Nigeria currently has a little over 90 million internet users, out of which half have carried out at least 1 online transaction within the past 12 months. A clear picture of the potentials in Ecommerce business and the growth prospects. This is even as the economy seems to be contracting due to fall in crude oil prices, and the crashing of the naira against the dollar.
Statistics like these have given rise to a number of Ecommerce businesses rising to service this growing market. Online retail stores and marketplaces are a common site, and anyone can mention some of them off the top of the head. With these come opportunities for other players in the sector, and one such opportunity is logistics.
It may surprise you to note that the bane of most Ecommerce stores is logistics. When you hear that an online store is downsizing, laying off staff, retrenching, the root cause most often is logistics. And it is always obvious in the way they eventually restructure their organization.
First it was Konga, where they separated K-express services from the Konga online stores. They had initially wanted merchants to pay before shipping their orders, but the negative response made them change their mind. Jumia used to do pick up from the merchants’ location, but now you have to drop off in their warehouse closest to you. Dealdey had a warehouse where merchants supplied products ordered, but now it’s a case of self fulfillment.
The list goes on and on. An experienced IT personnel once stated that if you can get logistics right, you’ll do excellently in Ecommerce. There are huge prospects in Ecommerce logistics and delivery. I would like to highlight certain information required to get you started in this business, and if properly managed, will ensure financial success.
Logistics, simply, is the branch of business that deals with the management of procurement, distribution, inventory, maintenance and replacement of personnel, materials, information to achieve an organization’s goal. It deals with all the actors and activities involved in getting products and services from a supplier to the consumer. It is also actively involved in the manufacturing and production processes.
However, logistics in Ecommerce does not include production, just the movement of products and services from the seller/ merchant to the buyer. It includes information/ communication with buyer, movement of products, inventory, cash handling, between the seller (or outsourced logistics/ delivery outfit) and the customer.
Logistics requires quite a substantial outlay of capital for equipment and man power, but a scaled down version can be started with less than N300,000. With this amount, you can buy or build a cargo bike, get mobile phone(s) for communication, stationery and other items needed for keeping your records.
With between N220k to N250k, you can get a good motorbike equipped with the plastic container to carry the products. Driving around Lagos is quite hectic, but with motorbikes, one can easily meander through the traffic. After the motorbike, the rider is the next most important factor to consider.
The rider is so important that the person you choose may make or mar the project. The rider has to be ready to work, conversant with Lagos cities, possess good phone manners (you’ll have to train him), must be honest cause he’ll handle cash, and also products.
You need at least 1 mobile phone for the rider to make contact with the buyers. If you’re the one managing the outfit, you’ll also need to be in constant touch with the rider in case the need arises. Other stationery can be acquired along the way. If you have more to invest, you can consider getting a space, computer, software and 1 or 2 more staff.
From my discussions on a logistics trainer/ consultant, it is possible to deliver an item anywhere in Lagos at the cost of N200. With the added benefit of delivering in volumes, this cost can be conveniently reduced as the cost would be spread out. If you have a smart and efficient rider, you can considerably reduce overhead expenses.
A typical Lagos delivery cost N500. The logistics outfit charges that much to deliver around the state. Some charge more to deliver at the extremes of Lagos eg. Ikorodu, Agege, Okoko, Alaba International. As a new entrant, you can maintain a flat rate of N500 for the time being.
Good places to get sellers who will use your service are Konga, Kaymu and Dealdey, where merchants are allowed to self fulfill. For instance, 2 of my stores sell an average 100 items monthly. The delivery outfit handling this just needs to get 9 more customers like this, and they’re sure of about 1,000 deliveries monthly.
There’s an arrangement with Dealdey, and the delivery company charges between N300 to N400 for 1kg delivered around Lagos. That translate to
1,000 (deliveries) X N300 (minimum delivery charge) = N300,000
monthly in revenue. Of course expenditures like fuel, oil, recharge cards, bike maintenance , rider’s salary, miscellaneous will be deducted from revenue. If you’re able to beat down cost efficiently, it’s possible to go home with between N50,000 to N150,000 a month.
For your marketing, you have to devise creative ways to reach out to online merchants. You are only limited by your imagination.