Africa’s leading e-commerce platform, Jumia Technologies, has announced that it will close its food delivery business in all seven countries where it operates by the end of the year. The company said the decision was part of its strategy to optimize its capital and resource allocation and to continue its path to profitability.
Jumia Food, which was launched in 2013, represents about 11% of Jumia’s general merchandise value for the nine months ended Sept. 30 and has not been profitable since its inception. The company faced stiff competition from other food delivery services, such as Bolt Food, Glovo, and Uber Eats, as well as high operating costs and challenging market conditions.
“It’s a segment that’s very difficult across the world, with very challenging economics and big losses. It’s also a segment that is extremely competitive across the world and Africa,” Chief Executive Officer Francis Dufay told Reuters.
Jumia Food currently operates in Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria and Ivory Coast. The company said several employees dedicated to the food delivery business will transition to the core e-commerce business in these countries.
Jumia, which became the first Africa-focused tech start-up to list on the New York Stock Exchange in 2019, has been trimming its losses by reducing its head count, exiting everyday grocery items, and cutting delivery services not related to its e-commerce business.
The company reported a 67% reduction in its third-quarter losses from a year earlier, as it saw a shift in shopping habits due to the pandemic. Jumia’s total sales value grew by 13% in 2020, driven by increased demand for essentials such as groceries, food, and health products.
Jumia is not the only e-commerce player that has struggled to make money in Africa, where internet penetration and digital payments are still low compared to other regions. In 2020, Jumia’s rival Konga, which operates in Nigeria, announced that it had achieved profitability after seven years of operation. However, some analysts have questioned the sustainability of Konga’s business model, which relies heavily on offline retail stores and cash payments.
Despite the challenges, the e-commerce market in Africa is expected to grow significantly in the coming years, as more people gain access to the internet and mobile devices. According to a report by Statista, the revenue of the e-commerce industry in Africa was forecast to reach $44.88 billion by 2028, up from $37 billion in 2022.
Jumia said it remains committed to its core e-commerce business, which offers a wide range of products, such as electronics, fashion, beauty, and personal care. The company also operates JumiaPay, a digital payment service that facilitates online transactions within Jumia’s ecosystem.
Jumia’s CEO said the company’s vision is to become the leading online platform in Africa, connecting consumers and sellers across the continent. He added that Jumia will continue to explore new opportunities and partnerships to enhance its offerings and reach more customers.
“We are very optimistic about the future of e-commerce in Africa. We believe that there is a huge potential for growth and innovation, and we are determined to be part of it,” he said.
Source: Reuters
