Dropshipping is a highly lucrative business that Nigerians can go into with little capital, and with the right amount of hard work, have a chance to make a lot of money from.
This article is a complete expert guide on how to start dropshipping in Nigeria, types of products to dropship and how to grow your dropshipping business right from the comfort of your home, anywhere in Nigeria.
Though the article is Nigeria specific, its content applies globally.
As an entrepreneur, I have been asked several questions on the dropshipping business, especially as it relates to Nigerians. With this article, I try to give answers to the many questions and more.
Following the how-to guide in the order written, you would have mastered the act of dropshipping and have no reason to find information anywhere else.
Typical Questions on How To Start Dropshipping Business in Nigeria
What is Dropshipping?
According to Wikipedia, dropshipping is a supply chain management method in which the retailer does not keep goods in stock but instead transfers the customer orders and shipment details to either the manufacturer, another retailer, or a wholesaler, who then ships the goods directly to the customer.
As in retail business, the majority of retailers make their profit on the difference between the wholesale and retail price, but some retailers earn an agreed percentage of the sales in commission, paid by the wholesaler to the retailer.
Does Dropshipping Work In Nigeria?
Yes, dropshipping works in Nigeria. We do have a lot of people dropshipping in Nigeria, and also dropshipping from Nigeria to other countries.
Is Dropshipping Lucrative in Nigeria?
Dropshipping in Nigeria is actually a very plausible venture; the issue is that most Nigerians do not know how to get started.
With the number of wholesalers in Nigeria, it is actually a worthy venture and more cost-effective to go into dropshipping in Nigeria than to join the importation and wholesale bandwagon.
How Do I Start Dropshipping Business?
Read the entire content of this article and you should be in a position to start your business. I have taken the time out to list how much it would cost you to start a dropshipping business in Nigeria. Please go to the section below.
Is Dropshipping Still Lucrative especially in Nigeria?
It is noteworthy to point out here that with wholesale, your initial investment is considerably high and you risk not being able to sell all your stock fast enough before another trend catches in on your wares.
However, with dropshipping, especially when you dropship in/from Nigeria; with the right product and market size, your chances of success are greatly increased. Moreso, you do not have to hold inventory until an order is placed by your customer. With drop shipping, you do not need to pay for warehousing, the huge cost involved with the logistics of fulfilling orders, etc.
Want to learn how you too can actually start dropshipping in Nigeria? Then read on.
As quoted from Wikipedia, Dropshipping is simply a supply chain management approach where a retailer chooses to be the middle person between a buyer and a manufacturer/wholesale or another retailer. In Dropshipping, a retailer markets a product and yet has no stock of the product, but once there is a demand, the retailer contacts the manufacturer, a wholesaler or another retailer and sends them the order with the shipping details while keeping a profit.
Below is a pictorial depiction of the processes of dropshipping.
Sounds good and easy, doesn’t it?
You may wish to also take a look at How to Make Money Online on Jumia
STEP BY STEP – TO STARTING YOUR DROPSHIPPING BUSINESS?
- Find or create a Niche
- Find dropshipping suppliers
- Understand how profit is made
- Understand private label drop shipping
- Master the use of available marketing platforms
- Plan your finances
- Benefits of drop shipping
- Downsides to drop shipping
- Tools to aid your dropshipping business
1. Find or Create Your Niche
Dropshipping excels when it serves a niche market. It is therefore noteworthy that picking a niche is the first step towards becoming a successful drop shipper. For drop shipping to be successful, you must be within a niche that you understand
Picking a niche, however, is not as simple as it may sound. There are lots of factors to consider, it mostly involves doing your due diligence, learning from past mistakes and putting your best foot forward. Please consider reading up on How To Start and Run a Successful Business in Nigeria It would help you better understand how to run businesses successfully in Nigeria.
Business is like a bed of wild roses, it looks beautiful when done right, but the behind the scene truth is that it is not easy and at some stage in its growth, it will test you.
What this means, therefore, is that if you are working in an area that does not align with your interest and passion, you are at great risk of quitting — especially if you are a first-time business owner. I strongly recommend that you read up on how to build systems and structures in your business by clicking here.
Suggested Reading – Don’t Quit, Keep At It.
