How Jumia Food’s closure may affect small businesses in 2024

The growth of the online food delivery industry in Uganda was partly spurred by the implementation of lockdown measures due to the Covid-19 pandemic in 2020. .

Jumia Technologies, one of the leaders in e-commerce in Africa, was the first entrant in Uganda’s online food delivery industry and has played a significant role in shaping the industry. 

Jumia, which had already been operating in Uganda under other business units, had the added advantage of having market awareness compared to other later entrants in Uganda and was thus able to quickly open access to its online food platform under the name Jumia Food.

However, it seems unable to leverage the advantages of early entry into this market. On December 14, 2023, Jumia announced closure of its online food delivery business in Africa, impacting the Ugandan unit.
 
This announcement came at a time when the Ugandan food delivery market was booming, with an increasing number of small businesses using online delivery platforms and a change in customer lifestyle favouring online food ordering. The departure of such a significant player thus raises critical questions about the implications for small businesses in Uganda.

Firstly, small businesses face the immediate challenge of losing online visibility, especially those that depended highly on Jumia Food for customer orders. The exit of Jumia Food will lead to a loss of online customers and business for small businesses that rely on the online platform to attract customers who prefer ordering online. This could ultimately lead to a loss in revenue and closure of such businesses. 

Small businesses may have to establish new and effective ways of marketing their products to keep existing customers and attract new ones for continued success.

Secondly, it could create logistical challenges as the delivery responsibility now lies on the shoulders of small businesses. Small businesses may need to invest in developing their own delivery service platforms.

Thirdly, the exit prompts small businesses to transition to alternative platforms. This shift may require businesses to adapt to new systems, payment methods, and changes in logistics. It will also necessitate the development of new strategies to survive.

Furthermore, Jumia Food’s departure from Uganda may allow for the emergence of a monopoly within the market, as there have been two major players in the industry. This could potentially lead to higher expenses for small businesses.

Fourth, it is also worth highlighting that platforms such as Jumia Food have played a role in curbing youth unemployment- a problem that Uganda has grappled with for many years. The departure of such a player could, therefore, harm youth employment as it implies a loss of jobs for the riders employed.

Alternatively, the exit of such a significant player may inspire small businesses to become more innovative.

This could lead small businesses to recognize that they are not obliged to rely solely on third-party platforms for their survival and will ultimately have to invest in their in-house digital platforms.

Jumia Food’s exit could, therefore, accelerate the digital transformation journey of small businesses as the need to establish an online presence becomes pressing.

The exit of Jumia Food could pose challenges for small businesses in Uganda. Still, it may also drive them to look for alternatives, innovate, and adapt to the changing landscape of online food delivery.

Their ability to do this depends on factors like adaptability, availability of alternative platforms, and development of support structures in the Ugandan market. Such a shift in the market may raise awareness of the need for regulatory considerations. 

Government and policy makers may need to reassess regulations related to online platforms, food safety, and delivery services.

Ms Naome Otiti is is a research fellow at the Economic Policy Research Centre, Makerere University.