Pan-African e-commerce platform Jumia has announced its plans to discontinue its food delivery service, Jumia Food. According to the company, this decision is a result of the current operational landscape and macroeconomic conditions in the seven markets where it operates, including Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria, and Ivory Coast.
Effective December 2023, Jumia will cease its food delivery operations in these markets.
The warning signs date back to Q4 2022, when the company underwent several cost-cutting efforts.
Among these efforts were discontinuing food delivery in Egypt, Ghana, and Senegal; suspending logistics-as-a-service in all markets except Nigeria, Morocco, and Ivory Coast; halting Jumia Prime across all markets; and scaling back first-party groceries in Algeria, Ghana, Senegal, and Tunisia. According to Jumia, these efforts only accounted for less than 1% of the company’s gross merchandise volume (GMV) and 2% of the group’s adjusted EBITDA loss in the first nine months of 2022.
However, it is worth noting that Jumia Food in the seven markets being closed down contributed approximately 11% of the Jumia‘s GMV for the nine months ending September 30, 2023. For years, Jumia Food was the fastest-growing category on the e-commerce platform and the second-largest category in terms of volume, behind fashion. In fact, in Q3 2022 alone, food delivery orders grew by 38% year-over-year and accounted for 20% of items sold on the platform.
Yet, despite these impressive numbers, Jumia has revealed that the food delivery business has not been profitable since its inception.
In line with its goal to optimize capital and resource allocation and achieve profitability, Jumia‘s CEO Francis Dufay joined the company and made the decision to shut down the food delivery business.
Instead, Jumia will now focus on its core physical goods business and maintain its JumiaPay operations across all 11 markets, as stated in a recent statement. According to Antoine Maillet-Mezeray, the company’s EVP Finance & Operations, this decision to exit the food delivery market, which has challenging economics both in Africa and globally, is based on prioritizing opportunities and expected return on investment.
“The more we focus on our physical goods business, the more we realize the huge potential for growth for Jumia, with a clear path to profitability,” Dufay stated. “We must make the right decision and fully concentrate our management, teams, and capital resources on this opportunity. In the current climate, this means leaving behind a business line that we believe does not offer the same upside potential – food delivery.”
In the third quarter of 2023, Jumia experienced growth in GMV for physical goods in Ghana, Uganda, Senegal, and two other African markets. Combined, these markets account for 49% of the company’s overall physical goods GMV, representing approximately half of its business scope. Jumia intends to capitalize on this growth and extend it to its remaining six markets. However, there was a year-over-year decline of 17% in actual dollars, but a 10% increase on a constant currency basis in Q3 2023.
As part of this strategic shift, some employees who previously worked in the food delivery business will transition to roles in the ongoing physical goods business in these countries, as stated by Jumia in its statement. However, the restructuring also includes a workforce reduction, which will lead to some employees leaving the company.
This decision by Jumia to discontinue its food delivery business follows a broader trend in the industry, with another food delivery competitor Bolt Food exiting both Nigeria and South Africa. Both exits seem to be influenced by current macroeconomic challenges, high inflation, and intensified competition in the food delivery sector throughout the continent. Notable competitors in this space include Chowdeck, Glovo, and Uber Eats.