Jumia, the leading online marketplace in Africa, has announced the closure of its Jumia Foods platform in several markets across the continent. This unexpected move has sent ripples through the e-commerce landscape, prompting questions about the future of online grocery shopping in Africa.
Jumia’s decision to suspend Jumia Foods was not taken lightly. The company stated that it was a strategic move to consolidate resources and focus on areas and markets that are profitable for their business. This decision follows Jumia’s previous shutdowns in Tanzania and Cameroon.
Jumia has been a significant player in the e-commerce sector, with a business model similar to Amazon’s. Despite the company’s efforts to turn a profit, Jumia has faced challenges. In 2019, Jumia’s losses rose 34% to $246 million, marking the eighth straight year without profits.
However, the company saw a surge in online shopping during the lockdowns, ending the year with 6.1 million active consumers on its websites. Despite these gains, the company has struggled with allegations of fraud and concealed losses, leading to a decline in its stock price.
While Jumia hasn’t publicly disclosed specific figures, data suggests Jumia Foods struggled to gain significant traction. In its 2021 Q4 report, Jumia revealed that Jumia Foods orders constituted only 5% of total orders, with a Gross Merchandise Value (GMV) contribution of 3%. This, compared to the 80% GMV contribution from its core physical goods business, highlights the stark difference in potential.
“The more we focus on our physical goods business, the more we realize that there is huge potential for Jumia to grow, with a path to profitability. We must take the right decision and fully focus our management, our teams and our capital resources to go after this opportunity. In the current context, it means leaving a business line, which we believe does not offer the same upside potential – food delivery,” said Francis Dufay, Chief Executive Officer of Jumia.
The Impact on the Market
The shutdown of Jumia Foods is likely to have a significant impact on the food delivery market in Kenya and potentially other regions where Jumia operates. It remains to be seen how this space will evolve and which players will step in to fill the gap left by Jumia Foods.
It will undoubtedly impact both consumers and sellers who rely on the platform. Consumers may face limited options for online grocery shopping, while sellers who depended on Jumia Foods for revenue will need to find alternative channels.
In conclusion, Jumia’s decision to shut down Jumia Foods is a strategic move aimed at consolidating resources and focusing on profitable markets. While this decision may have immediate impacts, it could potentially pave the way for Jumia’s long-term success in the e-commerce sector.