Jumia Technologies has announced the imminent closure of its food delivery business across all seven countries where the unit currently operates.
This decision, unveiled on a Wednesday, marks a pivotal shift in Jumia’s operational focus, as the company aims to streamline its resources and capital towards the expansion and enhancement of its core online retail business.
What do we know?
Jumia Technologies is set to cease its food delivery operations in Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria, and the Ivory Coast by the year’s end.
This move is part of the company’s broader cost-cutting strategy, which includes reducing its workforce, divesting from everyday grocery items, and scaling back on delivery services unrelated to its e-commerce activities.
Jumia’s decision reflects a commitment to optimizing its capital and resources, steering away from ventures deemed unsuitable for the prevailing operating environment and macroeconomic conditions.
Why Jumia Food is closing
The strategic pivot aligns with Jumia’s overarching goal of achieving profitability. Jumia aims to navigate the challenging landscape of the food delivery segment, notorious for its demanding economics, fierce competition, and consistent losses.
Francis Dufay, Jumia’s CEO, emphasized the difficulties inherent in the food delivery market globally, citing high costs and intense competition as key factors. The decision to exit this segment is underpinned by the need to mitigate losses, as the food delivery arm represented approximately 11% of Jumia’s general merchandise value for the nine months ending September 30.
Furthermore, this move is essential for optimizing operational efficiency and focusing on markets where Jumia can thrive.
What They Said
CEO Francis Dufay elucidated on the challenges faced by Jumia in the food delivery sector, describing it as a segment marked by tough economics and substantial losses. He emphasized the global competitiveness of this market, leading to downward pressure on commissions and escalating marketing costs as businesses vie for customer attention.
Dufay highlighted the intricacies of the food delivery market, making it clear that the decision to withdraw was a strategic move to safeguard the company’s financial health.
Transition and Optimizing Resources
Acknowledging the impact on its workforce, Jumia disclosed that employees dedicated to the food delivery business would transition to roles within the core e-commerce business across the affected countries.
This demonstrates Jumia’s commitment to retaining talent while realigning its human resources to areas that promise growth and sustainability. The move is indicative of a dynamic approach to optimizing resources in the pursuit of long-term profitability.
Financial Progress
Jumia’s shift in focus is complemented by tangible progress in reducing losses. The latest financial figures reveal a significant 67% reduction in third-quarter losses compared to the same period in the previous year.
This attests to the effectiveness of Jumia’s cost-cutting measures and strategic realignment, instilling confidence in investors and stakeholders regarding the company’s path to profitability.
