Jumia Food, the food delivery service of the e-commerce company, Jumia Technologies, has announced plans to shut down operations in Nigeria this December.
According to Reuters, Jumia said that it will close its food delivery business in Nigeria and six other countries in which it operates by the end of the year to focus on growing its core online retail business.
In its third-quarter results, Jumia Technologies reported a 67 per cent reduction in losses from a year earlier with a drop still expected. It tied the drop in losses to cost savings initiatives, which it is aggressive about to turn profitable.
Some of the cost-cutting measures include headcount reductions, exiting everyday grocery items, and reducing delivery services not related to its e-commerce business. The current decision to shut down Jumia Foods is seen in a similar light.
In a statement, it was revealed that the decision is in line with Jumia’s “strategy to optimise its capital and resource allocation and to continue its path to profitability.”
Jumia Food represents about 11 per cent 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. 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 said.
Jumia Food currently operates in Nigeria, Kenya, Uganda, Morocco, Tunisia, Algeria and Ivory Coast.
The company said that some of its employees currently dedicated to the food delivery business will transition to the core e-commerce business in these countries.
This followed the recently announced exit of Bolt Food, the food delivery service of the popular ride-hailing company, Bolt, this month after only two years of operation.
Bolt said that after evaluating its performance, it decided to align with its broader strategy of focusing on its more profitable segments. At first, it said that it was only exiting Nigeria but it later confirmed that it would shut down its operation in South Africa as well.
