Jumia announces closure of unprofitable food delivery business

Jumia announces closure of unprofitable food delivery business
Jumia will focus on its physical goods delivery business.

Kampala, Uganda | By Michael Wandati | E-commerce giant Jumia has disclosed its decision to cease operations of its food delivery business across all seven African markets, including Uganda, by the end of this month. The company cited unfavorable conditions as the primary reason for this strategic move.

In an official statement, seen by the Kampala Dispatch, released on Thursday 15, December 2023, Jumia, which currently operates food delivery services in Uganda, Kenya, Nigeria, Morocco, Tunisia, Algeria, and the Ivory Coast, explained that after a thorough strategic review, it found the food delivery business to be incompatible with the prevailing operating environment and macroeconomic conditions.

The firm stated, “Following a strategic review of Jumia Food, the company determined that its food delivery business is not suitable to the current operating environment and macroeconomic conditions and will close its operations in all markets by the end of December 2023.”

Jumia highlighted that the food delivery segment contributed 11 per cent to its gross merchandise value (GMV) during the nine months leading up to September 2023. Despite this, the food delivery business has never been profitable since its inception.

Gross Merchandise Value (GMV) represents the total value of orders for products and services, including shipping fees and taxes, before any deductions for discounts or vouchers.

Jumia’s decision to exit the food delivery market comes amid increased competition in various African markets including Uganda, include Glovo, Uber Eats, Dial-A Delivery and among others.

Francis Dufay, CEO of Jumia Group, characterized the move as a strategic shift towards profitability. He emphasized that the focus on the physical goods business revealed substantial growth potential for Jumia, prompting the decision to discontinue the less promising food delivery segment.

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“The more we focus on our physical goods business, the more we realise 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,” said Dufay.

“In the current context, it means leaving a business line, which we believe does not offer the same upside potential – food delivery,” noted Dufay.

As of the end of 2021, Jumia for instance, had incurred a cumulative loss of $87.8 million (approximately UGX 332, 642 billion) in its Kenyan operations since establishing local presence in May 2013.

In a June survey conducted internally, Jumia found that beauty products were the most ordered items by rural customers in Kenya, contributing 16 per cent of all upcountry deliveries. Urban customers predominantly purchased food items, including groceries and uncooked cereals.