How to Start a Grocery Store Business in Nigeria!
Are you contemplating starting a grocery store, mini supermarket, or a provision business in Nigeria? If yes, then you have come to the right place.
Opening a grocery store in Nigeria is a profitable business idea since the population is increasing, and the average person which makes up the bulk of the population needs to buy provisions on a regular basis.
It is, therefore, safe to say that the sale of provisions is a viable business option in Nigeria. However, you are not the only one that have an idea of just how lucrative it is. Some have ventured into the business without proper orientation with the business etiquette, only to get burned halfway into the business.
This, therefore, begs the question, how then can one successfully start a provision store business in spite of the competition and challenges that may arise?
Well, keep reading to find out how to set up, develop, manage, and nurture your investment in the grocery business in order to make good returns on your hard-earned money.
The purpose of this editorial is to get you acquainted with how to successfully start a provision business in Nigeria, how to survive the competition, and the various ways to mitigate risks. We will also be looking at the list of items in a provision store in Nigeria.
Steps to Start a Provision or Grocery Store Business in Nigeria
Below are the various steps one must take in order to establish a successful provision business in Nigeria.
- Conduct a feasibility study
- Develop a business plan
- Obtain the start up capital
- Choose the right location
- Contact reliable suppliers
- Set up a good pricing strategy
- Stock your shop
- Register your business
- Promote your business
Now let’s delve into these steps in a more elaborate manner.
1. Conduct a Feasibility Study
It is very important to understand the intricacies or complexities of any business before venturing into it. In other words, you need to understand how this business works. To achieve this, one must conduct a feasibility study.
There are three levels through which one can enter the provision business in Nigeria. They are;
- Provision business,
- Grocery store or mini supermarket business, and
- Supermarket business.
I. Provision Business
As the name implies, this type of business strictly deals with the sales of provisions alone. Hence, you wouldn’t sell perishables like fruits, meat, grains, and vegetables.
One can decide to become a retailer or a wholesaler. To become a retailer you’d need to negotiate with wholesalers who would provide you with inventories at discounted rates.
On the other hand, if you decide to become a wholesaler you would need to have a direct relationship with the producer.
II. Grocery Store or Mini Supermarket Business
A grocery store or mini supermarket business deals with the sales of dairy products, staple foodstuffs, meats, produce, and household supplies or provisions.
Simply put, a grocery store or mini supermarket business is a combination of provision business and the sales of fruits, meat, and foodstuffs.
This is usually done on a small or medium scale.
III. Supermarket Business
In simple terms, a supermarket business is a large scale business that deals with the sales of groceries. Shoprite is a good example of a supermarket business.
Understand Grocery Store Business
After selecting the type of provision business you wish to set up carefully examine the items you need to purchase and at what quantity. When several companies produce similar products, find out which company’s product sells the most. This will help you to determine buying preferences of consumers, product mix and the quantity to purchase.
Negotiate With Suppliers
If you intend to become a retailer, communicate with trustworthy wholesalers to help you identify fast selling products. Compare the responses of each wholesaler before drawing any conclusion. As you continue to read, you’ll find a list of items in a provision store in Nigeria.
Analyse the Competition
Assess the market discreetly to achieve success in this business. Spend some time to analyse your customer base and the level of competition in a particular area. While competition is good for business and customer satisfaction, unhealthy competition can paralyze your business before it even gets the chance to start.
The location of your shop shouldn’t be saturated with several other businesses rendering the same services or selling the same product. Select the right place to set up your shop and meticulously choose the products you want to offer.
A business plan is only as good as the information used to construct it. And a feasibility study is the foundation or pillars of any business plan. Make sure you have deep knowledge of your potential customers and competitors before progressing to the next stage (drawing up a business plan).
Understand Your Target Market
Since a grocery store provides all the necessary requirements needed for running a household, your target market, therefore, is the entire neighbourhood surrounding your grocery shop.
You must choose the best location for your mini supermarket business, examine the potential of the location, and find the perfect customer mix for it in order to accurately evaluate your target market.
Observe your competitor and try to find out how your potential customers think of your competitor’s business, and what they feel the competitor isn’t doing right.
2. Draw Up a Business Plan
Like many businesses, you need a plan before venturing into the provision business in Nigeria. It is at this stage you clearly define the type of provision business you want to set up, how large you want it to be, and how do you intend to beat your potential competitors.
Developing a business plan puts you ahead of some people on this business because more than 30 percent of salespeople in this line of work ventured into it without a robust business plan.
Why You Should Develop a Business Plan
For instance, Mama Emeka and Sister Indomie did not draft an in-depth business plan before starting the provision business. This may contribute to the low returns they get from the business.
