Economic headwinds forces Jumia to wind down food delivery operations in African markets
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In a strategic move to refocus its operations and return to profitability, Jumia Technologies AG (JMIA) is discontinuing its food delivery service, Jumia Food, in the African markets of Nigeria, Kenya, Morocco, Tunisia, Algeria and Ivory Coast. This decision is part of a broader effort to streamline the company’s operations and improve efficiency.
Jumia Food has been operational in these markets since its launch in 2016, but the company has struggled to achieve profitability due to the challenging economic conditions in these countries.
The closure of Jumia Food, scheduled for the end of December 2023, comes after a comprehensive strategic review revealed that the food delivery service was not aligned with the current operating environment and macroeconomic conditions. These conditions include high inflation, increased costs of operations, and a challenging funding environment.
According to Jumia’s latest financial report, the company’s food delivery segment has struggled to achieve profitability since its inception, and it currently accounts for about 11 per cent of Jumia’s Gross Merchandise Value (GMV) for the nine months ending September 30, 2023.
GMV is a key metric used to measure an e-commerce company’s performance, and the decline in Jumia Food’s contribution to the company’s overall GMV highlights the challenges it has faced in this segment.
In a statement, Francis Dufay, the CEO of Jumia, stressed the potential of the company’s physical goods business and the path to profitability that focusing on this segment offers. He noted that the more the company focuses on its physical goods business, the more it realises that there is huge potential for Jumia to grow.
Dufay added, We must take the right decision and fully focus our management, our teams and our capital resources to go after this opportunity. In the current context, it means leaving a business line, which we believe does not offer the same upside potential – food delivery.”
Antoine Maillet-Mezeray, executive vice president, finance & operations of Jumia, echoed Dufay’s sentiments, noting that the food delivery industry has very challenging economics, both in Africa and around the world. He also emphasised the importance of focusing on the company’s physical goods e-commerce business in the eleven markets where it operates, rather than continuing to invest in a segment with uncertain profitability.
Maillet-Mezeray stated that the company is focused on continuing to invest in the businesses that have shown the most promise, specifically the physical goods e-commerce and JumiaPay segments.
According to Jumia, the strategic shift away from Jumia Food will involve transitioning employees from the food delivery segment to other parts of the company’s physical goods e-commerce business in the countries where Jumia Food is currently operational. This decision is intended to maximize profitability and focus on the core business in these markets.
The company stated that the affected employees will be offered opportunities within its physical goods e-commerce business, which includes sourcing, operations, customer service, and other functions.