Nigeria has gone from being named the 3rd fastest growing economy in the world in 2014 to just recently escaping recession.
Every business owner felt the hit but something unusual is happening in Main-Market. One of the biggest markets in West Africa – the Retailers are packing up!
According to Economics, the distribution channel should be:
Manufacturers – Wholesalers – Retailers – Consumers
Or so we thought until the wholesalers declared a cynical war on the retailers by sidestepping the retailers to sell directly to the consumers.
The popular narrative is that wholesalers are not the big bully everyone is making them out to be. It was the retailers that drew the first blood.
Years ago, Importer Obi, after the safe arrival of his new container, rings his customers (retailers) to come for a new supply of goods. Based on the creditworthiness of customers built over the years, most of these supplies are on credit with the knowledge that they’ll pay up before his next trip to China.
It continued like this and everybody was happy until his customers (retailers) abused this trust, forgetting that trust is fundamental to all credit markets and must have consequences.
Obi had two options:
- To continue supplying them on credits, walk the entire length of the market begging to be paid back his money and ultimately end up going out of business like most of his contemporaries.
- sell only to those with cash and risk having a warehouse full of things that are going “out of fashion.”
From this vantage, the retailers were gods until Obi chose a 3rd option that nobody thought of or saw coming.
He rented shops at strategic lines, planted his apprentices in each, and made both consumers and retailers his target customers.
Since he has a bigger profit margin selling directly to the consumers, he can sell below the market price. This means that the retailers have no fair chance of competing.
This is mostly so in clothing/fashion lines as retailing is still a very important component of the distribution channel in other lines of business in the market but the question remains “for how long?”
NB: Importer Obi is a fictional character who represents the average wholesaler in Main-Market.