Identifying digital trends in emerging markets

Identifying digital trends in emerging markets

As a result of the pandemic, consumer online habits increased in both emerging and developed markets

COVID-19   PUT   THE   WORLD   IN   A   UNIQUE   POSITION,      FORCING      CONSUMERS      TO      CHANGE THEIR DAILY HABITS and businesses to      prioritise      innovation      to      remain      competitive.   Brands   are   changing   the   way   they   communicate  with  consumers,  and  in  some  cases  revolutionising the products they offer. In    2020,    significant    business    transformations    introduced   new   consumers   to   technologies   like   digital   services,   online   financial   payments   and   e-commerce.  The  stay-at-home  order,  imposed  in  many    countries,    made    these    services    more    essential,   encouraging   reluctant   or   less   tech-savvy consumers to try them. This willingness to use digital products and increased service availability has accelerated global adoption. Compared  to  more  developed  markets,  consumers  in  emerging  markets  lag  both   in   technology   adoption   and   availability   of   services   because   they lack familiarity and trust. In addition  to  limited  access  to  the internet, consumers tend to   be   more   reluctant   to   make purchases online as they are unsure of how their                personal                information  will  be  used and stored.

As a result of the pandemic, consumer online habits increased in both emerging and developed markets. This   white   paper   examines   how   the   pandemic   impacted the availability and use of online products and    services,    as    well    as    successful    business    innovation  and  adaption  case  studies  in  emerging  markets.


In  developed  countries  like  Canada  and  Germany,  access to the internet is available to more than 90% of   the   population.   For   countries   like   India   and   Indonesia, less than 50% have the potential to access the internet, which has brought a slower adoption of digital     products     when     pushing     for     digital     transformation during the pandemic.As emerging economies continue to develop, internet access    increases.    For    example,    Vietnam    and    Indonesia  experienced  a  49%  and  32%  increase,  respectively,   in   households   with   access   to   the   internet in 2014–2019.In  addition  to  economic  development,  the  growing  access   to   smartphones   and   the   gradual   shift   in   consumer  demographics  increases  internet  access.  Smartphone  ownership  has  spiked  significantly  in  the past five years. With a demographic shift to more millennials and younger generations, consumers are utilising online technology from an earlier age. Younger   generations   are   highly   attached   to   and   dependent on their online devices. In both emerging and   developed   markets,   the   growing   purchasing   power and decision-making influence by millennials will    remain    an    important    catalyst    for    digital    transformation and adoption in the global market.

In 2020, new consumers across all generations began to   use   the   internet   for   activities   such   as   digital   services,  e-commerce  and  online  financial  services.  Although these services will likely become less crucial as    countries    ease    COVID-19    restrictions,    these    consumer habits are likely to prevail.

Digital services will continue to impact consumers’ daily lives.DIGITAL SERVICESIn   recent   years,   digital   platforms   have   thrived   the   growing  range  of  digitial  services  that  include,  but  are  not   excluded   to,   streaming   services,   online   classes,   communication platforms and videogames. In countries such   as   Brazil,   Colombia   and   India,   the   consumer   expenditure in digital streaming services grew over 18% each year during the 2016–2019 period.

During  the  first  trimester  of  2020,  Netflix  acquired  almost  16  million  new  users,  achieving  more  than  double the revenue in 2019. The streaming platform saw its greatest growth in those regions with a high prevalence of emerging markets, such as Asia Pacific and  Latin  America,  with  63%  and  25%  more  new  subscribers than 2019, respectively.

Successful  global  competitors,  such  as  Netflix  and  Spotify,     have     familiarised     consumers     on     the     subscription-based model, creating opportunities for local   businesses   in   emerging   markets.   Alternative   subscription-based      players      can      offer      fitness      programmes    and    educational    classes    to    their    consumers with high growth potential.

In addition to leisure, the need to communicate and engage      for      work      boosted      downloads      in      communication   platforms.   Zoom   was   the   most   downloaded non-game app worldwide in April 2020, with    close    to    131    million    installs,    and    India    accounting for 18% of downloads.

The  pandemic  prompted  an  environment  in  which  brands  can  compete  for  the  growing  segment  of  consumers in emerging markets that are now willing to increase their usage of digital services.


Digital    financial    services    include    transactions    completed  online  or  with  a  digital  device.  Over  the  past five years, payment technologies have grown in emerging   markets.   Global   competitors,   such   as   Samsung  Pay  and  Apple  Pay,  are  now  available  in  countries  like  India,  Brazil,  Mexico,  Vietnam  and  China.  Despite  growth,  there  are  cultural  nuances  financial   service   providers   must   consider   when   developing new services in emerging economies. On average, the percentage of people with access to a bank  account  is  lower  in  emerging  markets  than  in  developed  countries.  As  digital  financial  services  traditionally  coexist  with  access  to  bank  accounts,  consumers  in  emerging  markets  demonstrate  less  interest in these services overall.

In  many  of  these  developing  countries,  cash  is  still  the most utilised and often only method of payment as   many   street   vendors   and   independent   stores   supply goods for local consumers. These merchants often enact low digital payment acceptance rates due to   high   usage   fees,   not   wanting   to   familiarise   themselves with a new process and a general lack of trust in digital payment services.


To overcome these barriers, financial players should implement  services  that  do  not  require  access  to  a bank  account.  For  example,  Kenya’s  M-PESA  allows  peer-to-peer   transactions   and   payments   to   third   parties  through  a  system  similar  to  text  messaging.  While most of Kenya’s population is unbanked, they have  one  of  the  highest  mobile-money  penetration  rates, according to Tech Crunch. In fact, M-PESA has 24.5  million  customers  in  Kenya’s  population  of  53  million in 2020.

