E-commerce now bets on rural areas to grow market

Vinod Goel, the group chief executive of Jumia, believes he has cracked the code to grow the e-commerce platform into an unrivalled firm in the region’s rural market.

The 2024 Black Friday campaign provided the light bulb moment as he revealed that the orders grew exponentially increasing by 70 per cent

Similarly, by December 2024, pick-up stations had increased from 220 to 300. He says the plan is to increase them again this year by between 60 and 100. Rural markets hold the key.

“We are seeing a clear trend that outside Nairobi is growing much faster at two to three times,” said Goel.

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While e-commerce has long been viewed as a reserve for urban populations, who are perceived to be more tech-savvy than their rural counterparts, Mr Goel believes otherwise.

He opines that while urban customers have options to visit physical stores, they prefer e-commerce platforms due to the convenience that comes with them.

While this is also a factor that attracts rural customers, he says more of this population is attracted to e-commerce due to the fair deals presented especially when one is purchasing basic items.

This is what the New York Stock Exchange-listed firm is targeting.

Some of these basic items are 43-inch televisions, boxers, vitamin C beauty products, women’s and men’s sneakers, and stationary for school-going children. These are the items he notes sold more during the Black Friday campaign.

“Whenever there is pressure in the economy, they (customers) would rather look for other avenues instead of going to their local shops that may be selling the same item expensively,” he says. “That is the reason we are growing more in the rural areas.”

Mr Goel says this strategy of targeting rural areas is contrary to larger economies like Southeast Asia where e-commerce thrives in urban dwellings that have the necessary economies of scale and technology to facilitate purchase and delivery.

“In our case, it is the opposite,” he says. “If you are in Molo, and you want a 43-inch television, you will find maybe three brands in your local shops at 40 per cent higher. But on Jumia, you will find the same 43-inch whether you are buying while in Molo or Lamu at a lower price except for the small shipping fee, you will incur.”

While Mr Goel may be viewing this strategy with a Christopher Columbus lens, it has been applied before by other platforms such as Copia whose business model was meant to solely serve the rural communities.

Copia provided folks in the city to shop on their platforms, then they would deliver the package to the nearest pick-up stations. The business had more pick-up stations in the rural areas than in the city and its environs.

Copia, however, closed shop mid-last year due to inadequate funding.

According to the Kenya National E-Commerce Strategy 2023, prepared by the State Department for Trade, the rural market is considered a key segment of the sector.

The strategy notes that targeting rural markets serves persons living with disabilities, the elderly and those who find it difficult to get goods and services from the shops physically.

“For micro, and small businesses, particularly, those in rural areas, it can give access to a wider market and source of supplies, enabling them to procure goods without travelling to a distributor, thereby improving their productivity,” the strategy states.

The strategy acknowledges the challenges facing rural communities, both consumers and merchants in accessing and utilising e-commerce platforms.

“Problem includes lack of access to telecommunication, payment and postal services, electricity, logistics, accessible roads and lower literacy levels. These problems impact the uptake and use of e-commerce and require a focus on rural areas in each of the initiatives in this strategy,” it reads.

Aware of these challenges, Jumia has deployed J-Force, a group of agents, whose role is to freelance and guide individuals to purchase from the platform. There are about 25,000 of such but on average 7,000 are active on any given day.

It is these agents who help sceptical first-time online buyers or those who still use feature phones to buy online.

Previously, Mr Goel reveals, Jumia was also sceptical about delving into the rural market. The platform would only consider opening a pick-up station if the area population was between 80,000 to 100,000 to guarantee economies of scale.

“What we found out is the moment we open a pick-up station in any town even with a population of 35,000, it starts to give enough orders to sustain it,” he says.

“Of course, we cannot cater for a village that has a population of 4,000 or 5,000 but our bar has gone from 80,000 to 100,000 to 30,000.”