Dateline: Phoenix, United States
I’m all about profiting from inefficiencies in the market. It’s one of the reasons I live and travel overseas full-time to find the next great untapped opportunities.
Throughout the last several months, we’ve discussed how business plans as simple as finding a way to more easily get garbage from Point A to Point B are proving to be highly successful in frontier markets like Cambodia.
In many emerging markets, inefficiencies – both planned but also “accidental” inefficiencies – can present ripe opportunities.
I’m in the United States for several weeks, probably the only time I’ll be here this year. In addition to preparing to host our Passport to Freedom event with Peter Schiff later this month, I’ve been meeting with friends and former colleagues and discussing American business culture with many of them.
If there’s one thing that the United States does well, and that’s consumer market innovations.
Forget for a moment that the US has lost what was once a winnable war to dominate the internet space in China. Entrepreneurship, especially in the tech sector, is a vibrant sub-culture in the United States. I only wish the talented people in it took their talents somewhere that valued them more.
And that means that markets have driven down prices for consumers. Allow me to share an example:
I recently purchased a pair of glasses online while I was in Taiwan. The company is called Warby Parker, is based in the US, and only ships to the US. So I scheduled them to be shipped to a friend’s house while I’m here.
For years, I protested against the idea of buying glasses online. Even while I spent time sitting in dusty eyeglass stores in bad strip malls being served by grouchy staff, I figured that system was better than hassling with buying glasses from a website.
Besides, I preferred my Italian Persol frames, of which complete pairs weren’t readily available online.
Today, however, my entire opinion changed. I received a pair of glasses from this New York-based outfit that has has gained press for outfitting celebrities like Ashton Kutcher, as well as for giving away a pair of glasses to kids in need for every pair sold.
On top of that, their business plan is very customer friendly: try on five pairs of glasses at home, then send them back and we’ll put lenses in your favorite pair. It couldn’t get much easier.
So when I received my glasses, which seemed as high-quality as any designer frames I’ve spent a lot more money on, I couldn’t help but marvel at the total price tag…
That includes the extra $30 for high-index lenses to hide my horrible vision prescription. For those with better vision, a complete pair of glasses comes shipped for under $100.
I don’t get anything for writing about this. And I rarely sing the praises of an online outfit in this way. But I’m telling the story to indicate an important point about what we talk about here.
There is such amazing opportunity to reduce inefficiencies in consumer markets overseas that I am practically slapping myself in the forehead that more young entrepreneurs here don’t do it.
For instance, I was in Malaysia several months ago and happened to walk into a glasses store. While there are certainly some excellent value destinations in Southeast Asia where glasses come really cheap, Malaysia is a bit more developed, and prices were quite high.
Why? No competition.
On top of that, the whole glasses experience there – as with almost everywhere – is nothing exciting. It’s miserable and filled with waiting.
Unlike some frontier markets, countries like Malaysia, Singapore, Hong Kong, and others have high credit card penetration rates among the upper and middle classes. The opportunity for moving more consumer products onto ecommerce is already available.
But far fewer people are doing it. I couldn’t even find much reliable information on leasing office space in Kuala Lumpur online. It’s much easier to just go there and hook up with a commercial real estate agent.
One reason I get from Americans who don’t want to live overseas is that they would miss the conveniences of home. In some regards, this is true; each country obviously has its own culture and its own conveniences.
And while it’s true that you can’t order your own custom-made granola bars, bicycles, or whatever else tech entrepreneurs have let Americans customize to their whim online, I look at that as a good thing.
Because the market is wide open.
I met with several young business people in Seoul last week, and several of them – unrelated to each other – told me think someone should open a Mexican restaurant there.
People in Seoul are literally paying up to $12 for a fast casual hamburger, and $20-25 for a restaurant hamburger isn’t out of the question. Even Taco Bell is expensive there. (Even more dreadful, that’s what many young South Koreans consider Mexican food.)
Yet labor costs and taxes aren’t any higher than in the west. Real estate in Seoul is expensive, but it’s expensive in New York, too.
While the Korean culture certainly requires some adjusting to for a westerner, I’ll take the gamble of opening a fast casual restaurant like Chipolte in Seoul over Los Angeles any day of the week.
If opening a restaurant, basically the kiss-of-death business in the west, is more viable in Asia than in the United States, then service-oriented businesses the centralize production of consumer goods and deliver them through efficient online channels is a lot better.
I told you recently about my friend in Singapore who easily ranked his financial company number one on Google Singapore. He now has one of the top sites in the entire country.
While the United States business culture does make life a bit easier in some regards (offset, of course, by the TSA, NSA, IRS, FDA, FTC, and other mafia characters), it is also extremely competitive.
On top of reduced competition when starting a business overseas, labor is also a lot cheaper. Malaysia’s middle and upper class pack into shopping malls as nice or nicer than any mall in your American suburb. Prada, Louis Vuitton, and Hermes stores are abundant.
Yet I saw an ad in the KLCC Suria Mall, inside Kuala Lumpur’s Petronas Towers, seeking workers for the cinema. The pay: starting at 5.50 RM – about US$1.75 at today’s exchange rate – per hour.
Similar spending power among your target market, but a more diverse economy that gives you added benefits and cost reductions. Sounds like a potentially winning formula to me, one that should make every entrepreneur think internationally.