In a decisive move, Jumia, the continent’s top online retailer, has announced the closure of its food delivery service, Jumia Food, by the end of December 2023 across the African e-commerce industry.
“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. In the current context, it means leaving a business line, which we believe does not offer the same upside potential – food delivery,” said Francis Dufay, Chief Executive Officer of Jumia.
Despite Jumia Food contributing 11% to the company’s Gross Merchandise Value, its ongoing struggle to achieve profitability ultimately became the decisive factor.
Since its inception, Jumia Food experienced fluctuating fortunes, with a significant 82% year-over-year growth in 2021, reflecting the company’s strong foothold in the food delivery segment. However, in 2023, the company saw a marked decline in Quarterly Active Consumers and Orders. A consequence of its shift to drive profitability by focusing on viable categories and reducing consumer incentives.
Industry observers were unsurprised by the news of Jumia Food’s closure, witnessing its rollercoaster trajectory. After a remarkable 82% year-over-year growth in 2021, the company experienced a sharp decline in 2023 due to a focus on profitability and reduced consumer incentives.
This departure mirrors a broader trend; Bolt Food, a significant player, also announced its exit from Nigeria and South Africa, shedding light on the challenging realities of the African food delivery landscape.
Economic downturns, high inflation, and intense competition from established rivals like Uber Eats and Gokada contribute to a volatile and challenging business environment.
“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.
“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.”
