In this sample business plan on setting up and running an ecommerce store in Nigeria we are going to be exploring the opportunities and challenges involved in this business. What should a new person entering this business expect? All this is summarized briefly in this write-up.
What is an ecommerce store?
An ecommerce
store is an online shop or mall that stocks regular consumer items in a holding
facility such as a warehouse, shop or store and displays these products online
using an interactive website portal to advertise and promote those products to
potential customers. You can think of an ecommerce shop as a regular offline shop
but with an online presence that makes it appear not be. In a nutshell, a shop
which displays products on a website, sells directly to end users using an
online payment system and delivers products to them is an ecommerce shop.
What are the kinds of products
ecommerce shops should stock?
The range of
products that are sold by ecommerce stores depend on the location of the
ecommerce store and their distance from the target market location. Let’s you
have a shoe shop based in Lagos but you have customers in Port Harcourt, there
are some products you cannot sell to such people based on distance e.g cheap
products that are easy to find like the shoes you would be selling, but there
are other products that can be sold over such distance such as; designer
handbags, washing machines etc if the product is expensive, unique and heavy in
size. But within the same city, you can sell cheaper products that are unique
and of good quality like designer shoes, food (snacks, cakes, ice cream) or
even suits.
Are ecommerce stores viable
businesses to do in Nigeria?
That is a
difficult question to answer. We have seen many ecommerce businesses come and
go since 2012 when Yakasuwa which later became Jumia, then came Konga, payporte
and several others. Jumia and Konga have remained around although both
companies are struggling to make profit but there are a few ecommerce
businesses that are both profitable and have stood the test of time. An ecommerce
business is viable if the target market can provide enough demand to sustain
the business, the delivery cost is reasonably low and the competition is not
eating away your market share. But what specific businesses are can survive and
thrive in the ecommerce space in Nigeria? That is an answer I will only make available
on request.
What are the opportunities for
running an ecommerce store in Nigeria?
Apart from selling directly to end users who visit your website from search engines, there is the opportunity to market directly on social media to your target market using digital marketing strategy. Besides this there is ever growing demand for specific products that cannot be purchased by people in their neighbourhoods or which must be provided at short notice. Such products present ecommerce businesses with opportunities to sell profitably and fast. It just calls for vigilance and due diligence from intending investors. Specific opportunities include; drop shipping, drop servicing, selling on online bidding websites, online market places, setting up your own ecommerce store to sell your own products etc.
How much money should I invest in
ecommerce?
If you want
to compete very well then you need a sizeable investment because logistics is a
major factor that will determine your success. That is the challenge Amazon has
overcome to become the world’s largest ecommerce business. A good offline
example is Dangote Cement that entered a very competitive market with
logistical challenges and have reasonably overcome it as well. But logistics is
a massive investment running into hundreds of millions of naira and that is for
a city based ecommerce business. For a nationwide project we should be looking
at billions of naira.
What are the challenges of running an
ecommerce store in Nigeria?
There are
many challenges but the most noticeable ones are; the absence of an effective
escrow system. This does not inspire confidence from buyers. Secondly is issue
of quality control and refunds. If what is advertised online is inferior to
what is supplied, then can consumers get back their money? There is logistics
challenge especially for customers living outside your state. On the other hand
customers in the same city may be easier to serve but most of your customers
may not reside in the same state as your business. There is counterfeiting, low
profit margins, cybercrimes and several more not mentioned here.
How much sales and profit can I make
from ecommerce business in Nigeria?
Sales can
come from many product ranges and large scale mass marketing and recruitment. Some
ecommerce businesses make as much as 800 million naira a day in sales (Jumia as
far back as 2014) while others may just make a little over 1 million naira a
day (an online Ankara store). As per the profit, that would depend on the
specific products and the operating costs. A business generating over 800
million naira a day in sales should make at least 20 million naira a profit and
this is a conservative estimate. It could be much higher.
Conclusion: How profitable is
ecommerce business in Nigeria?
My final
thoughts on this, an ecommerce business is profitable if you have a very strong
logistics base or if you can operate inexpensively within a city and on a small
and medium scale. It can be profitable
for people who know how to trade and have sound strategy in place on how to
ensure prompt products deliveries are made.
Do you wish to start an ecommerce
shop or online store in Nigeria and need a bankable business plan to help you
raise needed capital or attract partners, investors or bank loans? Give me a
call: 0803 206 4106 or email me: paulonwueme@gmail.com
to get one prepared for you
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