First, it was Dark and Lovely, Nivea Ghana, Game Shopping Center, Vodafone and now it is Glovo that is shutting down operations in Ghana due to profit margins. Is it a mere coincidence, or does Ghana have a problem with international brands? or Glovo has a perculiar problem? This video will explore the reasons why Glovo is shutting down its Ghana operations, and who will be affected and also the opportunities this situation presents.
2021, Post Covid-19 Ghana Begins.
The year is 2021. Post COVID-19 Ghana, a new brand pops up with vibrant yellow as their colour with green writings, Glovo. In 2021 Glovo was expanding, it looked logically correct that they should expand because you’re a delivery company, and people are forced to stay at home because they’re either scared of the pandemic or because it is a regulation from state authorities. Restaurants in some parts of the world are still not open to serve customers and the only means to get food is through on-demand food delivery apps. Business is booming in Europe for you because everyone is ordering from their favourite restaurants and You’re one of the best food delivery apps around. Because business is booming, you expand to the ends of the world including Africa, of which Ghana is part. The West African country is tech-savvy and looks promising because of the youthful population, it seems everything will work just fine like it is working in other parts of the world.
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Glovo launched its operations in Ghana in March 2021, intending to expand its operations in the country. The multi-category delivery platform started its operations in the Ashanti Regional capital, Kumasi, in a contrarian style since startups normally start with Accra, and then expand to other parts of the country. They later came to Accra central, and then Spintex, Legon and Tema, then places closer to the food joint your are ordering from since delivery service areas for companies like Glovo can vary depending on factors like courier availability and business partnerships with local stores.
They invested a total of about 3.7 million dollars in the Ghanaian market and These are the reasons Glovo is leaving Ghana to concentrate on other markets like Morocco, Uganda, Kenya, Côte d’Ivoire, and Nigeria;
1. The Pandemic Tech Bubble Burst; The phrase “Covid -19 tech bubble burst” is a reference to the economic downturn experienced by the tech industry in 2022. The COVID-19 pandemic had previously helped the tech industry by increasing the need for digital services and online presence, but the industry was unable to maintain this growth and was hit by inflation and rising interest rates. Truth is the Bubble burst still lingers around even in 2024, The COVID-19 pandemic tech bubble burst is a contributing factor to Glovo’s decision to reorganize. During the pandemic, there was a surge in demand for food delivery and online services, which led to rapid growth and expansion in the tech industry, including Glovo. However, as the pandemic subsided and the market normalized, some companies may have found themselves overextended or unsustainable, leading to a need for restructuring or reorganization.
Glovo’s decision to shut down operations in Ghana and other countries could be a result of this reorganization effort, as they may be refocusing their resources on more profitable markets or streamlining their operations to adapt to the new market conditions.
2. The Business Model: The business model is a factor. Glovo’s business model, like many other food delivery and logistics companies, is based on a complex ecosystem of riders, restaurants, and customers. This model can be challenging to sustain, especially in markets with high operating costs like Ghana.
These are Some potential issues with Glovo’s business model include:
1. High operational costs (e.g., rider fees, fuel price is Ghana is a problem, maintenance)
2. Thin profit margins due to high commission fees for restaurants.
3. Difficulty in retaining and incentivizing riders
And Glovo’s business model could not be adapted to the local market conditions, making their model not sustainable in the long term due to the economic conditions because in the end the cost will be pushed to the end user, the person ordering the food. leading to low patronage of the app, leading to financial difficulties for Glovo Ghana. And thus, the decision to shut down operations in Ghana.
2. The competition; The food delivery and logistics market in Ghana is highly competitive, with many players vying for market share. In Ghana, Glovo operates in a market with other established food delivery services like:
Foodpanda, Bolt Food, which has majority share of the market. Uber Eats, local players like Chowdeck, Zeptoz and others.
These competitors offer similar services, making it challenging for Glovo to differentiate itself and attract a loyal customer base. The competition leads to:
Aggressive pricing: Companies may lower their prices to attract customers, reducing profit margins for Glovo.
High marketing expenses: Companies must invest heavily in marketing and advertising to stand out.
Rider and restaurant poaching: Competitors may try to lure away each other’s riders and restaurants.
Innovation pressure: Companies must constantly innovate and improve their services to stay ahead.
In this intense competitive environment, Glovo may have struggled to maintain a strong market position, leading to the decision to shut down operations in Ghana.
3. Another contributing factor is Taxes and Local Inflation, Navigating Ghana’s complex web of regulations married with economic conditions proved burdensome for Glovo. From tax increments nightmares, unnecessary levies like Covid-19 levy in 2024, and also inflation issues. complying with these demands have squeezed their profits and stifled their ability to compete effectively. This harsh environment is a major reason Glovo decided to call it quits in Ghana.
Now, Opportunities.
Glovo’s exit creates a void in Ghana’s food delivery market, but comes with some opportunities for others.
1. Now there is the Market gap for new players: Glovo’s exit creates an opportunity for new food delivery services to grab a larger market share in Ghana.
2. Innovation: With one less competitor, existing players may innovate to attract more customers and stand out in the market.
3. Improved service quality: Competition is often a catalyst for improvement. Existing services may up their game to attract Glovo’s former customers, potentially enhancing the overall customer experience.
The impact,
The closure of Glovo will have an impact on various stakeholders:
1. Glovo riders will likely be the most immediately impacted, potentially losing their source of income.
2. Restaurants and stores that relied on Glovo for deliveries will need to find alternative ways to reach their customers.
3. Those who have come to rely on Glovo for convenient deliveries will need to find other options.
Conclusions
Glovo’s decision to shut down operations in Ghana may be attributed to various factors, including the COVID-19 pandemic tech bubble burst and intense competition in the food delivery market. The company’s business model, which relies on a complex ecosystem of riders, restaurants, and customers, may not be sustainable in the long term. Additionally, regulatory challenges, such as complying with labour laws, and taxation, may have added to the company’s operational difficulties. These factors likely contributed to Glovo’s decision to reorganize and focus on more profitable markets, ultimately leading to the shutdown of their Ghanaian operations.
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