Jumia Technologies AG (JMIA), Africa’s prominent e-commerce platform, has announced the cessation of its unprofitable food delivery service, Jumia Food, in Nigeria and multiple African countries. This strategic move is part of a broader initiative to concentrate on its core e-commerce and JumiaPay operations across markets.
The closure, slated for December 2023, follows a comprehensive strategic review revealing Jumia Food’s misalignment with the current operating landscape and macroeconomic conditions. Despite contributing around 11% to Jumia’s Gross Merchandise Value (GMV) for the nine months ending September 30, 2023, the food delivery segment has persistently struggled to achieve profitability since its inception.
Francis Dufay, CEO of Jumia, emphasized the immense potential within their physical goods business.
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“The more we focus on our physical goods business, the more we realize that there is huge potential for Jumia to grow, with a path to profitability. 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,” he said.
Echoing this sentiment, Antoine Maillet-Mezeray, EVP Finance & Operations of Jumia, acknowledged the challenging economics of the food delivery industry globally and in Africa. “Food delivery remains a business with very challenging economics,” he stated, underlining the prioritization of efforts on the physical goods e-commerce business across their operational markets.
“We want to focus our efforts on our physical goods e-commerce business, in the eleven markets where we operate. This is a matter of prioritization of opportunities, and expected return on investment,” he added.
Jumia Food currently operates in Nigeria, among other African countries. The decision to shutter this segment will involve transitioning several employees to the ongoing physical goods business.
This strategic reorientation reflects Jumia’s commitment to driving profitable growth and focusing on its core e-commerce endeavors across 11 operational markets.
Despite its substantial presence in the African e-commerce sector, Jumia has encountered significant financial losses in Nigeria, where intense competition and operational challenges led to reported losses. For instance, in its 2022 financial report, Jumia revealed a net loss of approximately $46 million attributed to its Nigerian operations, underscoring the complex dynamics of the market.
Moreover, amid these changes, Jumia has observed noteworthy growth in its JumiaPay transactions, reaching 3.2 million in the third quarter of 2023, signifying an 8% year-over-year increase. Impressively, about 44.7% of orders on the Jumia platform during the same period utilized JumiaPay, marking a significant rise from 31.9% in the third quarter of 2022. This surge largely stems from increased JumiaPay usage across both physical goods and food delivery platforms.