How to start a Distribution business in Nigeria in 2020.
The distribution business in Nigeria can be extremely lucrative. So many people never believe in Nigeria today you can begin a distribution business with a next to no measure of cash and make up a reasonable benefit on a specific item. Well, there is good news, in this article we have taken time to explain the nitty-gritty of starting and running a distribution business in Nigeria.
Who is a Distributor
Anyone can be a distributor. Distributors will always have a business relationship with manufacturers that they represent. Most time distributors maintain exclusive buying agreements that limit the number of participants or enables distributors to cover a certain territory. The distributor becomes the manufacture’s direct point of contact for prospective buyers of certain products. In most cases, distributors rarely sell manufacturers ’ goods directly to consumers. Wholesale representatives and retailers generally find distributors to buy products for resale.
Knowing the Business
Advertising huge amounts of goods in the market requires a compelling an effective distribution channel and this is the thing that the distributors enable them to achieve. This is where a distributor or wholesaler comes in to add value. They buy the goods in bulk from the manufacturers, separate them into littler units, and after that offer them on to retailers, who additionally separate them to pitch to purchasers or consumers.
Starting the Business
Before you begin the business, you will need some skills and knowledge that are vital to running a successful distribution channel. These include negotiation skills, financial acumen, business management, and your networking skills. Here is a short walk-through to starting your own distribution business in Nigeria.
What you Have to Know as a Distributor;
- You are to buy goods/products directly from producers and in large quantities and sell in relatively smaller quantities.
- You are expected to sell different varieties of a particular line of product. For example, a distributor who deals with paper is expected to keep all varieties of paper, cardboard sheets, cards, etc.
- You may need to employ a number of sales agents for the distribution of a product.
- You need a large amount of capital to be invested in the business.
- You may also be required to provide credit facility to retailers and financial assistance to the producers or manufacturers.
Keys to a Successful Distributor Business
- Always try to maintain good customer relationships.
- Build a large customer base. The most important thing you need is not the products you want to distribute but the buyers of the product you are distributing.
- Concentrate more on the turnover rather than on cost. The distribution business is a game of volume.
- Always reach out to your customers whether in the name of advertisement or marketing.
Starting a Distribution Business in Nigeria
In its most basic form, a distribution business is just a routine of buying, storing, transporting, and selling. However, even this routine can become tricky and complex. Every wholesale distributor knows a number of tricks to manage it efficiently in order to maximize profits. Gain a good understanding of basic supply chain management principles. These tricks are those that would not be visible to just any outsider. For instance, a distributor knows how to handle stock that is close to its expiry date, so that there is minimal impact on their profit margin. This is just one example, but there are a number of other things that you will need to know in order to maximize your profits.
Decide what you want to specialize on
Answering these questions will help you decide on particular products that are most suitable for your distribution business. You will need an area or segment that you want to specialize in- it could be fast-moving items such as groceries and food items, or construction supplies and materials, or even electronics and gadgets. You need to look at a number of factors, such as products that have a high turnover, products that are easy to market and distribute products that you are passionate about and the competition in the market for the product that you want to sell. What is your USP and why will people choose you over your competitors
Knowledge of the Market
You must have gone for the market survey; know who needs your product and how to market it to them before you start the distributor business. Knowing who needs the product will give you a sense of direction and the focus you need to succeed.
Some established companies will require you to deposit some amount of money with their company before giving you their products. Some others will require you to start with the half a trailer of their product. But for new companies who are still in need of distributors, you may only need a surety to qualify. As I said earlier, it is better you start with new companies that are not yet popular if you don’t have enough money. The only thing you need is selecting the best selling products before signing any agreement with them.
Means of Transportation and sales agents
To succeed as a big distributor you need a truck or space car as well as sales agents. This truck or space car will be needed for taking the products from the production company to your warehouse and to retail stores across cities. You can hire a truck if you can’t afford one. It is advisable you take the products to the retailers than wait for them to come to you because when they have another distributor that offers to bring the same products you sell to them to their shops, they will quickly abandon you. So, be wise and make use of your sixth sense.
Get a warehouse and office space
The hub of your distribution business in Nigeria will be your warehouse as this is where you will store and move your goods from. Select a warehouse that is close to the potential customers of your niche, and most importantly has great transport links and easily accessible roads. This will matter when you register with companies as their distributor. Having a separate or exclusive office area is not essential; you can easily dedicate an area of the warehouse as office space to reduce your overheads.
Register and develop contacts with manufacturers
As a beginner in the distribution business in Nigeria, gaining distributorship rights with large companies who have an established network may be hard, but you can still begin as a sub-distributor by collaborating with a larger wholesaler. From there, you can climb your way up the ladder. With the basic setup done, you will need to find manufacturers or suppliers of products that are within your niche. Generally, manufacturers need a distributor to be registered with their company, as well as meet some criteria for gaining distributorship rights. Other requirements could include proof of a specific turnover amount and some limitations regarding the locations. You can also look for new companies who are on the lookout for wholesalers in the meanwhile.
Find and connect with potential customers and build strong relationships
At the end of the day, what’s going to make-or-break you as a wholesale distributor is your ability to form strong, lasting relationships with your customers. Instead of solely prioritizing profit, you should prioritize customer service, adding value during sales conversations, and making faster order fulfillment a priority. If you achieve this you’ll be well on your way to building a long list of repeat customers.
When all of that is set up, you will need to connect with retailers to register with them as a supplier and sell your goods.
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