BY Guest Writer
The term “middle-man” or middle-person can refer to any person or business acting as a broker between two parties to facilitate a transaction. In Nigeria, the middle-person approach is an essential part of many businesses and has been for generations. This presentation will dive into the realities of the business in Nigeria and abroad. It will look at the various roles that middlemen play and how they impact industries in the country. Finally, we will explore ways middle persons can adapt to changing market demand and technology to become more efficient in their work.
A middleman business provides a service or product to customers on behalf of another company. In Nigeria, several of these types of businesses operate in various industries. For example, they sell airtime for mobile operators, distribute electricity recharge for utility companies, engage as POS Operators for Banks, and sell cards for BRT bus and train operators. Some people use this arrangement for real estate land, fashion products, and cars, among others. Nigeria is, by and large, known as a trading economy because of several of these types of companies.
Middle persons (aka sweet in the middle) typically earn a commission on each transaction completed. In some cases, they may also charge a service fee. The commission and service fees enable them to cover operating costs (like salaries, power generation, transportation, and recharge airtime for follow-up, to mention a few) and make a decent profit. It will amaze you that Nigeria operates in this space with its crude oil business.
There are several advantages to starting these types of businesses. First, it is relatively easy to set up such a business. Second, startups have little or no need for initial capital investment. Third, the operating costs are relatively low, depending on how the business decides to operate. Finally, such businesses have the potential to generate high levels of income with infinite returns on investment with zero initial investment.
Moreover, there are many benefits to starting a middle-person or reseller business. For one, it is a relatively low-cost way to start a business. Additionally, it allows you to be your boss and set your work hours. Finally, as a reseller, you will have the chance to connect with other businesses and individuals, which can help you expand your network of contacts and grow your business. In some of my mentoring sessions, mentees are advised not to focus excessively on getting the job done as loners (although that is a good place to start) but to seek opportunities to extend great services and products to others.
These kinds of businesses, called drop-shipping, are opening up opportunities to several students and young adults with similar advantages globally. And yes, most drop shipping models handle the order fulfillment part (delivery). Let’s imagine you have an online store where you sell dog products. As a dropshipper, you don’t need to buy hundreds or thousands of collars or leashes in advance and store them in a rented warehouse (or your garage) until you make a sale. They can be a great way to start your own business with little capital investment from anywhere you are. Drop-shipping is where a seller sets up a website and sells products that the seller does not keep in stock. When an order is placed, the seller sends it to a third party — the manufacturer, another retailer, or a wholesaler — who ships the goods directly to the buyer.
Additionally, they provide the opportunity to work independently and flexibly. As a reseller store owner (online), you will also have the chance to build relationships with other businesses and people from different cultures through social media marketing, which can be invaluable for personal and business growth. Many young Nigerians on Twitter and Instagram can start businesses of this kind by simply looking for a product they can source from other sites for less while people buy at the right price on their platforms. With a good web face (online store) often supported by smart big businesses like Shopify and Amazon, getting the business started becomes very easy. Many big businesses need to democratize access to their products and services by towing the path of enabling drop shippers. Do more research on what people in locations that you would like to serve will need, and start building your drop shipping business immediately to target these customers with what they want to buy.
However, the reseller is responsible for connecting the dots between the producer and the consumer, and in many cases, they are also responsible for negotiating prices. The fact that they interface with customers or off-takers gives them a lot of power in the market. One challenge that can be faced when running this type of business is becoming too close to one side or the other. It is important to maintain a balance and not become too invested in the producer or the consumer. This is often the reason for the excessive rent on housing in Lagos, Nigeria (where Agents tend to want to take sides with house owners). Another challenge is keeping up with demand. It can be difficult to predict how much of a product or service will be needed, and if demand exceeds supply, it can lead to missed opportunities and unhappy customers. The advent of Covid19 has pointed several young people in the direction of the drop-shipping model with companies like Amazon, Shopify, and several others. We all need to keep an open mind in times like these and rethink how we are doing our businesses.
Technology influx has enabled startups to own commerce platforms online, with delivery arrangements of order fulfillment handled at the producer or manufacturer’s end. This is the era of drop shipping and a fast-growing space worldwide. Businesses like Amazon have realized that offering value to the customer through different touch points allows them to focus on what they know how to do best – business automation while making a small percentage off the top of several small businesses that tell the Amazon story through direct internet marketing.
