If you are looking for the Advantages and Disadvantages of Independent Filling Station in Nigeria? If yes, read on to discover.
Filling stations basically fall under the downstream sector of the oil industry. The downstream sector involves refining crude oil into different products like DPK (kerosene), AGO (diesel) and PMS (petrol), marketing and distribution of these products.
In owing a filling station in Nigeria you can either decide to affiliate with an already-known brand or operate independently.
Those which operate independently are called independent marketers. Operating an independent marketer has attendant advantages and disadvantages, and the same applies when you choose to operate as an affiliate of a known brand.
Before you decide on the one to choose, you must understand very well how each of them works. In this piece I will discuss the advantages and disadvantages of independent filling station in Nigeria otherwise called independent marketers.
Filling station business, no matter the way you wish to operate, is a very lucrative business but also a capital intensive one.
It is also a highly regulated business as you will be instructed on how to sell the product, when to sell and whom to sell to by government authorities.
Advantages and Disadvantages of an independent filling station in Nigeria
An independent marketer is someone who chooses not to affiliate to any known brand like NNPC, Total, Oando, etc.
The owner operates his business independently and takes all the risks and major decisions involved. Now let’s look at the advantages of operating as independent filling station in Nigeria
1. Decision Making: He takes all the major decisions on the price to sell his PMS, AGO, and DPK without being harassed by officials of any mother company.
2. Pump Settings: No officials from mother company will subject you certain pump settings as you can set it anyhow you like anytime. Yes, independent marketers take advantage this sometimes to exploit their customers. He can only be sanctioned by government regulatory bodies.
3. Brand Name: You will operate with the name you like because you are the boss of yourself.
4. Cheaper Prices: You will buy products at cheaper rates and sell at any amount after settling with relevant industry authorities when there is excess of it on the market.
5. Source: You can buy from any major dealer just to cut cost unlike under franchise agreement where you must purchase from the mother company’s depot. Operating as an independent marketer allows you to source your products anywhere.
6. Constant Availability of Products: Because you are free to buy from any depot, chances are that you’ll often have the products even where there is scarcity.
Having carefully listed the advantages now let me tell you the disadvantages.
1. Intimidation: Locals or group of individuals can easily rise up against your filling station demanding you pay some amount. This means you will be paying avoidable taxes and fines to the locals
2. Product Shortage: If your product is shorting (transit loss), you can’t really do anything about it. This is not the case with affiliates.
3. Advertisement: You have to advertise your brand name for it to become popular and bear the cost of advertisement (if need be). Note that under franchise arrangement this is unnecessary.
4. Charges. Independent marketers are often fined by IPMAN (Independent Petroleum Marketers Association of Nigeria ) and other relevant associations each time they load products and hit the road unlike under the franchise arrangement
5. Trust Issues: You may have to always send a sales representative each time you load at the depot to ensure your product is complete after leaving the loading bay using a dip stick (T-bar).
Also, your sales representative may often escort the truck from depot to your station to ensure the truck drivers do not tamper with the product.
This is completely unnecessary under affiliation arrangement. So, there is a major trust issue here.
6. Sales: If your station is sited close to a known brand, it will be a major challenge because consumers often trust their (affiliates) pump settings and products more.
Yes, many consumers believe affiliates cannot sell adulterated products and this is somewhat true. So you may not maximize your sales.
In summary, people go into this kind of business mainly to make money and that explains why many people are still operating independently today.
Points 1, 2, and 4 of the advantages underscore the major purpose why people go into this business as independent marketers and those factors matter a lot in this business.
Nobody can tell you that being an affiliate or being an independent marketer is the best. This is because it all depends on individuals and the area he or she wants to site the station.
This piece on advantages and disadvantages of an independent filling station in Nigeria is carefully written to meet your need and help you in decision making as you join that lucrative business.
Ensure you examine carefully the area you will site your station if you want to operate under this arrangement because of the points 1 and 6 of disadvantages raised.
Endeavour you have valid DPR (Department of Petroleum Resources) license and ensure you renew from time to time to avert a seal off of your station which will cause you a huge embarassment and affect your sales.
The good part is that you can start off as an independent dealer and if you feel it doesn’t favour you, you can switch to affiliate.
Also, you can run your business as an affiliate for a while and if you feel that it doesn’t favour you, you can de-affiliate. But note that the latter will send panic to your customers who will feel you have committed a heneous crime in the industry which led to your de-affiliation.
Finally, always attend IPMAN state meetings to strategize as a body and learn new things about the business.