Jumia Technologies, the leading Pan-African e-commerce platform, has decided to exit the food delivery business entirely by shutting down operations in all seven countries by the end of 2023.
This strategic move aims to direct Jumia’s capital and resources towards expanding its core online retail operations and accelerating its path to profitability.
Years of Losses for Jumia Food
Jumia Food has struggled since its inception and has yet to achieve profitability. As of Q3 2022, the delivery unit accounted for 11% of Jumia’s total merchandise value.
However, the business suffered from high logistical costs and cutthroat competition from other food delivery rivals also aggressively discounting and spending heavily on marketing to capture market share.
“It’s a segment that’s very difficult across the world, with very challenging economics and big losses. It’s also a segment that is extremely competitive across the world and Africa,” Chief Executive Officer Francis Dufay told Reuters.
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“The economics are tough in this market because the costs are very high and there is plenty of competition so there is downward pressure on the commissions that we make and upward pressure on marketing costs because everyone is fighting for customers.”
$87.8 Million Losses Accumulated in Kenya
According to regulatory filings, Jumia has racked up staggering lifetime losses of $738.9 million globally as of the end of 2021.
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Zooming in on the Kenyan market, total losses hit $87.8 million (Ksh 11bn) after almost 9 years of local operations. This was up from $78.8 million in losses the prior year.
Nigeria, Kenya, Uganda Among Countries Impacted
The imminent closure of the entire Jumia Food vertical will directly impact operations in Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria and Ivory Coast.
Employees specifically handling food delivery logistics and fulfillment will transition into roles supporting Jumia’s e-commerce business.
Sharpening Focus on Profitable E-Commerce
Selling groceries and prepared meals online has proven hugely challenging for Jumia across Africa. By eliminating this consistently unprofitable segment, the company aims to sharpen strategic focus exclusively on growing its e-commerce profits.
The approach also aligns with Jumia’s extensive cost-cutting efforts and drive towards reducing losses.
Jumia’s aggressive optimizations to reduce operating losses seem to be bearing fruit. The company managed to decrease its Q3 2022 consolidated losses by 67% vs. the comparable year-ago quarter. Trimming its food delivery business will help accelerate margin improvement over the coming quarters.
Major Strategic Shift to Unlock More Value
Jumia believes there remains massive untapped potential in Africa’s budding e-commerce space. The company is confident that allocating resources exclusively to online retail can unlock significantly more long-term value than persisting with food delivery.
This decisive move closes the book on a struggling business line and opens an exciting new chapter for Jumia.
