Leading African e-commerce company, Jumia Technologies, is exiting the food delivery business by the end of December across its operating countries. Jumia Food, the company’s on-demand meal delivery service, failed to reach profitability since launching in 2013.
“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,” Francis Dufay, Chief Executive Officer of Jumia, said.
The shutdown allows Jumia to focus resources entirely on its core online goods retail operations and digital payment platform JumiaPay.
Jumia Food accounted for 11% of the company’s total gross merchandise volume (GMV) in 2022, indicating it facilitated over $60 million in food orders annually. But the economics of food delivery remain challenging in the 11 North, East and West African countries it operates in.
“We realize there is huge potential for Jumia to grow our physical goods business profitably. We must fully focus our teams and capital on this opportunity,” said CEO Francis Dufay.
Executives cited high competition and marketing costs as headwinds, along with commissions squeezed by vendors on tight margins. Jumia has prioritized a path to profitability under Dufay’s leadership since last year.
The move to shut down Jumia Food aligns with Jumia’s recurring efforts to cut costs after years of losses. This cost-cutting move includes 900 layoffs, consolidating management overseas, reducing advertising spend and exiting operations in 3 countries.
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While Jumia continues with its payments, logistics and grocery delivery arms, analysts see the greatest revenue growth potential in Jumia’s e-commerce business. In Q3 2022, the company saw physical goods orders spike 38% year-over-year. Focusing efforts here aims to accelerate this growth across the 11 African markets where Jumia currently operates.
A few employees from Jumia Food will transition to the core e-commerce business. But the restructuring means further workforce reductions.
Jumia, dubbed “the Amazon of Africa”, is again betting big that African consumers will increasingly shop for lifestyle goods online as internet access spreads.