June 15, 2010
Functional Goods Appeal to Emerging and Mature Markets Alike
By Kim Da-ye
Emerging markets no longer just follow trends. They now create them.
International firm trendwatching.com this month looked into emerging markets such as India and Brazil and found a compelling pattern among recently launched products.
They are small, simple and cheap - or simply "functionall," the firm remarked.
Small, Simple & Cheap
The products chosen by trendwatching.com range from instant noodles and cars to financial products. They include Tata Nano, an Indian-made hatchback smaller than the Daewoo Matiz, and microcredit from the Nobel Prize-winning Grameen Bank.
Originally designed for lowincome consumers, the "functionall" products tend to be small and their features limited.
But they have become increasingly relevant to global consumers "with cross-over appeal," which, it says, includes good design and energy efficiency.
Busy lifestyles and the recession also have left consumers desiring simple and inexpensive goods more than ever, according to the company.
Here are more details about how the trends are projected to play out in the global market.
Tata Nano by Tata Motors is the epitome of a "functionall" product. The basic model weighs only 600kg and its petite, rounded body maneuvers easily in the busy streets of Delhi, India. It skips a few features, including central locking and a magazine holder on doors, and the price starts from 115,361 Indian rupees or about $2,500. It ticks all the boxes: small, simple and cheap.
Tata Motors now plans to reach the European market by launching the Tata Nano Europa.
The car has been upgraded to a 3-cylinder engine, an automatic transmission and electric power steering for its target customers, according to Tata Motors's press release.
Small loans known as microcredit from Grameen Bank also come from the Indian Subcontinent.
Muhammad Yunus, a Bangladeshi economist, built Grameen Bank in 1976 with $27 to help "the poorest of the poor" get small loans with no collateral and start their own businesses.
According to its Web site, the Bank's financial model became replicated throughout sub-Saharan Africa, Asia, the Middle East and the Americas following the formation of the Grameen Foundation in 1997.
The foundation works with microfinance institutions, including Project Enterprise in New York City, in 25 countries.
Yunus and the Grameen Bank eventually won the Nobel Peace Prize in 2006.
A series of "functionall" goods have been just launched or will be soon. It is too early to tell if they will appeal to global consumers, but some manufacturers are confident about the success of their products.
Low-cost game console Zeebo, for example, was introduced last June in Brazil at less than $200 and was featured in Western publications, including the Financial Times and Forbes.com. The latter wrote that its 3G wireless content delivery "solves the piracy problem that has stymied efforts to sell games in the developing world for decades." The console's producer is ambitious in taking over emerging markets, stating on its Web sites that nearly 800 million consumers in Brazil, Russia, India and China will join the middle class and "perhaps 200 million households will be candidates for a product like Zeebo."
Consumers don't want to spend a dollar on an item and pay two to maintain it. Low maintenance cost and ecofriendliness attracts not only frugal consumers but also eco-conscious ones.
High energy-efficiency is the most common feature among products chosen by trendwatching.
com. The Zeebo consol uses only 1 watt of power, the firm says, while Tata Motors highlights its Tata Nano as being fuel- efficient and low on emissions.
Some products take their "ecostatus" to the next level by using renewable energy, including solar power. The Kiran solar lantern by an international consumer products company called D.light, for example, provides up to eight hours of light after a day's solar charge.
While the Kiran targets households without reliable electricity, large companies like Ikea have also implemented the same idea in their goods. The Swedish furniture company launched the solar- cell-powered Sunnan lamp at $19.99 last June.
For every unit sold in IKEA stores worldwide, trendwatching.
com says, another is donated via UNICEF to children without electricity in refugee camps and villages.
The technology isn't just limited to lighting goods. Samsung India released the Solar Guru, a $59 phone that offers 5 to 10 minutes of talk time for every hour of solar charging. Even a messenger Bag called Timbuk2 FLAP is equipped with photovoltaic panels on the front, an internal USB charger for electrical gadgets and a flashlight, according to the trend firm.
Functional in Korea
Functional goods are yet to enjoy popularity in South Korea, the world's 14th largest economy.
In South Korea, home appliances have become larger and more luxurious over the past few years as consumers' buying power has grown. According to the "Survey on Electricity Consumption Characters of Home Appliances" by Korea Power Exchange, 27.7 percent of the households surveyed owned a 600-liter refrigerator or bigger in 2006, the latest figures available.
The number has nearly doubled from 14.5 percent in 2004.
Large cars, including Hyundai's Grandeur and Equus, are also seen more often than five years ago. Year 2006 marked a 47.5 percent growth in sales of large cars, according to Yonhap.
The latest survey by the Ministry of Land, Transport and Maritime Affairs shows that the number of vehicles registered with an engine displacement capacity of more than 2500cc jumped to 976,301 last December from 836,710 a year earlier.
Ironically, however, the growing buying power is creating a niche market for small and cheap goods, says Son Min-seon, senior researcher at the LG Economic Research Institute, a private think-tank.
"The market for large home appliances is not shrinking, but as consumers' buying power grows, some consumers look for additional small appliances," Son says.
Son says that as main home appliances become bigger, some consumers buy smaller products of the same kind to complement their large gadgets.
Samsung's "Love Baby" washing machine is one of those products to complement large ones.
Designed to boil baby clothes, this 3kg-capacity washing machine sold well among mothers who want their babies' clothes germ free while saving water and electricity. Chinese brand Haier's 3kg-capacity washing machine was also a "big hit," Son said.
While Korea leads its own distinct trend involving "functional" goods in emerging markets, companies have toiled to improve energy efficiency and some firms are now investing in renewable energy.
LG Electronics, one of the leading electronics brands, launched a full touchscreen phone that can be recharged using solar power. The LG GD510 phone, one of the company's "green initiatives," provides up to 2 minutes and 15 seconds of talk time after ten minutes under the sun.