EXCLUSIVE: Rocket Internet Consolidates E-Commerce Businesses Amidst Huge Staff Lay-Offs in Nigeria

Following its recent pull out of Turkey and its shut down of development operations in China, and its reported downsizing in the Philippines and Pakistan, Rocket Internet has now laid off about half of its employees in Nigeria in an attempt to consolidate its business operations in the West African country, Techloy has learnt.

According to a reliable source, the company fired about 50 of its staff in both of its operations in Nigeria, mostly involved with support functions last Friday, saying that it was ‘outsourcing’ those support functions in a move to restructure its operations.

The company which has been on a hiring spree since May 2012 aggressively recruiting staff — some of whom were ex-employees of Kalahari Nigeria, a Naspers-owned e-commerce service that was shut down last October — allegedly poached some employees from iROKO Partners, a digital entertainment company recently to firm up its 130 employees in Nigeria.

Recall that the Germany-based company which is one of Europe’s most powerful Internet start-up incubators launched Kasuwa, its Amazon-clone and Sabunta, its Zappos-clone — arguably two of the largest e-commerce sites in Nigeria — in June 2012 with huge potential to compete in the African e-commerce market.

Last month, the company initiated a brand name change of its e-commerce offering, Kasuwa to Jumia believed to be due to a copyright infringement threat from the original owner of the ‘Kasuwa’ and ‘Kasuwa.com’ trademark.

After just three months of operations, the company is now consolidating the e-commerce offering, Jumia (formerly Kasuwa) with its online fashion store, Sabunta into one e-commerce service that would cater to the growing demand for online shopping in Nigeria. The move is said to be in co-operation with its operations in Egypt, Morocco and other locations across the African continent using the Jumia brand name and to help position the brand as the largest online retailer in Africa.

The result is a massive downsizing that affected all of its Human Resource and IT staff, several employees in customer service, logistics and warehousing, and a few employees in marketing, legal and accounting departments, most of whom left their jobs in other companies to join the company in the last two months, according to another reliable source.

But there’s more to the company’s shut down of Sabunta’s operations that should be told.

We learnt that Sabunta, its online fashion store will no longer exist as an entity, although at the time of writing this post, Sabunta’s website appears functional, despite the fact that some customer service requests have gone unanswered since Friday. Worse, the online fashion store is reportedly doing very badly since the margins are said to be too low for Rocket Internet to keep it hanging around as this foreshadowed a likely business failure.

However, we learnt that its top management team including Tunde Kehinde (co-founder of Rocket Internet Nigeria), Ralphael Afaedor (co-founder of Rocket Internet Nigeria) and Onyeka Akumah (Sabunta’s former Online Marketing Lead) are expected to continue working with the company, but it is unclear if they would maintain their new roles in the new venture.

It is also believed that this consolidation move was a result of Millicom’s acquisition of two of Rocket Internet’s subsidiaries, Latin America Internet Holding (LIH) and Africa Internet Holding (AIH) which both control eight operating businesses in Latin America and Africa, including its e-commerce offerings in South Africa and Nigeria.

Millicom is said to have a better local knowledge of the African market, way more than Rocket Internet does, so teaming up with the global telecommunications group could bring local expertise and talent to run Rocket’s e-commerce operations in Nigeria, as against having a management team without knowledge of the Nigerian market.

It has no doubt been a bumpy road for Rocket Internet in recent times, a company that is seen as fast at shutting down an unsuccessful idea as it is at copying a successful one.

As concerns continue to grow over the challenges of running successful e-commerce services in Nigeria, could this be a sign that Rocket may gradually be pulling out of a market with such huge potential?

Or could it be that the Samwer brothers are playing a game with their myriad of clones — set up quickly, cut your losses quickly, focus on the wins, rake in the millions, and repeat – as GigaOM describes it?