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In a surprising move that reverberated across the African e-commerce landscape, Jumia, the leading online retailer on the continent, has announced its decision to close down its food delivery service, Jumia Food, by the end of December 2023.
This unexpected withdrawal creates a significant void in the thriving African food delivery market, prompting speculation about the sector’s trajectory and the hurdles confronting major industry players.
The CEO of Jumia, Francis Dufay, pointed to a strategic focus on the company’s core physical goods business and the Jumia Pay platform as the primary rationale behind this departure.
Despite Jumia Food contributing 11% to the company’s Gross Merchandise Value, its ongoing struggle to achieve profitability ultimately became the decisive factor.
He stated, “The more we concentrate on our physical goods business, the more we recognize the substantial opportunities for Jumia to flourish and achieve profitability. Hence, we must make the right decision by directing our management, teams, and capital resources towards seizing this opportunity.”
Industry observers were unsurprised by the news of Jumia Food’s closure, witnessing its rollercoaster trajectory. After a remarkable 82% year-over-year growth in 2021, the company experienced a sharp decline in 2023 due to a focus on profitability and reduced consumer incentives.
This departure mirrors a broader trend; Bolt Food, a significant player, also announced its exit from Nigeria and South Africa, shedding light on the challenging realities of the African food delivery landscape.
Economic downturns, high inflation, and intense competition from established rivals like Uber Eats and Gokada contribute to a volatile and challenging business environment.
“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.”
Amid the challenges in the industry, some players are thriving. Barcelona-based Glovo is making its mark in Sub-Saharan Africa through strategic partnerships with restaurant chains. Chowdeck, a startup in Nigeria, has achieved a significant milestone by delivering over ₦1 billion worth of food in a single month.
While Chowdeck’s success is notable, the scale of Jumia is significant. Despite generating a staggering ₦5.7 billion per month in food delivery GMV for nine months, Jumia struggled to achieve profitability, echoing the universal challenge in the global food delivery market. Despite massive venture capital investments, this struggle is evident even among giants like Doordash and Uber.
The potential is immense, with Africa’s food delivery market projected to reach $1.7 billion by 2028. However, success in this market demands overcoming obstacles and strategic partnerships, technological innovations, and capital-efficient models, as seen with Chowdeck, may hold the key.
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