Distributorship Business in Nigeria

Distributorships are businesses selling goods or services directly from producers to consumers without going through intermediaries. In Nigeria, distributorships are common because they allow companies to bypass expensive import duties and other taxes. Here, we'll discuss everything there is to know about the distributorship business in Nigeria.

Nigeria has a large manufacturing sector, accounting for over 50% of its GDP. The country also imports many raw materials, such as oil and steel, which makes it vulnerable to fluctuations in global prices.

"A distributor is someone who buys products at wholesale prices and sells them at retail prices," says Olayinka Ogunseye, CEO of Eko Distribution. "It's a win-win situation for both parties." So, if you're interested in being a distributor in Nigeria, follow along!

How to Become a Distributor in Nigeria

Choose a Niche

The first step in starting up your distributorship business in Nigeria is deciding on a niche. This is like choosing a specialty store within a larger chain. You can sell a wide range of products with different brands under one roof (such as clothing, electronics, etc.).

Write a Plan

Once you've chosen a niche, you need to write a plan that outlines how much capital you will require for your distributorship business. It includes things like buying equipment and hiring employees.

Get Business Licenses

You must get various licenses to run a distributorship business in Nigeria legally. These include:

• License to buy and sell goods;

• License to distribute goods;

• Sales tax license; and

• Manufacturer's license.

You can find these licenses online and at local government offices.

Meet Other Distributors

You need to contact an existing distributor in Nigeria. Try contacting 5-10 distributors until you find one that offers your product range and cost structure. If possible, visit their warehouse and see how they work.

Are they open on weekends? Do they have salespeople working on commission? Learn what kind of payment terms they offer. You can also learn about their customer service by calling clients.

What do customers say about them? How long does it take to get paid? Once you've found a reliable distributor, send them an email stating your intentions to become a distributor.

Understand the Costs

Ensure that you understand the costs associated with becoming a distributor. There are two types of fees: one type applies whether you sell any products or not; the other type only applies when you sell products.

It may be cheaper to hire employees instead of buying inventory, so consider hiring employees instead of purchasing stock. Also, ask yourself if you want to buy products outright or finance your purchases. Financing will require interest payments out of every sale you make. Ask yourself if you're willing to pay these monthly payments.

Get a Warehouse

It would help if you secured a warehouse. A warehouse is where you keep your products before shipping them to customers.

Set Up a Bank Account

You should set up a bank account to receive money when you start selling. This way, you don't risk losing money due to insufficient funds. After setting up this account, you must deposit 10% of all your sales into this account.

Get Registered

To legally operate as a distributor, you must register with the Federal Ministry of Commerce (FMC). Registering allows you to obtain a certificate of registration, tax identification number, and license plate. It also lets you create invoices and collect payments.

Start Small

Don't try to sell too much in your first month. Instead, focus on building relationships with your current customers and generating new ones.

Keep Records

Make sure you always keep detailed records of your transactions. These records include invoices, receipts, shipping documents, and purchase orders.

Track Expenses

You should keep track of your expenses using a spreadsheet program. Include all your fixed costs (rent, insurance, etc.) and variable fees (sales commissions, marketing expenses, etc.).

Hire Employees

A good employee can help you save on overhead costs.

Learn to Negotiate

Negotiate better rates. Some manufacturers won't give discounts to distributors. , you can negotiate deals by offering to buy more than you need. For example, you could offer to buy 20 units rather than 30. sidex

Is the Distributorship Business in Nigeria Profitable?

The distributorship business is profitable for those who own warehouses. However, most people who begin the distributorship business fail because they lack capital. They either spend too much or too little on the company.

If you plan to invest in the business, you should invest enough to cover your fixed costs. Fixed costs include rent, utilities, insurance, taxes, and equipment maintenance.

These costs vary depending on how many products you wish to distribute. You'll need to pay higher rents and utility bills if you have a large inventory. Also, you'll need to pay more for insurance and taxes.

In addition, you should invest at least 5-10% of your total revenue. The rest of the money goes towards marketing and advertising.

How Long Does it Take to Start a Distributorship Business?

Starting a distributorship business takes anywhere from 6 months to 2 years. However, the length of time depends on how many products you sell and how well you manage your business.

Niches in the Distributorship Business in Nigeria

1. Beverages: Distributors that specialize in beverages are known as beverage distributors. Beverage distributors often work with breweries and wineries.

2. Coffee: Some coffee distributors ship roasted beans directly to consumers. Others roast their beans and then sell them to retailers.

3. Food: Many food distributors specialize in canned goods, frozen foods, or bread.

4. Healthcare Supplies: Healthcare suppliers sell medical supplies like bandages, gauze, syringes, and other items used in hospitals.

5. Home Appliances: Appliance distributors usually stock appliances like refrigerators, washing machines, dryers, stoves, and air conditioners.

6. Water: Most water distributors also sell bottled water. Some sell bulk water, while others only sell packaged water.

Other Products

There are several different niches within the distributorship business. Some distributors sell only one product type, while others sell various products.

What Are the Advantages of Being a Distributor?

Advantages of being a distributor include:

• You get paid every month.

• No special skills or training.

• You can start selling almost immediately.

• Making more money than working for someone else.

Disadvantages of Being a Distributor

Being a distributor has its disadvantages. Here are some of them:

• You must be able to meet deadlines.

• Your job is unpredictable.

• It's hard to new customers.

• You're not guaranteed a steady income.

• Inability to control your hours.

Conclusion

Distributorship business in Nigeria is an excellent way to make extra money. It's easy to set up and doesn't require any special skills or training. So, why are you waiting? Become a distributor in Nigeria and earn cool cash.