Jumia Technologies, an African e-commerce company, will shut down its food delivery service in Africa. Jumia has its delivery business in seven nations which it will shut by the end of the year. The decision was taken so that the e-commerce company can make efforts to grow its key online retail business, the company said on Wednesday.
Jumia is reducing headcount, getting rid of regular grocery items, and cutting back on delivery services unrelated to its e-commerce business as part of its aggressive cost-cutting strategy to become profitable. The retailer stated that the action is in keeping with Jumia’s “strategy to optimise its capital and resource allocation and to continue its path to profitability,” but that Jumia Food is not appropriate given the macroeconomic climate and current operating environment.
Jumia Food has never turned a profit since its founding and accounts for just 11% of Jumia’s total merchandise value for the nine months that ended on September 30.
“It’s a segment that’s very difficult across the world, with very challenging economics and big losses. It’s also a segment that is extremely competitive across the world and Africa. The economics are tough in this market because the costs are very high and there is plenty of competition so there is downward pressure on the commissions that we make and upward pressure on marketing costs because everyone is fighting for customers,” Chief Executive Officer Francis Dufay told Reuters.
As of right now, Jumia delivers food to Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria, and the Ivory Coast.
Many of the staff members currently working on the food delivery business will move to the main e-commerce business in these countries, according to the first Africa centred tech start-up to list on the New York Stock Exchange. Jumia has been cutting its losses; according to the most recent data, its losses for the third quarter were 67% lower than they were a year earlier.