You need to pick a niche in line with your passion. It is a belief that knowledge in the line of passion is next to nature. Picking a niche around your passion will give you a competitive advantage and help you scale through the rough periods in your entrepreneurial cycle.
If picking a niche is difficult, you could create one that you are comfortable with by identifying a problem or a need within your areas of expertise and proffering a solution or service. You would, however, need to ensure that such a need has market potential. Most importantly, the knowledge of what you intend to sell is very important, because knowledge might make what is supposedly very difficult less difficult.
That being said, the second most important thing is knowing what your target market /niche actually buys consistently, not what is trending. It is important to understand your market and how to best reach the players in your chosen market segment.
2. Find Dropshipping Friendly Suppliers
Many suppliers of wholesale drop-ship items are in China and the United States of America. Notwithstanding, you can also get suppliers from all around the world, including Nigeria; it all depends on your target market and how they can be best reached and served.
For affordability and wide range of goods, China might be a preferred choice because of the improved logistics and ease of trade barriers. It is important however to do your due diligence before selecting a supplier, as your supplier could mean the difference between success and failure. Not all suppliers are dropship friendly, check the supplier others are using; suppliers like Alibaba, Aliexpress and their likes are your best bet.
List of Platforms To Locate Reputable Dropshipping Suppliers:
- Alibaba is about the largest online platform with drop shipping friendly operations in the Chinese market.
3. Understand How to Profit From Drop Shipping
It is best practice to go after products that would give you the highest possible profit per item. Dropshipper’s profit is mostly calculated as follows:
The difference between the Buyer’s Price (BP) and Wholesaler’s Price (WP) inclusive of all Extra costs (EC) such as shipping, handling, private label custom incurred by the Dropshipper – P = BP-(WP+EC)
4. Understand Private Label Drop Shipping
A common trend in Drop Shipping in recent times is to have the manufacturer customize the goods for the Drop Ship Retailer, simply by adding the Drop Shipper’s label on the products; more like producing on behalf of.
The range of private label drop shipped goods is not limited to the following: fabrics, multivitamins, body products, custom wears, cups, water bottles and so on.
To private label, you would need to identify the products you would want to sell, then contact manufacturers, send them photos of the product(s) you would want to private label, pay, and get them sent to your fulfillment company.
One way to get manufacturers to private label products for you is to go on Alibaba.com and use their RFQ sourcing tool. You could even start your own local products like tailored clothes and send them overseas.
It is always advisable to keep the source of your goods from your clients if you want to remain in business for long. This can be achieved by blind shipping that is, shipping without adding a return address or private label shipping, which means shipping while ensuring the manufacturer/wholesaler customizes the return address showing as your address (that is, the Drop Shipper’s address).
5. Understand Available Marketing Platforms
Understanding the various marketing platforms available to most drop shipping business owners in Nigeria; their merits, demerits and distinguishing features would help you make the right choices. Consider reading up on how to sell in a crowded market like Nigeria.
A Nigerian retailer may choose to have a website or blog to market his or her products. A sample of each item will be displayed. You do not need to purchase a sample of the product to achieve this if you do not have a personal need for the product(s). You can simply get a sample from the manufacturer/wholesaler/another retailer.
As a Drop Shipper, you can keep product catalogs for the purpose of marketing. This does not necessarily require a physical shop. Catalog marketing can happen where two or more people meet for any type of meeting/activity.
You can have physical samples of the products for customers to view and make informed choices. However, you do not keep an inventory. This approach can also be beneficial to small retailers who sell only small quantities; whenever they have large demands for their products, they can use the Drop Shipping method to meet their client’s needs with ease.
Online Auction Sites vs Internet Retailing:
A seller can use online auction sites such as E-bay or other online retailers like Amazon, Jumia, Konga, Jiji, Kasuwa.ng and the likes to market a product without having stock. Once, an order comes in, the retailer can ship directly from the wholesaler to the client in need of the goods.
Leverage on Digital Media:
On leveraging digital media, I do not expect you to have the skills of Digital Media Marketing experts like Neil Patel. However, a drop Ship retailer might advertise a product using different media. However, digital media is a big plus in the Nigerian market space, because you can reach farther. It is a common belief that all classes of people in Nigeria are on social media (rich, average, poor, educated, and uneducated).
