical consolidated financial statements of Jumia Technologies AG.
On December 18, 2018, our then-existing shareholders entered into an investment agreement with a new investor, Pernod Ricard Deutschland GmbH, pursuant to which the new investor agreed to provide additional capital in the aggregate amount of €75 million against issuance of new shares based on an agreed pre-money valuation of €1.4 billion. As a result, we issued 7,105 shares (corresponding to 5,087,180 shares following the capital increase from own resources resolved upon on February 15, 2019) to such new investor, which corresponded to 5.08% of the shares in the Company as of January 3, 2019. In connection with this financing round, Pernod Ricard Deutschland GmbH was granted the right to subscribe for additional shares at nominal value, if an initial public offering of our shares or ADSs occurs within 18 months from the date of the investment agreement and the reference price is lower than the initial issue price (based on the agreed pre-money valuation, i.e., €10,555.60 per share, corresponding to €14.74 per share following the capital increase from own resources resolved upon on February 15, 2019).
Immediately prior to this offering, our existing shareholders held 100% of the shares in the Company. Upon consummation of this offering (assuming no exercise of the underwriters’ option to purchase additional ADSs), our existing shareholders will continue to beneficially own an aggregate of % of the shares in the Company.
Corporate Information
Our principal executive offices are located at Charlottenstraße 4, 10969 Berlin, Federal Republic of Germany (“Germany”). Our telephone number is +49 (30) 398 20 34 51. Our website address is https://group.jumia.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our ADSs.