Sample Business Plan Online Fashion Store in Nigeria

An online fashion store in Nigeria is a viable business venture but there are challenges which could potentially stifle its potential to be profitable, sustainable and ensure growth. Nigeria is one of Africa’s fastest growing and largest e-commerce markets and is expected to be worth at least N152 billion ($400 million) in annual sales by 2020. There are at least 150 existing fashion stores with online presence competing for a share of the ever expanding (16.1% annual growth) Nigeria target market. More of this breakdown will be explored in this article. 
 
An online fashion store is an online shop which stocks and sells a range of fashion items such as; hair products, clothing, bags, shoes, wrist watches, belts, cosmetic products, perfumes and designer fabrics among a host of other products. The online fashion store business hasn’t been around for very long with the major players in the market coming on board in 2011 with dealfish (now Olx.com.ng) setting the pace and the entry of other players such as; kasuwa now jumia.com.ng, konga, kaymu among others coming up at various times between then and 2015.

The Opportunity in Nigeria’ Online Fashion Market
In 2014, the Nigerian online retail market was worth at least N800 million per week in gross sales with fashion items capturing a sizeable 25 to 30% of that amount especially clothing and shoes. By 2016, the market has grown to over N1.5 billion a week with at least 105,000 transactions conducted on the two largest online retail stores namely; Jumia and Konga – despite an economic recession.

By 2020 when more Nigerians would have improved online shopping options with the expected development of online payments, the market would experience weekly sales of over N3 billion going by current market growth rates and expected market impact of technology and increased purchasing power of Nigerian shoppers.

The current demand level for online shopping is driven by several social and economic factors among which are; increasing urbanization, improved payment systems, increased brand awareness, cheaper internet access, stronger customer retention strategies and 12 other factors which will progressively increase annual demand by online shoppers for fashion items.

There are strong indications that less than 12% of Nigeria’s potential online market has been captured as at 2017 and this has implications for new entrants into the market as well as the top two market players – Konga and Jumia who currently control over 85% 
of all localized e-commerce transactions in Nigeria.

Challenges with setting up and running an online Fashion Store in Nigeria
There are at least 22 identified challenges that will adversely or moderately affect the success of running an online fashion store in Nigeria but here are a few to take note of;

• There is very stiff competition in the market that new entrants must deal with if the hope to reach their target market.
• Online scams in Nigeria is a major deterrent to online shopping among the potential target market
• Cybercrimes like hacking, identity theft, phising and many others present serious logistical and financial challenges to online stores
• How will customers in rural parts of Nigeria be served with their deliveries
• The high incidences customer complaints which are left unattended to usually create negative backlash for online retail stores
• Creating a trusted and respected brand is very expensive and many new startups must find less expensive ways of doing this which is painfully slow and inefficient

Financial Summary
The financial projections for this financial analysis is based on 5% sales conversion rate and average of N6,000 per transaction and 8 transactions per day for 300 days in a year, cost of sales 79.2% of gross sales.

Startup Summary

• Premium e-commerce website: N250,000
• Inventory: N500,000
• Advertising Budget (6 months): N300,000
• Operating costs (6 months): N630,000
• Contingency: N300,000
• Rent: N300,000
• Other expenses: N600,000
• Total: N2,880,000

Profit and Loss Summary  

• Gross Sales:                 14,400,000   
• Cost of Sales:               11,400,000
• Gross Profit:                  3,000,000   
• Operating Expenses:       1,260,000
• Profit before Tax:           1,740,000
• Taxation:                           522,000
• Profit after Tax:              1,218,000
• Return on Investment:       42.3%
• Breakeven Period:           8^th or 9^th month
• Payback period:              24^th to 30^th month

Conclusion
This is a challenging business to do but there are also plenty of untapped opportunities as the market is not properly served even by the big players. The success or otherwise of this opportunity depends on your ability to meet your sales target which in turn depends on having an effective marketing strategy and a thorough knowledge of market trends and consumer needs. Achieving these requires a detailed marketing plan and the right team to work with to make them happen.

Looking to setup an online fashion store in Nigeria and wish to have a professionally written business plan to help you accomplish setting one up? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com

How to Setup a Profitable Beauty, Hair Salon in Nigeria

A beauty salon is a place where mostly women visit to receive beauty treatment/services for their hair, skin, nail or facial needs. There are different forms of beauty salons such as nail salons, hair salons, beauty parlours, cosmetic shops or even spas. Each of these type appeals to different target market needs. Today’s article is merely dealing with the hair aspect of the beauty salon business in Nigeria.