Paying for targeted adverts on social media such as Facebook, Instagram, LinkedIn, a blog or SEO optimization for some keywords on search engines will definitely create the needed awareness for your business.
6. Plan Your Finances
Now that you know all that is required, it is important to put to books proper financial planning and accounting. Financial planning and accounting will keep you focused and able to track your progress on the entrepreneurial journey. It is very important to separate personal and business accounts.
Understand the finance structure needed to be successful; you would need to plan for advertising, fulfillment, etc. Please take your time to read my post on Forecasting Revenue and Positioning a Company for Growth.
Sending and Receiving Money For International Drop Shipping From Nigeria
Regardless of the fact that the world, through technological innovations has become a global village with inter-continental trades taking as low as a few milliseconds to initiate and conclude, sending and receiving money from international clients had until recent times been a nightmare for Nigerians; most payment platforms only allowed individuals and businesses to receive money in Nigeria through unified platforms and as such made it extremely difficult for clients to remit payments directly to the accounts of Nigerians.
A major downside to such arrangements is a hindrance to instant fulfillment as the Nigerian needs to either go to platforms that rendered money transfer services; these services did not, however, solve the challenge of instant fulfillment, a major prerequisite to a successful e-commerce venture.
Luckily, Nigeria now has a lot of payment systems opening up their markets to Nigerians to operate full payment transfer features. Some of these are homegrown and some are international. However, of all the available payment systems, Paypal remains the most popular and most secure.
Up until recently, Nigerians could not enjoy the full benefits of the Paypal platform. There was no provision for receiving funds; this was due to the effect of massive corruption and money laundering by Nigerians. The resulting effect of this is the massive proliferation of the payment transfer market in Nigeria by many other players; equally good in their service offerings and low on charges too.
Luckily for Nigerians, though the most popular, PayPal is not the only payment gateway option available for online financial transactions. There are several of them, some home-grown and indigenous to the Nigerian market, yet there are many international payment gateways that have opened up their market to Nigerian businesses.
Below is a list of payment gateways available to Nigerians:
How much does it truly cost to set up and launch a drop shipping website/store
Technically speaking, you can start drop shipping for NGN0.00 (Zero Naira). Leveraging the right combination of free trials and starter plans from platforms like Shopify, you could actually start using their free trial periods and get lucky if you are in the right niche and sell the right products at the right time.
Note, however, you would need to feed your dropshipping business before it actually starts to grow; apart from money, you must have the right business resilience and the ability to always go for the very best when it comes to product quality – with the right mix of luck, 45 minutes of spare time daily is all that stands between you and a successful dropshipping store.
But just like it is always being said – Just because you can doesn’t mean you should. Without a doubt, dropshipping has made it easy to engage in e-commerce business; you can connect with suppliers from around the globe right from the comfort of your room and sell their products without holding inventory or shipping to anyone. It’s an amazing development.
So amazing, in fact, that people can get carried away, dreaming of a six-figure business that doesn’t require any investment.
Realistically, starting a successful business anywhere has never been free nor easy and that is still the case globally today- it takes time, efforts and money. Even with dropshipping, you may not need to break the bank nor get a second mortgage, but you would have to put some money into your business before your business puts money into your pocket – You must feed your business.
7. Benefits of Drop Shipping In Nigeria:
- The start-up capital is relatively low. You do not need huge thousands of Naira to launch a Drop Shipping business.
- It is very convenient to run because you will not have to deal with an inventory. The most difficult part in the process of starting a Drop Shipping business is connecting with reliable suppliers. Once that hurdle is crossed, running the business requires little efforts and a lot of commitment.
- You are making a profit with low overhead. The business could be as easy as running it in the comfort of your house. There is no need for a warehouse or storage facility and the expenses that accompany owning a warehouse. Most definitely, you can run the business without employing extra hands. You may employ extra hands if you can afford the luxury.
- The location for running the business is flexible. In fact, you do not have to be at your house to carry out your business activities. All you need are the internet and your device (laptop or smart-phone).
