🍔E-commerce giants and the unprofitable food delivery puzzle
E-commerce giants worldwide seem to grapple with an elusive foe: turning a profit in the food delivery domain. This isn't just an African narrative; it's a tale echoing across Asia and beyond.
In the latest chapter of this saga, Jumia, Africa's commerce giant, is bidding farewell to its food delivery service in several African countries.
While Jumia has been a powerhouse in the African technology space, making its mark in payment processing, logistics, and a bustling online marketplace, Jumia Food has faced challenges in turning a profit since its inception. Although Jumia itself as a whole has remained unprofitable since its launch, it would make sense that it makes cuts to its bleeding segments as a careful evaluation of profitability.
Meanwhile, Jumia isn't the only business that has been compelled to reevaluate and adapt in a landscape influenced by global economic fluctuations and high customer acquisition costs. Car-hailing service Bolt Nigeria also pulled the plug on its food delivery operations in December 2023, citing "business reasons".
This also echoes a broader trend drawing a parallel with companies like Zomato, Amazon, Deliveroo, Send, Quicko and several others that have pulled the plug on their food delivery operations in one location or the other.
While the food delivery market, whose size is estimated to be about $100 billion in 2023, has seen significant growth over the past five years, particularly during COVID-19 when millions of people in lockdown ordered food online for the first time, the valuations of most food delivery apps have declined significantly since 2020.
What factors contribute to the persistent unprofitability of e-commerce food delivery services? Are there viable solutions to turn the tide and make food delivery a profitable venture for e-commerce companies?
The quandary persists.
– Emmanuel & Loy
