Last week, Jumia, the pan-African e-commerce platform, announced the discontinuation of its food delivery service, Jumia Food, in seven markets. The decision was made due to the challenging operational landscape and prevailing macroeconomic conditions in these markets, including Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria, and Ivory Coast.
Key Takeaway
Jumia has decided to discontinue its food delivery service in seven markets due to intense competition and challenging economic conditions, focusing instead on its core physical goods business.
Jumia’s Cost-Cutting Measures and Financial Progress
Jumia has been implementing cost-cutting measures since new management took over a year ago, resulting in significant progress. The company’s adjusted EBITDA loss for the year stands at $61 million, down by 61% from the first nine months of 2022. The focus has shifted to the core physical goods business, leading to the suspension of first-party grocery offering, logistics-as-a-service, and food delivery operations in markets where economic viability was deemed unsustainable.
Impact of Exiting the Food Delivery Business
Jumia Food accounted for approximately 11% of the company’s gross merchandise volume (GMV) until Q3 2023 and was the second-largest category in volume terms, following fashion. The decision to discontinue the service has led to a decline in active customers and orders, posing potential challenges for the platform.
CEO’s Perspective on Market Competition
Francis Dufay, CEO of Jumia, highlighted the intense competition in the food delivery market, citing deep-pocketed and aggressive rivals as a significant challenge. The company’s limited resources led to the strategic decision to focus on the physical goods e-commerce segment, where it sees significant growth potential and clear upside.
Competitive Landscape and Market Dynamics
Dufay emphasized the presence of international players and local competitors in the African food delivery market, noting the aggressive strategies employed by various players to gain market share. He highlighted the irrationality of the market, with companies engaging in aggressive pricing and promotions, resulting in unsustainable economics.
Focus on Physical Goods E-Commerce
Jumia’s shift in focus towards physical goods e-commerce is driven by the positive growth trends, healthy economics, and potential for profitability in this segment. The company’s well-developed logistics network and established partnerships provide a competitive advantage, making it a more attractive business proposition compared to food delivery.
Future Outlook and Growth Strategy
While acknowledging the potential impact of the food delivery exit on user and order numbers, Dufay expressed confidence in the company’s ability to make up for the loss through accelerated growth in the physical goods business. The core categories driving growth include phones and electronics, TV, appliances, home and living, fashion, and beauty, where Jumia sees promising results.
