Pan-African e-commerce platform Jumia, has announced its plan to discontinue its food delivery business in Nigeria and other African markets which include Kenya, Uganda, Morocco, Tunisia, Algeria, and Ivory Coast, citing macroeconomic conditions.
The company announced that by the end of December 2023, the plan will take effect, as it strategizes to optimize its capital, and resource allocation, and continue its plan for profitability.
Jumia’s CEO Francis Dufay speaking on the recent move said that the company’s food delivery business across several African markets has been plagued with challenges, amidst tough competition in the ecosystem, which necessitated the discontinuation.
Tekedia Mini-MBA edition 14 (June 3 – Sept 2, 2024) begins registrations; get massive discounts with early registration here.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
In his words,
“It’s a segment that’s very difficult across the world, with very challenging economics and big losses. It is 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”.
Jumia Food represents about 11% of the company’s general merchandise value for the nine months ended September 30th, highlighting that the business has not achieved profitability since its inception.
According to Antoine Maillet-Mezeray, the company’s EVP Finance & Operations, the decision to exit food delivery, a business with challenging economics in Africa and globally, was rooted in prioritizing opportunities and expected return on investment.
The Pan-African e-commerce platform said that the number of employees currently dedicated to the food delivery business will transition to the core e-commerce business in these countries.
It is worth noting that Jumia has been on an aggressive cost-cutting journey that involves headcount reductions, scaling back offerings such as groceries, and reducing delivery services not related to its e-commerce business in order to turn profitable.
Recall that the e-commerce company fired 900 people last quarter, and also significantly reduced its presence in Dubai, relocating most of its remaining staff to its African offices.
It also significantly reduced its sales and advertising expenditure, by 41% year on year and scaled back its grocery offering in Algeria, Ghana, Senegal, and Tunisia to reduce business complexities.
Jumia, the first Africa-focused tech start-up to list on the New York Stock Exchange, earlier this year announced that it expects these headcount reductions to enable it to save over 30% in monthly staff costs starting from March 2023.
Jumia is redirecting its focus towards the core physical goods business and maintaining its JumiaPay operations across all 11 markets, as outlined in a recent statement.