Localising your web startup
This might sound very unorthodox of me, but localizing your web start-up is the way to go in some countries in Africa. Don’t get me wrong, It is not a myth that the internet creates a global frontier for your web based business, nevertheless global sales requires certain tools and experience to guarantee patronage not to talk about even a success.
It would be myopic to underestimate the potential of your local nationwide market, with an effort to target a global market from inception. Targeting a global market from inception creates a huge burden on your small business and presents a lot of logistical challenges.
Lets take an example of your web shop in Nigeria with an inventory located in Nigeria with a global market target. Here I am assuming the shop accepts credit cards and is able to deliver its products to anywhere in the world within 7 days.
I am also assuming that the products cost you about $10 USD from your supplier, and you want to sell it at a 10% mark up price for $11USD. I am also assuming that the credit card gateway you are using charges about 2% per transaction, and your per unit shipment cost comes to about 40% of the cost price of your product.
This makes your total selling price of the product to come up to $15.20 USD. You would realise that, for every product costing you 1 dollar,you would end up selling it for about an approximated 52% above the cost price per unit, whereby I am assuming that you provide free shipment for your products. Now would that make your products very costly? Yes?
So what should web based shops in this locations do?
Web based Shops in a disadvantaged location should focus on their local nationwide market. This would allow them to create enough volumes, which thereby could allow them to benefit from overhead cost reduction through the law of economics of scale. By localizing you would be able to understand running a business on the internet, learn from certain mistakes, experiment with certain with a much lower cost in a more controlled environment. In the future you could always consider expanding to the global frontier, and all the experiences gained from the local market would come in handy.
Economies of scale, in microeconomics, are the cost advantages that a business obtains due to expansion. This are factors that cause a producer’s average cost per unit to fall as output rises. : Wikipedia
Do you have a localized or a global web based business in Africa?
Tell me your story through your commentaries.
I have been a little bit troubled by our standards in evaluating startup solutions that are worthy of celebrating and that which are not worthy of celebrating, in our dotcom industry. I am using the “our” in this context, to address dotcom start-ups in Nigeria, as I am a role player, and because I don’t want to be accused of being a “traitor” to the Nigerian dotcom industry.