Looking for more information? Search this blog

Sunday, July 9, 2017

How to Setup a Baby Products Retail Store in Nigeria

Nigeria has a huge market for sale of baby products ranging from diapers, to baby clothing to baby shoes, baby toys and other products that can be associated with children under 18 months of age – those that can reasonably be breast fed or still growing little teeth. 

In all Nigerian homes I know, babies are the darlings of everyone. They can possibly do no wrong but they are the most destructive, restless, playful and distracting members of many households. They have needs and the loving parents know this very well.

Socially Nigerians tend to celebrate with their family member, friend, colleague, church member or neighbor who just put to bed. Guess how they choose to celebrate with them – by buying baby products as gifts presented to the parents as a way of showing their love for the new child. It is a very common

The Opportunity in Selling Baby Products in Nigeria
There are many opportunities in Nigeria to sell baby products in Nigeria. Let us start with the population of new born babies. In 2016 an estimated 5.2 million babies were born in Nigeria with over 2 million of them born to parents who reside in many Nigerian towns and cities. The main customers of baby products reside in the towns and cities of which an estimated 40% of Nigerians are resident in. The big towns and cities include state capitals, transit such as towns, trading towns and other densely populated commercial areas etc

Nigeria’s Population is growing very fast
Nigeria’s population is growing at an alarming 3.2% per annum which would make Nigeria the 3rd largest country in the world - by population - by the year 2050 when our population would reach 400 million. This is because family planning is not widespread in Nigeria. Most homes have at least 4 children even among educated middleclass families. There is also the issue of early marriages. In Nigeria women get married as early as 21. Combine that with our high fertility rate of 5.7% - this means most Nigerian women between the ages of 19-39 will bare at least 5 children which is the 10th highest in the world. Nigeria will keep producing millions of babies every year.

Huge Pool of Customers in Nigeria
There is a huge market pool of over 38 million customers to consider (parents with children less than 2 years). About 15.2 million of them reside in state capitals and cities such as; Lagos, Port Harcourt, Abuja, Benin, Jos, Kano, Ibadan, Ilorin to mention a few. This population keeps increasing year after year meaning that by next year we should be expecting a higher population of parents with children less than 2 years of age.

Products are affordable to the Nigerian Middle Class             
Thirdly baby products are relatively affordable for the middle class who are 23-30% of total population according to the World Bank. In Nigeria middle class families consist on average two parents and 4 children with gross household income of N120,000 and above. Most middle class families can afford to buy this range of products and they reside mostly in the urban centers. 

There are few Specialist Baby Product Shops
There are a lot of shops that sell baby product but very few of them are specialist stores. This means they can only stock their shops with the most common baby products i.e diapers and baby food but not on baby clothes. Most people buy their baby products from corner shops and Supermarkets in Nigeria. Secondly they are not likely to source quality baby wares and products at the best available price.

Family Planning is not widespread           
Nigeria is one of the least compliant countries in the world when it comes to the use of contraceptives and other family planning methods. Our cultural, religious and social practices encourage larger families compared to European and Asian households. 

Low Marketing Costs                                                             
Being a retail product that cuts across many social and economic divides, the cost of reaching potential customers is relatively low compared to many other products. There are marketing strategies that can achieve good results in a short time with a small budget that fits into this business. This offers a chance for investors to realize quicker sales if the marketing approach used is cost effective

High Profit Margins                                 
Baby products also carry a higher profit margin than many fast moving consumer products. Some baby products such as diapers can attract 10% or more in sales margin compared with other kinds of consumer items.

The Challenges
There are many things that could affect your business negatively or prevent you from achieving your business goals. In Nigeria I have identified at least 9 for baby product range of businesses but I will only explain 3 in this article;

Counterfeiting of Baby Products
One thing common in the Nigerian landscape is how soon a fast moving product is counterfeited or produced using substandard ingredients in order to make a quick buck. It cuts across drinks, to clothing to bags, shoes and a lot more and certainly baby products are not excluded. The unfortunate thing is that consumers often don’t know better. This can actually discourage some people from buying from your store. 

Strategic Shop locations are expensive                                                       
To have a strategic location to drive sales to your business is very hard to come by because the available spots are usually very expensive and can contribute to your already high operating cost

Stiff Competition
A lot of people already know about this business and there is no way they will sit back and allow others profit from it. Since there are many alternatives to the products you will be selling you will likely lose some potential customers so long as people can order for the same product from someone else. But this shouldn’t discourage you as aggressive marketing works well when there is stiff competition

How to Find Customers
There are at least 15 different ways I know you can find new customers for your business. There is word of mouth, targeted internet marketing, social media marketing, use of a strategic shop location, online shopping malls among other methods many of which are low budget and effective.

Startup Requirements for Baby Products Retail Store in Nigeria
  • 2 years’ Shop Rent – 1,200,000
  • Inventory – 3,000,000
  • Adverts and Marketing – 600,000
  • Working Capital – 600,000
  • 3 months salaries – 300,000
  • Contingency – 600,000
  • Total – 6,300,000
NB: required staff; 2 sales girls and 1 marketing executive

1st Year Financial Summary
  • Gross sales = 18,000,000
  • Gross Profit = 5,400,000
  • Net profit before tax = 3,240,000
  • Taxation = 972,000
  • Net Profit after Tax = 2,268,000
  • Return on Investment = 36%
  • Breakeven period = 9th or 10th month if sales target is met
  • Payback period = 3rd year
Assumption used in this projection is daily sales of N60,000, gross profit margin of 30% and 300 business days in a year.

Do you wish to setup a baby/children’s store in Nigeria and need a professionally written business plan for it? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com to get one prepared professionally for you.

No comments:

Post a Comment