How the Retail Business works

How does the retail business work in Nigeria and Africa by extension?

Here’s what we think.

So, we have the importers who bring in the goods in huge quantities. The goods get to the port – mostly seaports. The goods are offloaded, cleared and every one collects their containers and transport to their warehouses.

Then we have the Major retailers – these ones are big money movers. Money spenders, market controllers. These ones go on to the Importers, negotiate for huge quantity of goods, then buy to keep and redistribute to smaller retailers.

Up next, the Mini retailers. The mini retailers are usually the ones who control a major distribution center. For instance, most motorcycle spare parts are bought from Nnewi in Anambra state or Lagos State. The Major retailers are usually in the same spot with the importers. The Mini retailers are usually big names in Ibadan or Kano for instance who buy in quantities to distribute to their locations.

Then we have the final retailers. These ones are the final gap between the consumer and the product. They serve the consumer directly and bring the goods as close to them as much as they can.

How does money move in the retail business?

Many people are usually conflicted as to how much profit they can expect to make in the retail business. There’s the assumption that middle men or retailers are usually the ones who raise the price of goods to unbearable amounts. Is it true? To some extent, not really.

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This is how profit works in the retail business.

So we have four groups – the Importers, the Major Retailers (We can also call them Wholesalers), the Mini Retailers and the Final Retailers.

Let’s start with the Importers. When goods are brought in, Importers are usually anxious to sell off their goods as fast as possible. So, margins are usually already fixed even before the goods get here. Importers have to move quickly with pricing. That’s how the retail business works – with speed at the top. Do you want to learn how to start the Retail business?

What factors affect price of goods?

• Exchange rate (The prevailing exchange rate almost always affect the pricing of goods. Different industries have how they calculate the exchange rates. For some, they calculate how much the dollar was bought as at that current time, factor in shipping and offloading costs then fix a price on the item. Some look at how much the dollar was as at the time they ordered and paid for the goods. Then they factor in shipping costs when it gets to them. Do the plus and all then arrive at a price)
• Demand on goods (Every Industry or Retail segment has some goods that are the hot cake of that segment. It could be a brand or a type of an item. If the demand on the item is pretty high, the importer of the item could decide to raise the prices to make the most of the situation. If it is just about the same quality as other goods, then the Importer looks at other pricing from other people and work around that same pricing with little or not modification)
• Season (Some goods are seasonal goods. When it is off season, demand could be slow so margins are low to keep the inventory moving. When it is on season, prices could be high to account for possible losses made during off season)
• Quality – (Goods are in different qualities. There are different standards used in producing goods and it reflects in how good the products are. Goods of higher standards will definitely cost a bit more than lesser standards. Which means that all things being equal, when the goods get to the Importer’s warehouse, the landing cost would not be the same as that of lesser standards. This of course would reflect in the pricing they would offer to retailers)
• Competition – (how much are others selling theirs for is also a big determinant of how much Importers sell their products. Products, regardless of brand names and brand designs are usually built to certain standards. For example, there could be Standard A, B, C and D. Two brands, ABC and XYZ could have the same standard B but with different brand names and colors. Goods of same standards are usually priced at the same rate to the owners so all costs are almost equal. When the goods get here, the two brands might be in a hurry to sell off their inventory so they go for low margins just to sell off and order a new batch.)

So, here’s the big question especially if you are looking to learn how the retail business works – How do retailers sell off their goods fast and make as much money as they can? Great news, we created an insightful eBook that will teach you how to 10x your profits in whatever retail business you find yourself in. Get the book here.