African e-commerce giant Jumia to cease food delivery business in seven African countries
Jumia currently runs its food delivery services in Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria, and Ivory Coast.
This strategic decision is part of Jumia’s efforts to concentrate on the expansion of its core online retail business, Reuters reported.
To achieve profitability, Jumia is actively implementing cost-cutting measures, such as reducing its workforce, exiting the everyday grocery segment, and scaling back delivery services unrelated to its e-commerce operations.
The move is in line with Jumia’s “strategy to optimize its capital and resource allocation and to continue its path to profitability,” the retailer said, adding the current operating environment and macroeconomic conditions are not conducive for the sustainability of Jumia Food.
The food delivery segment contributes about 11% to Jumia’s general merchandise value for the nine months ended September 30.
Notably, Jumia Food has faced challenges in attaining profitability since its inception, prompting the company to reassess its portfolio and prioritize areas with stronger growth potential and a clearer path to financial sustainability.
The Chief Executive Officer, Francis Dufay, told Reuters that the segment is universally challenging, characterized by difficult economics and significant financial losses.
“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,”
“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.”
As the first Africa-focused tech start-up listed on the New York Stock Exchange, Jumia announced that several employees currently focused on the food delivery segment will shift to the core e-commerce business in these countries.
In June, the company expanded its operations to rural communities, aiming to delve deeper into the waters of profitability. It also recently partnered with Elon Musk’s Starlink to boost fast-speed internet in Africa, facilitating the sale of Starlink’s satellite terminals and associated equipment in select African countries.
The company has been actively cutting losses, as reflected in the latest data indicating a 67% reduction in third-quarter losses compared to the previous year.
