Map-EmergingMarkets2005.png

I don't like politically correct speech. Anyone who has read me for a while already knows this. The reason for my distain is that PC speech tends to gloss over the real situation out of fear that someone's feelings might be hurt by an unfiltered airing of the truth. This tiptoeing around inconvenient truths tends to make the situation more murky than it needs to be. People in need cannot get the help they really need if no one recognizes them as a person who needs help. If we're talking about poor people, let's just say that we are talking about poor people. I've been one. Some might even say that I am one now. I wouldn't. But in this world where language gets more squishy and fluid, it is always better to err on the side of saying what you really mean.

The first time I heard the term, "emerging markets", I had no idea what it meant. It does not indicate the condition of the market we are trying to address. The market is emerging from what? We act as if "emerging" nations are like startups in Silicon Valley. That is such a pile of poop! There is not a single nation that is a startup. They are not new, but rather ancient. The Egyptians of old would have scoffed at the notion of their empire one day being referred to as an emerging market. The same goes for the mighty Babylon, Assyria, and Persia. 

Even the nations that have never been world powers, or a part of world powers, have nonetheless been around for a very long time. They are not startups. They are not new to the game of life. Their condition, whatever it happens to be, is the result of choices made, and long established, by the people and their leaders. More often than not, those choices are religious in nature. Religion has an indelible effect on the culture. Pretending it does not is just another of those politically correct lies we tell ourselves. We wouldn't want anyone to think that we are looking down on their faith-based worldview. 

Let me be very clear: There are no emerging markets. There are only markets graded on their economic soundness. We say emerging markets when we are talking about poor people in economically depressed countries. Of course, it is not nice to say that because it smacks of Western elitism. It also glosses over the fact that there are many poor people in Western nations. Talking about smartphone share and usage in a given country is less interesting than breaking down share and usage by economic classification. 

The number of iPhones or Galaxy phones sold in the US at any given quarter is meaningless to me. A more meaningful metric would be, how many people in a certain income bracket bought which phones. At that point, we could dispense with the marketshare numbers based on geography. Fake lines on a  map do not tell us anything that matters in the personal electronics space. 

In every emerging market, there are always outliers who are wealthy and powerful. Those people are not using the same products and services as the poorest of the unwashed masses. No matter how many $100 smartphones are sold in Indonesia, the people who can afford better are using better. Let’s count the number of iPhones and Galaxies used in emerging markets by people who make the equivalent of $50,000 and more. I bet we would see a different picture. More to the point, we would see the same picture as we do in the US, and other markets where people can choose any product they want.

Here is another inconvenient truth: As a neck bearded fanboy in a completely emerged market, I could care less what products people use below a certain income bracket. Those choices do not represent the best of the state of the art. They represent the art of the possible. Those are two very different art forms. The only reason a fan-site would be talking about a sub-$100 smartphone is to obscure the fact that their platform of choice is not very popular among people who have the ability to use anything they want. 

A person looking for the most popular, high-quality restaurant does not care how many Big Macs vs. Whoppers have been sold. If you are researching the marketshare equivalent of great restaurants, fast food dives are not even considered. What you want to know about restaurants, cars, and smartphones is what the most popular one is in your income bracket. When I get ready to buy a car, I will not even look at what Consumer Reports has to say about luxury cars. I am not in that particular market. I care about cars in the $10,000 to $15,000 range. Any more expensive than what I can afford is not even in the conversation. The same goes for something considerably less than I can afford. I absolutely don’t care what they are driving in emerging markets.

Lately, the smartphone world is fixated on emerging markets like never before. There is good reason for that. The emerged markets are already wrapped up. While there is still room to grow, there is very little room for new players to enter. The reason why platforms like Windows Phone and Blackberry have to focus on emerging markets is that iOS and high-range Android phones dominate the upper income markets by a large margin. Windows Phone, Blackberry, and low-end Android are scrapping it out in places where an alarming percentage of the population don’t own shoes. 

My concern for the people in such places is not whether or not they have the top of the line smartphone, but whether or not the have clean water, sufficient shelter, and basic medicine. It seems rather exploitative to see them as a market, emerging or otherwise. They should not be considered a market until they have sufficient human rights, fulfilled needs, and a baseline of creature comforts. If they save up an extra nickel, we see it as a market opportunity. We are scheming up new ways to convince them to give us that hard-earned nickel. That feels exploitative in the worst kind of way.

That these markets can afford some sort of personal electronics devices is a good thing, but it is not the stuff of fanboys and geeks. I am happy for the Indian family that can finally afford their first $35 smartphone. But don’t expect me to review it, or count the operating system it is using as a competitor to the iPhone. That is dishonest, unworthy, and just plain stupid. 

Having been quite poor, I can tell you that poor people do not want nor care about $35 smartphones. They buy them because that is all they can buy. They do not buy them out of a sense of loyalty to a budget brand. What those people want is a $650 iPhone. The moment they can afford one, that is exactly what they will get. As these markets emerge, they emerge from cheap, low-end devices into something a lot better. That is what it means to emerge. Companies who make $35 phones generally do so because they cant sell $650 phones. The world needs both. They are not really competitors. 

People make the mistake of thinking that emerging markets are growth markets. That couldn’t be more wrong. Selling cheap products to people who have no economic choices is not a recipe for growth. If you want to base your future on the limited choices of poor people, you are making the wrong bet. The whole point is that those poor people will soon be middle-class people. They will not thank you for the cheap phone you sold them. They will immediately buy something better. Most likely, they will want a different brand, one that they don’t remember as offering a crappy experience. The true growth market is to make the product that people want when they emerge, not the product they have to have before they emerge.

David Johnson

Comment