By Jonathan Ntege Lubwama
- Jumia has sunset its food delivery operation due to the lack of profitability since the service’s inception
- The company’s shares have persistently lagged, experiencing a drop of almost 70% since going public
African e-commerce giant, Jumia (JMIA +1.04%), made the pivotal decision to discontinue Jumia Food, its food delivery wing in favor of expanding its primary retail and Jumia Pay services. By the end of December 2023, Jumia Food ceased operations in all markets, a move propelled by a strategic reassessment. Although 11% of Jumia’s Gross Merchandise Value (GMV) for the first nine months of 2023 stemmed from Jumia Food, the sector has struggled to achieve profitability since its inception and has poor unit economics even though the CEO attributed the closure to deep-pocketed rivals in the space.
Why This Matters: Jumia is one of the most significant startups in Africa’s ecosystem and has achieved so many firsts. It is the most funded startup in Africa, having raised over $800M across at least 10 funding rounds including a record $400M Series C in 2016. It was also Africa’s first unicorn and the first to go public on the New York Stock Exchange. And even though it has made significant milestones in curbing losses, Jumia has struggled for profitability and finding product market fit. Its stock price has fallen by over 70% since going public, and currently has a market cap that is less than the $800M it raised.
Over the market calls in 2023, Jumia leadership made it clear they will prioritize a path towards profitability. Food delivery is known for its poor unit economics so it is not surprising that it joins other products like third-party logistics, third-party advertisements and grocery delivery in the cemetery. Closing food delivery will come at the cost of losing some customers, though.
Situational Awareness: Following the closure of the food delivery service, Jumia fortifies its commitment to scale its e-commerce and financial service sectors where it sees more robust potential. This refocusing aims to harness opportunities in the physical goods market and reap better returns through Jumia Pay across its eleven country strongholds in Africa. The company’s strategy underscores efficient capital deployment and a robust approach towards achieving profitability. As the e-commerce landscape in Africa continues to evolve, Jumia’s transition could herald a more streamlined business model for online retail platforms, paving the way for sustainable growth and innovation in the industry. The challenge ahead for Jumia is how to increase revenue while bleeding customers with the challenging macroeconomic conditions.
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