Jumia discontinues food delivery across seven markets, shifts focus to expanding physical goods business (TechCrunch)

Pan-African e-commerce platform Jumia has disclosed its intention to discontinue its food delivery service, Jumia Food. The company said its food delivery business is not aligned with the current operational landscape and prevailing macroeconomic conditions in the seven markets, including Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria and Ivory Coast.

As a result, Jumia will cease its food delivery operations across these markets by the end of December 2023.

The warning signs date back to Q4 2022, when the decade-old company undertook several cost-cutting efforts. It discontinued the food delivery operations in Egypt, Ghana and Senegal; suspended logistics-as-a-service in all markets except Nigeria, Morocco and Ivory Coast; halted Jumia Prime across all its markets; and scaled back first-party groceries in Algeria, Ghana, Senegal and Tunisia. At the time, Jumia said these accounted for less than 1% of the group’s gross merchandise volume (GMV) in the first nine months of 2022 and 2% of group adjusted EBITDA loss.

Yet, it’s worth noting that Jumia Food across the recently closed seven markets constituted approximately 11% of Jumia’s gross merchandise volume (GMV) for the nine months ending September 30, 2023. For years, Jumia Food was the fastest-growing category on the e-commerce platform and second-largest category in volume terms behind fashion; in Q3 2022, for instance, food delivery orders grew 38% year-over-year and accounted for 20% of items sold on the platform.

However, Jumia — which has been cutting losses all year (losses fell 67% year-over-year in Q3 2023) — highlights that this business has not achieved profitability since its inception. The decision to shut it down is in line with its strategy to optimize its capital and resource allocation and to continue its path to profitability, the company’s main objectives since CEO Francis Dufay joined.

Jumia is redirecting its focus toward the core physical goods business and maintaining its JumiaPay operations across all 11 markets, as outlined in a recent statement. According to Antoine Maillet-Mezeray, the company’s EVP of Finance & Operations, the decision to exit the food delivery, a business with challenging economics in Africa and globally, was rooted in prioritizing opportunities and expected return on investment.

“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,” Dufay added. “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.”

In the third quarter of this year, the e-commerce platform witnessed growth in GMV for physical goods in Ghana, Uganda, Senegal and two additional African markets. These markets collectively contribute 49% of the company’s overall GMV for physical goods, representing roughly half its business scope. Jumia intends to capitalize on this growth and extend it to its remaining six markets. (Jumia observed a year-over-year decline in GMV in physical goods by 17% in actual dollars but a 10% increase on a constant currency basis in Q3 2023.)

As part of this strategic shift, some employees previously working in the food delivery business will transition to roles within the ongoing physical goods business in these countries, as communicated by Jumia in the statement. However, the restructuring also entails a reduction in the workforce, leading to the departure of a few employees.

Jumia’s decision to discontinue its food delivery business aligns with a broader trend in the industry, mirroring the recent exit of another food delivery competitor, Bolt Food, from Nigeria and South Africa. Both exits seem to be influenced by current macroeconomic headwinds, high inflation and intensified competition within the food delivery sector across the continent. Notable competitors in this space include Chowdeck, Glovo, and Uber Eats.

Read the original article on TechCrunch