In this article on setting up and running an ecommerce store in Nigeria we are going to be exploring the opportunities and challenges involved in this business. How profitable is the ecommerce business in Nigeria for year 2020? 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.

You can find out more from the source: https://lagosbusinesses..com/2020/07/sample-business-plan-for-e-commerce.html

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