Pan-African e-commerce outlet Jumia Technologies has announced it will close its food delivery business – Jumia Food – in Kenya, Morocco, Nigeria, the Ivory Coast, Tunisia, Uganda, and Algeria by the end of the year 2023.
The firm is cutting costs to maximize efficiency and profits. The cuts will include staff reductions, a reduction in grocery items, and a reduction in delivery services that are not related to its e-commerce business.
The retailer says the discontinuation of its food delivery business is in line with its goal to optimize its capital and resource allocation and to continue its path to profitability.’ Massive changes within the operating environment across the continent, including unsuitable operating environments and macroeconomic conditions have compelled the outlet to act.
In a statement, Jumia Food says affected employees will transition to the durable consumer goods business.
“Following a strategic review of Jumia Food, the company determined that its food delivery business is not suitable to the current operating environment and macroeconomic conditions and will close its operations in all markets by the end of December 2023,” a statement released by the retailer reads in part.
According to the firm’s published statistics, the food delivery business accounted for 11 percent of its gross merchandise value (GMV) during the first three quarters of the year ended September 2023. The firm says its food delivery business has never been profitable since it was founded.
Jumia Food Withdrawal from African Markets
Jumia Food’s withdrawal from the food delivery business comes at a time when the space has been expanding continuously to accommodate new entrants across the continent. In Kenya, delivery firms including Glovo, Uber Eats, and Bolt Food have intensified competition within the marketplace.
Jumia Group CEO Francis Dufay says the food delivery business has failed to live up to the group’s expectations. He says the move is a strategic shift that would place the firm on the path to profitability.
“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,” said Mr Dufay.
“In the current context, it means leaving a business line, which we believe does not offer the same upside potential – food delivery,” he added.
Jumia is the first pan-African start-up to be listed on the New York Stock Exchange. Over the past few years, the firm has been aiming to trim its losses, with the latest figures showing that it reduced its third-quarter losses by 67% from a year earlier.
The global economic recession has compelled most multinational businesses to adopt new strategies to stay afloat. The war in Ukraine and the Middle East instabilities have scripted dire economic consequences for most of the developing world.
Jumia Food Job Losses
It remains to be seen how Jumia Group will deal with the resulting redundant staff as a result of the discontinuation of its food delivery business.
Indeed, a recent survey by the Central Bank of Kenya (CBK) that targeted CEOs of more than 1,000 private sector firms through online questionnaires, shows that 26.3 percent of those targeted expect to cut their workforce between now and the end of the year while 63.5 percent will not be hiring. The 26.3 percent, will be the highest number of firms cutting jobs in a single quarter since the CBK introduced the survey back in March 2021.
The planned job cuts by many firms including Jumia Group will set up employees and their dependants to a dull Christmas and New Year festivities as firms react to the increasing cost of doing business, which is manifesting through higher purchase prices in an environment that does not offer room to increase selling prices.
In June 2023, an internal Jumia survey revealed that beauty products were the most ordered items among rural populations, accounting for 16 percent of all upcountry deliveries, ahead of phones and home items such as furniture and bedding.
