E-commerce Business in Tanzania: A Step-by-Step Guide

The E-commerce Business in Tanzania has seen exponential growth in recent years. Unlike in the past, where owning a physical store or "Fremu" in areas like Kariakoo, Sinza, or Posta was necessary to be considered a businessman, today any young person with a smartphone can own a massive store in the palm of their hand. Technological changes, affordable internet bundles, and the ease of financial transactions through mobile networks (M-Pesa, Tigo Pesa, Airtel Money) have made this business a haven for many.

However, the Tanzanian market is unique. Many customers still prefer to see products before paying, and residential address challenges can make delivery slightly difficult. This article provides a detailed guide, covering capital, how to source stock, how to legally register your business, and strategies to ensure you outsell your competitors.

Requirements and Capital Preparation

The beauty of an E-commerce Business is that the barrier to entry is low compared to traditional brick-and-mortar businesses. However, to build trust and scale, you need the following preparations:

• Work Tools (Smartphone or Laptop):

  This is your office. You need a phone with a decent camera (at least 12 Megapixels) to take clear product photos. To start, a smartphone with 4G internet capability is sufficient. The cost can range from TZS 300,000 to 800,000 depending on the model.

• Product Capital (Stock) or Dropshipping Model:

  You can start in two ways. First, buying stock and keeping inventory. For small items like watches, bags, or cosmetics, a starting capital of TZS 200,000 to 500,000 is enough. Second, you can do local 'Dropshipping' (online brokerage) where you don't need to buy stock; you visit wholesale shops in Kariakoo, take photos, and once you get a customer, you take their payment, buy the item, and ship it.

• Business Registration and Legality:

  To build trust and avoid harassment, register a Business Name with BRELA (Cost is approximately TZS 20,000 if done online). Also, visit TRA to get a TIN number, which is often issued free or with minimal tax estimates for small entrepreneurs depending on turnover. This identifies you as a legitimate trader.

• Marketing Budget:

  Online business without advertising is like winking in the dark. Set aside at least TZS 50,000 to 100,000 per month for Instagram/Facebook Ads (Sponsored Ads) to reach new people.

• Packaging & Branding:

  Do not ship products in plain black plastic bags. Budget for branded bags or clean boxes. This adds value to the product. Packaging costs can range from TZS 500 - 2,000 per item.

Deep Analysis of Business Operations

1. Business Location and Warehousing

Unlike a regular shop, your main "location" is Instagram, Facebook, WhatsApp, or a Website. However, your inventory needs storage. Many start at home (using a spare room). As the business grows, you can rent a small storage space or use 'Pick-up Points' services available in Posta or Kariakoo, where you pay a small fee (like TZS 50,000 per month) for customers to collect their parcels.

2. Product Sourcing

There are two main sources for the Tanzanian market:

• Kariakoo and Local Markets: This is Tanzania's main warehouse. Areas like Aggrey Street (Phones and accessories), Congo Street (Clothing), and China Plaza are gold mines. Build good relationships with wholesalers to get products at lower prices.
• Importing from China/Turkey/Dubai: For higher margins, you can import directly via Alibaba or using cargo agents like Silent Ocean. This requires slightly more capital and patience to wait for the shipment for 2 to 4 weeks.

3. Logistics System

Logistics is the backbone of e-commerce. For Dar es Salaam, you will heavily use 'Boda-boda' riders. Build trust with them or use registered delivery companies. For upcountry customers, you will rely on buses (like Abood, Shabiby, etc.) that go to main regional bus terminals. Ensure you charge the customer for delivery or factor the cost into the product price.

Pros and Cons

Benefits of Online Business

• Low Operating Costs: You don't pay millions in rent for a physical frame (fremu), nor do you have high electricity bills for a shop.
• Limitless Market: You can be selling shoes while in Sinza, and your customer could be in Mwanza or Arusha. Your reach is nationwide.
• Ease of Starting: You can start today with just product photos, even before owning the actual stock (Dropshipping).
• 24/7 Operations: Your online store (Website or Instagram DM) never closes. A customer can place an order in the middle of the night.

Challenges and Solutions

• Trust Issues: Many customers have been scammed by online fraudsters (sending money but receiving no goods).
  Solution: Strive for 'Social Proof' (post photos of customers who received their goods), register with BRELA, and if possible, allow Payment on Delivery (COD) for nearby customers.
• Returns: A customer orders a size 40 shoe, but it doesn't fit upon arrival.
  Solution: Have a clear Return Policy. Ensure you know the correct measurements before shipping.
• Shipping Costs: Sometimes the cost of shipping is almost as high as the product price itself.
  Solution: Look for "Group shipping" or schedule specific days for upcountry shipments to reduce costs.
• High Competition: Everyone is selling clothes on Instagram.
  Solution: Differentiate yourself (Niche). Instead of selling "men's clothes," sell "Wedding suits only" or "Office leather shoes."

Marketing Strategies and Competition

To win in the Tanzanian market, use these strategies:

1. Use Instagram and TikTok Effectively: Most Tanzanians are there. Don't just post static photos; create short videos (Reels/TikToks) showing how the product is used or worn. Videos are more engaging than static images.
2. WhatsApp Status Marketing: Save all your customers' numbers. WhatsApp Status is the easiest place to sell to customers who have shown interest. Post discount offers there regularly.
3. Customer Care: Reply to messages quickly and politely. Delaying a DM response for two hours can lose you a customer who has cash in hand.
4. Micro-Influencers: Instead of paying a big artist millions, find young people with 10,000 to 50,000 followers who are trusted by their audience. Their rates are affordable, and they have intimate influence.

Frequently Asked Questions (FAQ)

• Do I have to pay taxes to TRA if I do business online?
  Legally, any business generating income must pay tax. However, to start, get a TIN number. TRA has specific rates for small businesses (Presumptive Tax) where you might pay very little or nothing if profits are low, provided you keep records.
• Can I start without having stock (Inventory)?
  Yes. This is called 'Dropshipping'. You get photos and prices from a wholesaler in Kariakoo, advertise at your price (with profit), and when a customer pays, you take the money, buy the item, and ship it.
• What is the best way to receive payments?
  Tanzania is driven by Mobile Money. Ensure you have a Merchant Number (Lipa Namba) for M-Pesa, Tigo Pesa, or Airtel Money to show more credibility than using a personal number.

Conclusion

The E-commerce Business in Tanzania is a golden opportunity that is growing rapidly. There is no better time to start than now. You don't need millions to start; you need discipline, your phone, and the courage to seek markets. Start small, build trust with your customers, and eventually, you will build a business empire without needing a physical frame in Kariakoo. Best of luck in your entrepreneurial journey!