While   financial   inclusion   remains   a   challenge   in   most  emerging  markets,  many  of  those  that  are  banked have been more open to new online financial services.  The  increasing  product  offerings  by  global  competitors,  like  Apple  Pay  and  Samsung,  and  local  banking applications that spent a significant amount of    resources    in    training    both    consumers    and    establishments on usage will benefit in the long run.


Over   the   past   five   years,   the   e-commerce   sales   channel  in  emerging  markets  grew  by  a  CAGR  of  30%.  This  growth  represents  a  value  increase  of  US$242 billion to reach a total of US$834 billion by the end of 2019. The first half of 2020 experienced a global    boost    in    online    sales,    continuing    this    escalation.

In emerging markets, the growth of e-commerce can be   attributed   to   heightened   speeds   of   internet   penetration   and   consumer   behavior.   Consumers   demand convenience and desire the ability to easily compare    product    prices    and    qualities    before    purchasing.

As  a  result,  companies  cannot  afford  to  ignore  the  digital   distribution   channel   and   must   prioritise   e-commerce  for  retail  strategy.  Successful  players  will utilise omnichannel efforts like click-and-collect and last-mile delivery services.In the latest consumer insights survey, Euromonitor asked   if   consumers   anticipate   changes   in   their   shopping  and  spending.  Over  60%  of  respondents  claimed that they will likely increase online shopping and  reduce  in-store  shopping  in  the  medium  and  permanent term.


According   to   Euromonitor   International,   98%   of   population growth is predicted to take place in urban areas.  By  2030,  60%  of  the  world’s  population  will  be   urban.   As   a   result,   transport   authorities   and  municipal  governments  will  be  tasked  to  deliver  efficient    methods    of    transportation    as    more    businesses   deliver   their   products   to   consumers’   homes.

The lack of an efficient infrastructure could diminish or   complicate   the   process   to   establish   proper   business operations for delivery services. To prevent these  potential  challenges,  delivery  networks  are  becoming  more  centralised,  shifting  their  supply  chains to focus on urban fulfilment strategies aiming to target the last mile.

Some   retailers   pivoted   to   use   ‘dark   stores’   as   localised  fulfilment  locations.  In  addition,  store-to-store  shipping  and  ship-from-store  home  delivery  helped reach consumers faster. An increase in urban disposable income in emerging markets could add to the demand for delivery services.

For    instance,    Romania,    Malaysia    and    Vietnam    represent  a  combined  urban  disposable  income  of  over US$ 119 billion in absolute terms from 2014 to 2019.  This  increase  of  wealth  can  positively  direct  potential  consumer  expenditure  to  online  shopping  and virtual services.

As  consumers  can  rely  heavily  on  e-commerce,  a  seamless  omnichannel  experience  is  key  for  retail  growth.  Consumers  are  likely  to  favour  companies  that  give  them  a  friendly  in-app  experience,  as  well  as multiple options for receiving purchased products.

E-Commerce  demands  increase  opportunities  for  delivery services While stay at home orders were in place, many consumers experienced an improvement in their online shopping experience. Upon purchase, consumers could expect to receive their products the same or next day. However, as demand continues to rise,  legacy  shippers  may  not  have  the  capacity  or  network to deliver packages at the same rate.

This presents an opportunity for startups to conquer the last mile delivery market. Retailers, small stores, foodservice  restaurants  and  other  businesses  can  connect  using  the  crowdsource  technology  model  which will, in turn, improve the customer experience. The   last   mile   represents   an   incentive   for   many   businesses  to  participate  in  this  new  wave  of  the  digital world. The automatisation of the distribution and incorporation of new technologies will continue to    make    businesses    more    efficient    and    more    connected to consumers.


A significant number of consumers who tried digital products and services during the pandemic are likely to keep relying on them in the future. As consumers continue to experience benefits like convenience and efficiency,  they  overcome  important  usage  barriers  like mistrust and unfamiliarity.

Historically,   emerging   markets   lagged   in   digital   product    and    service    adoption.    However,    these    technologies   have   become   essential   to   daily   life   during   the   pandemic.   The   digital   industry   has   become   attractive   for   investors   and   competitors   trying to meet the rapidly growing demand.

In  order  to  enter  this  space  successfully,  there  are  factors  specific  to  emerging  markets  that  players  should  consider.  Consumers  in  these  markets  want  seamless,  user-friendly  and  secure  experiences  as  many may not be familiar with technology products. They    desire    training    on    service    benefits    and    information   on   how   their   private   and   personal   credentials will be used.

Companies should keep costs low as many emerging market  consumers  transition  away  from  cash.  The  benefit  of  digital  financial  services  must  be  evident  as  many  may  be  of  the  unbanked  population.  Small  business owners will also be conscious of costs when incorporating  digital  payments  platforms  into  their  services.

As  consumer  demand  continues  to  rise  amongst  digital services, digital financial services, e-commerce and  delivery  systems,  digital  behaviours  become  essential  to  consumers’  daily  lives.  Now  more  than  ever,   there   is   room   for   innovative   growth   and   business opportunity in emerging markets.

Euromonitor International is a global market research company providing strategic intelligence on industries, companies,   economies   and   consumers   around   the   world.   Comprehensive   international   coverage   and   insights  across  consumer  goods,  business-to-business  and service industries make our research an essential resource for businesses of all sizes.

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