Pan-African e-commerce giant Jumia is making a major shift in its strategy, announcing the closure of its food delivery service, Jumia Food, across seven key markets: Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria, and Ivory Coast. This decision, effective December 2023, follows a period of cost-cutting measures and strategic reevaluation aimed at achieving profitability.
Jumia Food: A Promising Start, But Ultimately Unsustainable
Jumia Food had initially shown remarkable growth, becoming the fastest-growing category on the platform and the second-largest in terms of volume behind fashion. In Q3 2022 alone, food delivery orders grew by 38% year-over-year, accounting for 20% of items sold. However, despite its initial success, Jumia Food never achieved profitability.
This lack of profitability, coupled with the challenging economic landscape in Africa, characterized by high inflation and fierce competition from players like Chowdeck, Glovo, and Uber Eats, ultimately led Jumia to make the difficult decision to exit the food delivery market.
Shifting Focus to Core Business and Profitability
Jumia’s strategic shift prioritizes its core physical goods business and JumiaPay services across all 11 markets. This decision reflects Jumia’s belief that the physical goods sector offers greater potential for growth and profitability. Antoine Maillet-Mezeray, Jumia’s EVP Finance & Operations, emphasized the need to prioritize opportunities with the most promising return on investment.
CEO Francis Dufay echoed this sentiment, stating, “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.”
Growth and Restructuring in the Physical Goods Business
Jumia is already seeing promising results in its physical goods business, particularly in Ghana, Uganda, Senegal, and two other African markets. These markets collectively contribute 49% of the company’s overall GMV for physical goods, representing roughly half its business scope. Jumia intends to capitalize on this growth and expand its physical goods business to its remaining six markets.
This strategic shift will involve transitioning some employees from the food delivery business to roles within the physical goods business. However, the restructuring will also necessitate workforce reductions, leading to the departure of some employees.
A Broader Trend in the African Food Delivery Market
Jumia’s exit is not an isolated event. It aligns with a broader trend in the African food delivery market, with similar exits recently witnessed by competitors like Bolt Food in Nigeria and South Africa. This trend is driven by the confluence of challenging economic conditions, high inflation, and intense competition within the sector.
Looking Forward: Jumia’s Path to Profitability
Jumia’s decision to exit the food delivery market represents a strategic shift towards its core business lines and a renewed focus on achieving profitability. By prioritizing its physical goods business and JumiaPay services, Jumia aims to capitalize on its strengths and navigate the challenging economic environment in Africa. This strategic shift positions Jumia for future growth and success in the competitive e-commerce landscape.