Market Opportunity for Beauty Salons in Nigeria
There is a huge market for haircare products and hair treatment service in Nigeria. Nigeria is Africa’s second largest market for hair products with consumers spending over $210 million (N798 billion) in 2016 on hair extension products alone (both natural and artificial). The average middle class Nigerian woman (21 to 45 years) spends between N9,000 to N30,000 monthly on her hair mostly on extensions.

This is because for most women in Nigeria, their hair is a source of confidence and scruffy looking hair even for a not so classy lady is a nightmare they wish to avoid. As a result they go through a lot of inconvenience to have a really nice hairdo – spending hours at a salon ‘fixing their hair’, saving to raise the required amount to make the next hair style in say 2 or 3 weeks times – even sometimes the buck falls on the men in their lives to foot the bill of styling their hair.

A conservative estimate of this market reveals that at least 5.1 million Nigeria women qualify as target market who can spend within the N9,000 to N30,000 monthly range which means a beauty salon that in a big town or city such as; Lagos, Abuja, Port Harcourt or Benin should be able to attract sizeable patronage if they have an effective marketing strategy in place.

Target Market Summary Hair Extension yearly gross sales in Nigeria

                          

·         Total population: 24.45 million (2010 est.) ·         Urban Population: 13.45 million ·         Middle class Population: 5.1 million ·         Estimated spending for Nigerian middle class women on hair extensions:  N797.6 billion

Challenges of Beauty Hair Salons in Nigeria

• Irregular Power Supply: the main challenge is having adequate power supply to power the different machines required. This doesn’t come cheap because fueling costs and maintenance cost fluctuate very unpredictably and this can affect the bottom line by as much as 30% of gross profit.
• High cost of Rent: as if that is not enough, finding an ideal location for a premium hair dressing/treatment service is both expensive and difficult. If you want to target the middleclass and you can’t afford to find a place within their reach that you can afford, how can you possibly achieve your sales target?
• Difficulty in finding competent hair stylists: professional hairstylists mostly prefer to be self-employed but when they are not, usually don’t come cheap. But that is if you can even find them because they are hard to come by. Which means you’ll have to make do with apprentices and inexperienced hairstylists which may delay your business growth for a while
• Difficult customers: some customers don’t know what they want and even when they know may make ridiculous and frustrating demands. Others may be very rude and aggressive to your staff and may bad mouth you and your business. Dealing with such customers can be difficult especially if they have been patronizing you for long and have even referred others to you.
• High amount of fake/counterfeit hair products: the market has been infiltrated with low quality, cheap imitation hair extension and hair creams/shampoos which makes delivery quality hairstyling difficult and frustrating if your customer insists on buying her own hair style products. 

How much is required to setup a Beauty/Hair Salon in Nigeria
For a small sized operation with 1 main professional stylist and 3 assistants/apprentices, a good breakdown should look like this;

• 2 wall hair driers – N80,000 (N40,000 each)
• 2 hand hair driers – N10,000 (N5,000 each)
• 4 hair straighteners – N16,000 (N4,000 each)
• Stock on hair creams/shampoos – N100,000
• Stock on other hair accessories – N40,000
• 1 year shop rent – N300,000
• 3 months operating costs – N300,000
• Signage and print advert – N90,000
• Furniture – N300,000
• Contingency – N300,000
• Total – N1,536,000

Financial Summary and Projections
Assuming you can on a daily basis attract 6 customers and the salon is open for 300 days in a year with each customer paying on average N4,000 for your service then the projections should look like this;

• First Year Sales – N7,200,000
• Cost of sales – N2,880,000
• Gross profit – N4,320,000
• Total Expenses – N1,800,000
• Profit before tax – N2,520,000
• Taxation – N756,000
• Profit after tax – N1,764,000
• Payback period – 10^th or 11^th
• Return on Investment – 115% within 12 months

Conclusion
You can recover your initial investment within your first year if you can achieve your sales target and minimize your operating costs. There is stiff competition in this business but there is also plenty of room to succeed - as this business favours innovative service and marketing approach.

Are you looking to start a hair/beauty inclined business in Nigeria and need a well-researched, well written business plan? Give me a call: 0803 206 4106 or email me: paulonwueme@gmail.com for details