Why Rocket Internet sold Jumia House to its smaller rival

Why Rocket Internet sold Jumia House to its smaller rival

As predicted, Rocket Internet has just sold off Jumia house, one of the appendage units of Jumia, an eCommerce company in Nigeria.

The Jumia House was sold to Tolet.com.ng,  an apparent competitor that disclosed it has about 7,000 listings while Jumia claimed it had about 22,000 listing prior to the sell-off.

Formerly called Lamudi, it was renamed to Jumia House after Germany’s Rocket collapsed all the company under the Africa Internet Group (AIG P.S: not related to AIG insurance) into Jumia.

The reason was nit far-fetched. It was a compelling move to stop the bleeding. Jumia was raking-in record losses that grew up to EUR92 million in 2016 full year. As at the ninth month of this year, the company has already disclosed it had over NGN21 billion in losses.

What kind of acquisition is this?

While Jumia and Tolet.com.ng would refer to this as an acquisition, the reported transaction was nothing close to that. Jumia House was operating as a unit of Jumia under a subdomain (house.jumia.com).

The folks at Tolet were basically buying the database/listings garnered by Jumia and perhaps, the website script. The fact that some of those listings might be duplicated might see Tolet.com.ng ending up with less than half of the total data as useful resources.

Neither Jumia nor Tolet.com.ng, however, sources close to both companies said the ‘acquisition’ was more expedient to Jumia and so, it gained far less should it have sold the business as a buoyant entity.

To be fair to Rocket Internet, Nigeria’s eCommerce scene is immature, disorganised for the kind of business model they employed. The macroeconomic fundamentals of the country are also unfriendly to this kind of startups. However, Oliver Samwer and his team in Berlin should have focused more on building a stronger business instead of dabbling in various units that ended up swelling debt for the company.

A possible solution lies in a leaner business that not transcends few cities. Jumia has to go back to its core. Sell items people cannot afford not to buy online and not goods they can easily walk into Shoprite or a mall to pick up. Focus more on exclusivity and timing of sales. These few tips might sound too simplistic but cannot be far off from the solution.

It is not clear if Jumia travel will be sold to Wakanow or even a Travelbeta, a smaller rival to Wakanow looking for growth. What is certain will be job losses for most employees under Jumia House units. Employees of startups are often the whipping boys when the ship sinks.