Assuming you are starting a middle-person business in Nigeria, the first step is to find a niche market to serve. This can be done by researching online using Google or talking to people in your community to see what services or products are needed. Asking the right question stirs great answers. When you are at the checkout counter at Shoprite, Lagos, what do you often see people going out with? I want bread but don’t like the added checkout stress. Once you have found a niche market, the next step is to find suppliers who can provide the products or services you need. This can be done through online research, attending trade shows, or simply going where your customers like.
After you have found suppliers, the next step is to create a website and social media accounts for your business. This will allow you to promote your business and reach more potential customers. Finally, it is important to set up systems and processes so that your business runs smoothly with little to none of your presence. This includes things like creating invoices, tracking orders, and setting up customer service protocols. It may just be as simple as helping people deliver ShopRite bread to their homes every evening.
Furthermore, if you’re looking to expand your middleman business (in multiple locations), there are a few things you need to keep in mind. First, research the target market. What the customer wants to buy starts the entire process every time – It is not about you, but all about the customer. What are the potential customers like? What do they need? What are their buying habits? The more realistic your answers, the more profit you can make. Once you understand the target market, you need to find a way to reach them (including talking to the manufacturers about delivery). For people in foreign cultures, this may mean setting up a website or social media presence in their language and using local search engine optimization techniques to reach potential buyers. Again, I will say here that the customer is king! That is why we all open shops and must treat them like VIPs.
Building relationships with potential customers and partners in the target country is also important. Attend trade shows and networking events, and ensure you understand the local business culture well. Last but not least, don’t forget about logistics in those communities. Make sure you plan to ship products or services to the target country and research any customs regulations that may apply. With proper planning and execution, expanding your middle-person business abroad can be a great way to grow your company while earning foreign currencies. This type of business has three parts: 1. The Product or Service, 2. The Payment, and 3. Connecting the Product or Service with Customers.
I close with this story – There was once a smart tailor handling my clothes design and delivery over a decade ago. His service delivery was so thrilling, especially his efficiency of work. At the time, he was already driving a Honda Accord as a Tailor in Lagos. My interest in his approach piqued my curiosity, leading to questions about how he operated his business. Dovin (not his real business name) told me he realized that Tailors liked to disappoint people and decided to become a middle person in that fashion space. Dovin could not sew but went to sit with another tailor to teach him how to take measurements. On learning how to measure, he realized there were five (5) tailors at the center where he was in the Ogba axis of the Lagos metropolis, and they were always sharing gist because they really were not getting business. He then decided to go out with picture catalogs to banking halls, telecom, oil and gas, and insurance companies to market his custom-made wear to staff and executives. He often got the orders and texted the measurement, and made part payments to the tailors on his network. Dovin made a Generator available and left fueling to the tailors due to incessant power outages to ensure top-quality customer satisfaction. The company called Dovin was formed, and less than a year after leaving school, the Dovin business could already afford a Honda Accord car for its CEO. He owned the company and only sought ways to support the delivery and motivation of the tailors in his network (fully outsourced). The number of tailors grew to ten (10), although Dovin doesn’t pay rent or own a single sewing machine. He, at some point, was borrowing the ten-man tailor team money to buy important machines that cost N250,000 while he made arrangements to seal big clothing deals with Corporate communications of big companies. It is very sweet in the middle as Dovin moved to the United States, and we haven’t been in touch since then. You can always start from where you are with what you have today.
In conclusion, the middle-person business can be a great way to make money locally and across the world, as long as startups are willing to think and build connections. By finding profitable opportunities and leveraging your skills and knowledge, one can become an important link between two sides of a transaction. Doing so comes with certain risks that must be managed carefully, but when done right, it is possible to create a successful business that provides financial freedom for yourself and your family while reducing the unemployment number, even with lean businesses. With the right attitude and effort, there is no limit to what you can achieve through middle-person businesses.
Thank you for the investment in time, as I am open to listening to your startup story. To be alerted each time I create a new post, follow my Medium: https://medium.com/@roariyo and LinkedIn: https://www.linkedin.com/in/olufemi-ariyo-923ba6130/ or send an email to techtalk@freesia.com.ng
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