African e-commerce giant Jumia Technologies has announced a strategic move to cease its food delivery business operations across all seven countries where the unit currently operates. The decision, aligned with Jumia's commitment to optimize capital and resources, comes as part of the company's broader efforts to enhance profitability and streamline its operations in response to the current economic environment.
Cost-Cutting Measures for Profitability
Jumia's decision to exit the food delivery sector is part of its comprehensive cost-cutting strategy, which includes reducing headcount, discontinuing everyday grocery items, and scaling back on delivery services not directly aligned with its core online retail business. This strategic realignment aims to bolster Jumia's financial performance and reinforce its path to profitability.
Challenges in the Food Delivery Segment
Jumia Food, the food delivery arm of the e-commerce platform, constitutes approximately 11% of Jumia's general merchandise value for the nine months ending September 30. The segment has faced considerable challenges and has not achieved profitability since its inception. CEO Francis Dufay highlighted the tough economics of the food delivery market, characterized by high costs, intense competition, and challenging profitability dynamics.
"The economics are tough in this market because the costs are very high, and there is plenty of competition, so there is downward pressure on the commissions that we make and upward pressure on marketing costs because everyone is fighting for customers," explained Dufay.
Jumia Food is currently operational in seven countries, including Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria, and Ivory Coast. The cessation of food delivery operations is expected to be completed by the end of the year. Jumia emphasized that employees dedicated to the food delivery business will transition to roles within the core e-commerce business in the respective countries.
Strategic Focus on Core Retail
With Jumia being the first Africa-focused tech start-up to list on the New York Stock Exchange, the company is strategically refocusing on its core online retail business. The move to exit the food delivery sector underscores Jumia's commitment to optimizing its operations, allocating resources judiciously, and enhancing its competitive positioning in the rapidly evolving e-commerce landscape.