By the year 2020, it is estimated that half the world’s middle class will be in Asia. It is expected that by this time, Asian customers will account for more than 40 percent of global middle class consumption.
The growth of the middle class presents businesses and investors with exciting opportunities. As a result, a significant number of start-ups are now focusing on setting up or expanding into Africa, Latin America, Asia and the Middle East, where population growth presents huge untapped market potential.
A recent research by Lamudi, one of the fastest growing online property market place, has identified the factors responsible for this shift.
According to Lamudi, many emerging market governments are laying the foundation for a flourishing business environment. With particular reference to Nigeria, it states that in 2014, the Nigerian government through the National Information Technology Development Agency (NITDA) supported technological start-ups with N1.5 billion. Recently, the Kenyan government invested $10 billion in a digital tech hub. The Konza Techno City, close to Nairobi, has been nicknamed the Digital Savannah. Likewise in Malaysia, a $100 million fund was put forward by the government to create high tech industries of the future.
The fast growing population of Nigeria is seen as the attraction for start-ups. With a young population, Nigeria is producing home-grown technological entrepreneurs with many of its citizens returning from abroad, setting a trend for the rest of West Africa, and presenting a chance to grow with the consumer along the product life cycle.
A large population equates to more consumption. In the developing world, large populations have fuelled a consumption-driven economy with levels of economic growth not achievable in Europe or developed markets.
The operating costs in the emerging markets are much more competitive. The price to rent an office is only a fraction of the price in cities like San Francisco or London. The average price to rent an office in Manila, the Philippines, is $10 per square meter as compared to the $2,194 per square meter demanded in London’s West End.
Labour costs are also substantially lower. In the Philippines, the average salary of a computer programmer is $4,927; contrast that to $69,000 on offer in San Francisco. Between staff and rent, your startup costs will be considerably lower, allowing a faster transition into profitability.
Co-founder and Managing Director of Berlin-based start-up Lamudi, Kian Moini said that “since Lamudi launched in October 2013,” it has become a leader in a number of our markets, including: Nigeria, Ghana and Kenya. “This kind of growth in such a short time would be much less likely in more established markets, where searching for real estate online is a more widespread practice. By introducing a service that is not yet available, start-ups have the opportunity to mould their industry, educate consumers, and lead market development,” he said.
Start-ups focused on the emerging markets can profit from the rapid increase in Internet penetration with the shift from desktop to mobile and apps. The high costs associated with Internet usage in many developing nations makes apps more appealing to interact with online companies.
By Pita Ochai