Jumia, the prominent African e-commerce company, has announced the cessation of its food delivery arm, Jumia Food, across several African nations, including Nigeria, Kenya, Morocco, Ivory Coast, Tunisia, Uganda, and Algeria. The decision is set to take effect by the end of December 2023.
Facing a substantial loss of $19 million in Q3 2023, Jumia has been conducting a comprehensive reassessment of its business segments to navigate challenging market dynamics. This scrutiny began in Q4 2022 when the company reported a full-year loss of $207 million and a Q4 loss of $49.2 million. Jumia CEO, Francis Dufay, cited the tough unit economics and significant losses in the food delivery sector as key factors behind the decision.
Increased Competition and Rising Costs:
Dufay highlighted the intensified competition and escalating operational costs in the food delivery sector, contributing to the challenging environment. Despite Jumia Food contributing 11% to the company’s overall gross merchandise value, the sector consistently operated at a loss across the 11 North, East, and West African countries where it was active.
In response to the financial challenges, Jumia has implemented significant cost-saving measures. This includes a 20% reduction in its workforce, involving 900 employees, and the relocation of 60% of top management from the United Arab Emirates to the respective African countries. Additionally, there have been substantial cuts in advertising and marketing spending.
Strategic Shift and Expansion:
Initially focusing on small-ticket everyday items in 2021, Jumia Food underwent a strategic shift with CEO Dufay redirecting efforts and expanding into smaller Nigerian cities. Despite these efforts, the food delivery segment continued to operate at a loss, prompting the decision to discontinue its operations.
Reflecting a Broader Trend:
This move follows a broader trend for Jumia, as it had previously ceased Jumia Food services in Egypt, Ghana, and Senegal. The company cited sub-scale operations and challenging economics as reasons for discontinuation in these regions.
As Jumia navigates these strategic shifts and cost-saving measures, industry observers will be watching closely to see how the company adapts to the evolving e-commerce landscape in Africa.