Even so, they have an edge over you because they’ve learned more about the business over time. They have made mistakes and tried a different approach to solve those mistakes.
They have witnessed a couple of trends and how these trends changed over time. This kind of knowledge can only be acquired on the job. This is often called knowledge due to iterations.
That said, you can make up for this gap in knowledge by using the information gotten from your assessment of the business, consumer’s behaviour, and target market to formulate a good business plan.
Things to Consider When Drawing up a Grocery Store Business Plan
- Customers’ background,
- Business location,
- Living standards of potential customers,
- Customers’ products preference,
- When, how much, and how often of it they buy,
- Customer retention: Having a good network of customers is a huge asset to this business.
It is often said that in business customers are the kings. This is very true for the provision store business because it is the customer’s demand that impacts all aspects of your provision store business.
How you choose to respond to this demand would determine the success or failure of the business. It is essential to draw up plans on how you intend to satisfy the wants of your customers.
Since this is a very low margin business, you need to make sure that there is no room for error while buying provision items. Make plans to periodically check your inventory to identify items that reside in your shop for more than a month. Subsequently, reduce the amount of that product when making a purchase.
3. Obtain the Start-up Capital
Upon progressing to this stage you must have done a market assessment and prepared a provision store business plan. Also, you must have drawn up a budget of how much you’d need to set up this business.
There are several factors that impact the provision store business start-up cost. You must put into consideration the location of the business, the size of the business, the number of employees you intend to hire (if any).
Small Scale Start-up Cost
It would cost you ₦75,000 to ₦150,000 to set up a small caravan for a provision store business stocked with the essentials. You would have to work as a sole trader because hiring a salesperson would increase your expenses.
Even so, getting a caravan would prove helpful as it would reduce or in some rare cases eliminate the cost of rent. That said, you might still have to pay a small token for the piece of land you currently occupy.
Medium Scale Start-up Cost
On the other hand, the cost of a basic provision shop (15 x 10 feet), fully stocked with inventories and furnished is about ₦350,000. This sum will increase if you add the cost to rent a shop. You would have to inquire about the cost of renting a shop in your location, as this cost varies from place to place.
Large Scale Start-up Cost
Furthermore, if you want to set up a modern mini supermarket with air conditioners and an industrial generator while hiring the services several salespersons in a metropolitan area, you would need about ₦50 million.
At this point, you may need to obtain a business loan from the banks, especially if it goes beyond your budget. Recently, it was discovered that Nigerian banks are more willing to give loans due to the current policy of CBN. However, you still have to meet up to the minimum requirements to become an eligible recipient.
Items in a Provision Shop
- Books for inventory,
- Wooden shelves or racks,
- A table with drawers,
- Shopping bags,
- Carts (for a mini supermarket),
- CCTV (for a mini supermarket).
How to Manage a Provision Shop
- Maintain a proper account of the inventory and the products being sold;
- Organise books of account;
- Closely monitor the cash-flow, accounts, and stocks in your grocery shop.
- Arrange products in an organised manner;
- Use FIFI (first in, first out) method. Older commodities should be sold before newer ones.
4. Choose the Right Location
A good location is a critical aspect of your business. Search for an easily accessible location in the city centre or a busy place, with a good number of persons going to shop there. This would broaden your target audience.
However, if you anticipate that the competition may be too much for your business, you could strategically position your shop at a visible spot where customers can easily find you.
Furthermore, if you intend to open a mini supermarket, you would need to spend a huge amount of capital on an industrial generator, air-conditioners, management system, secret cameras, security, marketing, and advertising, etc. You would need to create a modern environment with the right product mix to attract and retain clients.
Moreover, the age group of persons that make up your customer base would influence your choice of products to stock your shop. The location of your shop would also affect the kind of goods you should buy.
5. Contact Reliable Suppliers
It is important to have a concrete arrangement with suppliers before progressing further. So contact different suppliers or wholesalers in order to find the best deal.
Patronise at least three suppliers for price comparison and to have good fallbacks in case a supplier disappoints you. A good network of suppliers is a huge asset to a lucrative provision business.
Note: Maintain a good relationship with your supplier so that you can enjoy some customer benefits (e.g. discounted prices and credit purchase).
6. Set Up a Good Pricing Strategy
Price is one of the essential variables in the marketing mix. According to Kotler and Armstrong, there are four general pricing techniques that businesses use to set an appropriate price for the products they sell and services rendered. They are;
- Cost-based pricing,
- Value-based pricing,
- Value pricing, and
- Competition-based pricing.
