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African e-commerce firm Jumia Technologies (4JMAy.F) will close its food delivery business in all seven countries in which the unit operates by the end of the year to focus on growing its core online retail business, it said on Wednesday.
Jumia is aggressively cutting costs in order to turn profitable, including headcount reductions, exiting everyday grocery items and reducing delivery services not related to its e-commerce business.
The move is in line with Jumia’s “strategy to optimize its capital and resource allocation and to continue its path to profitability,” the retailer said, adding that Jumia Food is not suitable to the current operating environment and macroeconomic conditions.
Jumia Food represents about 11% of Jumia’s general merchandise value for the nine months ended September 30, and has not been profitable since its inception.
“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,” Chief Executive Officer Francis Dufay told Reuters.
“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.”
Jumia currently operates its food delivery business in Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria and Ivory Coast
The first Africa-focused tech start-up to list on the New York Stock Exchange said a number of employees currently dedicated to the food delivery business will transition to the core e-commerce business in these countries.
Jumia has been trimming its losses, with the latest figures showing that it reduced its third-quarter losses by 67% from a year earlier.
