Jumia, the prominent online retailer in Africa, has announced the imminent closure of its food delivery service, Jumia Food, by the end of December 2023.
This decision has sent shockwaves through the African e-commerce landscape, creating a void in the expanding food delivery market and raising apprehensions about the future challenges faced by key players in the industry.
Attributing the decision to a strategic refocus on the company’s core physical goods business and the Jumia Pay platform, CEO Francis Dufay highlighted the ongoing struggle for profitability as the primary factor behind this move.
Despite Jumia Food contributing 11% to the company’s Gross Merchandise Value, redirecting resources towards seizing opportunities for profitability in the core business was deemed imperative.
Observers familiar with Jumia Food’s journey anticipated this development. Following an impressive 82% year-over-year growth in 2021, the company faced a substantial decline in 2023, attributed to a shift towards profitability and reduced consumer incentives.
Jumia’s exit aligns with a broader trend, as another major player, Bolt Food, also announces its withdrawal from Nigeria and South Africa. Economic downturns, high inflation, and intense competition from established rivals such as Uber Eats and Gokada contribute to the challenging and unforgiving environment in the African food delivery landscape.
Acknowledging the tough nature of the segment, CEO Francis Dufay stated, “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.”
However, amid these challenges, some players are thriving. Barcelona-based Glovo, through strategic partnerships with restaurant chains like Chicken Republic and Shoprite, is carving out its niche in Sub-Saharan Africa. Additionally, Nigerian startup Chowdeck celebrates a major milestone by delivering over ₦1 billion worth of food in a single month.
While Chowdeck’s success is promising, it is crucial to consider the scale of Jumia. Despite generating $64 million in food delivery Gross Merchandise Value over nine months, equivalent to ₦5.7 billion per month, Jumia Food struggled to achieve profitability.
This highlights the universal challenge of achieving profitability in the global food delivery market, with giants like Doordash and Uber facing similar struggles despite massive venture capital investments.
The potential of Africa’s food delivery market, expected to reach $1.7 billion by 2028, is undeniable. However, success in this industry requires overcoming obstacles through partnerships, technological innovations, and capital-efficient models like Chowdeck’s.
