African e-commerce giant Jumia has announced the impending shutdown of its food delivery business, Jumia Food, by the end of 2023, as part of a broader cost-cutting initiative as the company focuses on core business segments with higher potential for profitability.
With a reported loss of $19 million in Q3 2023, Jumia has been realigning its strategic focus under the leadership of CEO Francis Dufay, who assumed the role last year. Dufay cited challenging unit economics and substantial losses in the food delivery segment as key reasons for its closure. He also attributed the decision to increased competition and rising operational costs.
Dufay noted the downward pressure on commissions and the upward pressure on marketing costs in the food delivery space, describing it as lacking the same “upside potential” as Jumia’s physical goods business.
Jumia has already implemented various cost-cutting measures, including laying off 900 employees (20% of its workforce) and relocating 60% of its top management team from the United Arab Emirates to African countries to streamline operations. The company has also significantly reduced its advertising and marketing expenditures.
Launched in 2013, Jumia Food, has met with challenges in its bid to turn a profit throughout its existence. In Q3 2023, it contributed $63.9 million in gross sales, accounting for 11% of Jumia’s overall gross merchandise value. However, the segment has consistently posted losses in the eleven North, East, and West African countries it operates in.
The decision to shutter Jumia Food aligns with the company’s shift towards business segments that demonstrate greater potential for profitability. Jumia’s recent focus on small-ticket everyday items has been revised under Dufay’s leadership, with an increased emphasis on Jumia Pay, delivering physical goods and expansion into smaller Nigerian cities.
The total shutdown of Jumia Food follows the discontinuation of the food delivery service in Egypt, Ghana, and Senegal, where the activity was deemed sub-scale. With a liquidity position of $166.3 million, according to Q2 2023 reports, Jumia is strategically repositioning itself for sustained growth and profitability.