JUMIA CEO Reveals Why the Food Delivery Business Got Cancelled

A couple of days ago, popular e-commerce company, Jumia, announced that it had to close down its food business. The company shared that at the end of this month, there will no longer be a thing as "Jumia Foods" and this is because operations weren't compatible with the current operational environment and economic conditions in all seven markets. 

Considering how Jumia Food started in 2013, its decision to withdraw from food delivery in seven markets came as a surprise. Jumia Food represented about 11% of the company's gross merchandise volume (GMV) until the third quarter of 2023. 

During an interview with TechCrunch, Francis Dufay, CEO of Jumia stated that the initial explanation given for closing down the business was that despite feeling emotionally connected to the service internally, considering it a longstanding part of their operations and beneficial for the company,  discontinuing it was also good news as it contributed to their ongoing efforts to decrease losses.

Dufay shared in the interview that their company operated in two primary business areas: one involving e-commerce for physical goods and the other being food delivery. According to him, the physical goods segment displays continuous positive growth trends, presenting healthy financial prospects and significant potential. He expressed confidence in their understanding of how to expand and outperform numerous competitors within this sector. Contrarily, regarding Jumia Food, he mentioned the intense struggle faced in a highly competitive market, noting the challenges of competing against numerous well-funded and aggressive competitors in the food delivery space. 

"To me, it made little sense to continue, economically speaking. Some of these markets are small and crowded. While we had little upside potential, it required disproportionate efforts to maintain the business because of huge competition, operational complexity, management of many vendors, and so on," Dufay explained. 

Explaining further for clarity purposes, Dufay said" And so, since we’re a company with limited resources, we have to make choices. When I say limited resources, it means not infinite. At the end of last quarter, we had $147 million in the bank accounts. So we have resources. But as a CEO, I must decide where they will be better invested. So we decided to focus all our energy, teams, leadership, and financial resources on the one big opportunity with a clear upside and where we know how to capture it and grow profitably: physical goods e-commerce." 

Dufay was asked if he wasn't concerned about a potential decline in orders and users from the platform since Jumia Food has to go, he said he believes that concentrating all company resources on a single business line where they possess strength would enable them to recover lost orders and customers more swiftly. He explained the potential of this particular business line and the intention to compensate for the losses incurred. However, he noted the inability to provide a specific timeline for this recovery, outlining it as a clear strategy moving forward.

"We should make up for it, but I can’t give you a specific timeline as you can imagine. But that’s clearly the plan," he said. 

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