In a recent announcement, leading e-commerce platform Jumia is set to bid adieu to its food delivery operations across all seven African markets, including Kenya, by the end of this month. Citing challenging conditions, the company expressed its decision after a thorough review of the food delivery arm.
Jumia, which has been actively involved in food delivery services in Kenya, Nigeria, Uganda, Morocco, Tunisia, Algeria, and the Ivory Coast, stated that employees currently engaged in the food delivery sector will seamlessly transition to the durable consumer goods business.
The decision, according to a statement released on Thursday, stems from a strategic evaluation that revealed the current operational environment and macroeconomic conditions were not conducive for the food delivery business. Despite contributing 11 percent to Jumia’s gross merchandise value (GMV) during the nine months leading up to September 2023, the food delivery segment has reportedly never achieved profitability since its inception.
Gross merchandise value (GMV) represents the total value of orders, encompassing product and service costs, shipping fees, and taxes, before any discounts or vouchers, excluding cancellations or returns.
The move comes at a time when the food delivery market in Kenya has seen an influx of new players, intensifying competition with the likes of Glovo, Uber Eats, and Dial-A Delivery.
Francis Dufay, CEO of Jumia Group, characterized the decision as a strategic shift aimed at steering the company towards profitability. He emphasized that despite the closure of the food delivery segment, Jumia sees significant growth potential in its physical goods business.
Dufay stated, “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.”
Highlighting the financial aspect, Jumia revealed that, by the end of 2021, the Kenyan business had accumulated a cumulative loss of $87.8 million (Sh13.5 billion in current exchange rates) since its inception in May 2013.
Earlier this year, an internal survey by Jumia unveiled interesting trends among its Kenyan customer base. The survey identified beauty products as the most ordered items among rural customers, contributing 16 percent of all upcountry deliveries, surpassing phones and home items such as furniture and bedding. Meanwhile, urban customers predominantly purchased food items, including groceries and uncooked cereals.
As Jumia bids farewell to the food delivery chapter, the company remains optimistic about the opportunities and growth potential in its core business, emphasizing a commitment to building a more robust and profitable future.