Your pricing approach is important because it influences the number of items a customer would buy and the probability to retain that customer. This would have a direct impact on the revenue and profit of your business.
Thus, it is important to set the right price for each product before you commence operations. An appropriate pricing technique will help a business to break even and cover overhead costs, thereby improving your net profit.
You can opt for one or more price approach, namely cost-based pricing or competition-based pricing.
For a provision store business, cost-based pricing is a pricing method that uses the cost of purchasing a product, cost of transportation, and the cost of preservation to set the price of a product.
If you were a producer, the cost-based pricing technique will incorporate the cost of production, manufacturing, and distribution. Essentially, the aim of starting a business is to make a profit, this makes the cost-based pricing method a good place to start.
Competition-based pricing is a pricing technique that makes use of competitors’ prices as a basis to set the prices of the same or similar product. This strategy can be very useful when there are several competitors in the market selling similar products.
Mark-up and Profit Margin
Most conventional grocery stores usually have mark-ups of 5% to 33% or profit margins of 5% to 25%. This is dependent on the size of your provision shop business, the living standards of your neighbourhood and the level of competition.
7. Stock Your Shop
Your target market plays a huge role in determining the kind of product to purchase. If your shop is located in a wealthy neighbourhood, you can purchase premium or expensive products and set your pricing system accordingly.
That said, for shops in a humble environ, setting prices too high may lead to low turnover.
It is important to arrange all your products in a neat fashion. This gives your shop an appealing look and makes it easier for customers to find products. Think of your store as a tangible art show of goods.
Note: If you are on a tight budget it is best to acquire a small shop because getting a big one with few items in it would give off the impression that you’d likely not have what customers are looking for.
Provision Items List in Nigeria
Here is a list of items in a provision store or shop in Nigeria.
|Laundry items||• Detergent,|
• Coldwater starch,
• Spray starch, etc.
|Toiletries||• Toilet Soap,|
• Liquid Soap,
• Tissue paper or toilet roll,
• Baby wipes,
• Body cream,
• Facial cream,
• Hair cream,
• Face Mask,
• Deodorant, etc.
|Drinks and Beverages||• Soft drinks,|
• Gin, etc.
|Household items||• Candle,|
• Light bulb,
• Mosquito repellent,
• Shoe Polish,
• Air Freshener, etc.
|Foodstuffs||• Pasta; Noodles, Macaroni, Spaghetti, |
• Peanut butter, etc.
• Chewing gum, etc.
|Seasoning and Spices||• Salt,|
• Culinary spices; cinnamon, paprika, aleppo hot pepper, chili pepper, ground or coarsely chopped pepper, cumin, tumeric, garlic, saffron, cloves, and ginger.
• Cooking herbs; basil, oregano, marjoram, parsley, rosemary, thyme and dill.
• Wet blends; vinegar, ketchup, mustard, tomato paste, etc.
|Stationery items||• Pen,|
• Cardboard paper,
• Markers, etc.
8. Register Your Business
To start a lucrative provision business in Nigeria, you will need to have your grocery store business registered with the Corporate Affairs Commission (CAC).
On June 29, 2020, the Corporate Affairs Commission (CAC) announced that business owners would no longer need to approach the Federal Inland Revenue Service (FIRS) for a tax identification number. Your business TIN along with Certificate of Incorporation will now be issued to you by the CAC.
9. Promote Your Business
In recent times, promoting your business is a matter of necessity rather than an extravagant effort. This would broaden your target market and make people aware of your business.
Advertisements and promotions are essential for any business, and for your provision shop to attract as much as customers. You can tell your family members, relatives, and friends about your venture since oral publicity is a good way to promote your business.
You can even emplace a drive-by traffic neon signboard to attract customers. Also, attractive window displays could help to increase patronage to your provision store business.
Build Good Customer Relationship
It is imperative to have a good customer relationship, for a satisfied consumer is often the best way to advertise your quality, rates, and reliability.
When it comes to making a choice on what medium to advertise and how large it should you must put into perspective the size of your business and the type of market. This includes flyers, TV, social media campaigns, newspapers, websites, etc.
Create a Business Page
We have gotten to the era where businesses need an online page. With a business page or website provision shop owners can take orders from consumers and deliver products to the abode of consumers while offering an online payment option.
The Bottom Line
A provision shop is a profitable business opportunity in Nigeria. Nigerians are ready to spend money on commodities they need daily. To get the best out of this business invest in better infrastructure, technology, and address customers’ needs.
It is usually best to start this business on a small scale, then scale later on. This gives you some on the job knowledge about the business. Having some knowledge of how to run a provision store will contribute to your success in the business.