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The WAVE Report
Issue #1005------------------12/12/10 |
The WAVE Report archive is available on http://www.wave-report.com
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Emerging Markets - V
Consumer Market Ecosystem
Defining a Consumer Market Ecosystem – A Framework for Understanding Emerging Markets
Ecosystem
As we got engaged in these markets it became clear there were ecosystems in place. To better understand the ecosystem we needed a model and this evolved as the assessment progressed. It helped us understand what is happening but more important to characterize the forces of disruption. Note that this ecosystem is from a consumer perspective and not representative of the supply chain or OEMs.
The components of the model include the following.
Education
Wealth
Real
VirtualInformation
Sales Presence
Real
VirtualDelivery
Environment
We consider each.
Education
To make effective use of a computer requires a level of literacy and basic understanding of the technology. We found it interesting that there were no computer shops where at least one person was fluent in English.
But this same level of education is not required for the cell phone. Literacy is not required and this is one of the reasons that the cell phone penetration in Africa is so high, 80%, and the PC penetration so low.
For all the countries in this effort the educational skills were not in question. This is reflected in the literacy percentage rates, consistently in the 90’s.
Wealth
A society, that is, the geographical area of the country or region, needs to generate wealth. There are many ways to do this and one which stood out in several countries is oil, as in Azerbaijan, and expectantly in Iraq. In the case of Georgia it is outside investment, in part, linked the Western affiliation of the government. On a personal level, which is what matters in this ecosystem, there are two components of wealth.
Real
This is the per capita income of the population, how it is rising and the distribution of wealth in society. Asymmetries could easily be seen in countries such as Georgia, Macedonia and Kosovo. This is consistent with the PPP, the measure of personal wealth used here.
Virtual
On a personal level, Virtual Wealth is credit. This is a large factor and we saw it in many forms from credit terms in a store, to bank loans to credit cards.
Information
This is what a buyer learns about a product in advance of the purchase and in the process of buying. In developed countries we think of the Internet as a major source of information but in this assessment the POP, point of purchase, played a major role. Yet, we saw on numerous occasions where the Internet was the primary source of information but the POP provided essential “touch and feel” to close the sale, see below.
Sales Presence
This is where the actual purchase is made.
Real
A brick and mortar location. It came in many forms, from malls, to system builders to converged stores. At the upper end of the scale are managed retail.
Virtual
Online shopping, many called this Internet shopping.
Delivery
In many cases delivery is no more that walking away with a just purchased product. But in those countries where Internet buying is present delivery and the means of purchasing and receiving the good purchased are important elements.
Environment
This is the environment where the buyers live and use computers or cell phones. For example, we found that the environment had a major impact on the purchases of the iPhone. From a different perspective the security environment in Iraq has a significant impact on the ability of the country to create wealth.
In order to use the ecosystem model we need to frame it in the context of what ecosystems exist. Then it will be applied to various markets of a Market Spectrum. This will be applied to personal computers but a similar description can be done with smartphones.
Mature Market
Today a mature market, such as in the US consists of the following:
Education – Well educated especially in technologyWealth
Real – significant buying power
Virtual – extensive credit easily availableInformation – Internet is used extensively
Sales Presence
Real – Big box stores on the decline, system builders virtually gone
Virtual – Increasing Internet purchases with all the major OEMs having a direct presenceDelivery - Wide range from store pickup to FED EX overnight delivery. To the door delivery is expected. Sales tax and other fees are usually not present and increasingly shipping is free.
Environment – Technology is embedded in the fabric of society and personal security not an issue.
Undeveloped Market
This is a broad generalization, not of a specific market.
Education – Rising skill levels including the increasing use of computers in schools
Wealth
Real – A computer is barely affordable
Virtual – noneInformation – In store and mostly provided by sales personnel
Sales Presence
Real – System builders making the lowest cost systems
Virtual – NoneDelivery- If products come outside the country VAT, Customs and even postal delivery erodes the convenience.
Environment – Computers are seen as the means to improve the success of children. Personal security may be an issue.
One element of this model based approach is as a tool to ask – how can a product get to market from brand awareness, opportunities to purchase and delivery? In the end it will be by the sales presence but influencing the buyers along with a strong sales presence are important components. Another element is that one tends to view markets outside those that one lives in, in the same context as one’s home market. This bias can lead to important ecosystem misperceptions.
Assessment
The insights gained from this reporting can best be summarized by a statement made by a store owner in Georgia:
In emerging market one MUST know the local customs – you cannot just push products into the market
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