- You can afford to use your profits for other businesses. Drop Shipping is not a kind of business that needs more capital for expansion. You will rely mostly on business opportunities and suppliers for expansion.
- Reduced Risk
- A major benefit to the dropshipping business model is that you do not need to pay for inventory upfront, you only get to transfer the order when it is made
- You do not lose money to change in trend or customer buying patterns – there is no inventory involved, you can choose to stop the business or simply pivot to another or change your products without the fear of losing money due to unfulfilled inventory
- There is no cost associated with inventory management
- Lowered costs
- You can change the products you sell easily, quickly and without losing money
- Product manufacturers are overly friendlier on shipping costs to drop shippers than customers buying to go resell directly
- All the hassle of packing of products to prepare them for shipment is taken care of for you
- You can add new products to your offerings very quickly, thus you have the capability to test new products and markets conveniently.
8. Downsides To Dropshipping Business in Nigeria:
Every endeavor with great benefits definitely has possible downsides that are worth knowing. In Drop Shipping business, the disadvantages might include the following:
This happens when an item that is requested to be drop-shipped is already out of stock with the wholesaler. So, the retailer will wait until the wholesaler restocks before the goods can be drop shipped. It causes a delay in delivery to the client, and situations like this make it difficult for drop ship retailers to give an accurate delivery response time to their customers. There is always a way out of this though; one of several ways being that a dropship retailer to have contacts of more than one wholesaler/manufacturer should one be out of stock of goods or materials, the other(s) would be able to meet up.
Dropshipping scam is real in drop shipping and anyone could be caught in the web of scam unaware. It is very important to tighten all loose ends on any transaction. If possible, know your suppliers adequately and update information on your dropship suppliers at regular intervals. The scam could be in different forms, e.g. some middlemen businesses pose as the wholesaler and make margin off the drop shipper. It is very important that you be on the lookout for reviews on your wholesaler from other drop shippers and customers. Reviews from others are always a very good check for scams.
Considering the ease with which the business can be done, there is a possibility of having competitors within the same line who are willing to lower prices for the increase in turnover.
Shipping and Returns Issues:
Mostly for huge purchases, you will be using more than one supplier which means different shipping fees and conditions. This might translate to double the regular shipping and handling headaches.
Over-dependence on Suppliers:
Over-dependence on suppliers might determine your definition of customer satisfaction and experience. This is as a result of the fact that a huge part of your business activities such as quality and speed are outsourced to the supplier(s).
You are responsible to your clients, and so responsible for the suppliers’ faults if any. You should be emotionally prepared for managing the so-called middleman dilemma of simply being in-between.
High price war risk:
With drop shipping, you do have the flexibility to earn and pass discounts down to your customers; your customers may not enjoy the discounts that come from buying in bulk, mostly on the average your sales come in small trickles and you only pay for the small orders while still trying to maintain a profit level.
When you hand over the packaging and order fulfillment of your orders to a third party, you automatically lose some control; such practice comes with very high risks. Any error made on your fulfillment automatically affects your brand and in most cases, you are not responsible for such errors.
You do not control the level of stock kept by your manufacturers and as such could at times not be able to meet demands from your clients because your manufacturer ran out of stock tools
Tools To Aid Your Dropshipping Business
To successfully run a dropshipping business, you would need some tools to help you with some tasks and process automation. Below are my favorite tools:
- The number one must-have on your shop is a chatbot, there are a lot of them out there, depending on the platform you use
- The next tool is a niche scrapper what this does is to give you a list of niches that are profitable
- Another must-have tool that I love and use is a check out tracker to track the behavior of your customers on your platform. You could even track to know if they checked out or not and may need to remarket them.
Though the Nigerian environment is pretty much suitable to drop shipping, dropshipping is relatively new in the Nigerian entrepreneurial space.
Considering that the internet and social media are currently trending in Nigeria, everyone seems to be jumping on the train. This makes most online business ideas viable. Dropshipping should be a comfortable business for new entrepreneurs and even the experienced ones.
This post was written to be an expose on this new business model; expatiate on the meaning, ways, benefits, and downsides to Drop Shipping in the Nigerian environment. This should serve as a quick guide as you plan on starting a Drop Shipping business.
This article firstly published at experts.ng