Understanding Developing Economies and the Importance of Market Research

A developing economy, often referred to as an emerging or low-income economy, is characterized by lower levels of industrialization, income per capita, and overall economic development compared to developed nations.

According to the World Bank, a developing economy typically has a Gross National Income (GNI) per capita below a certain threshold, which, as of 2024, is around $13,205.

Steve Johnson, Managing Director of Frontline Research Group, says, “Developing economies are marked by rapid economic growth, though they often face challenges such as higher levels of poverty, lower education rates, and less access to healthcare and infrastructure.”

Developing economies are predominantly found in Africa, Southeast Asia, Latin America, and parts of Eastern Europe. The largest developing economies include China, India, Brazil, Indonesia, and Nigeria.

These nations have significant populations and have shown substantial economic growth, particularly in the last few decades, contributing to their increasing influence on global trade and investment.

Characteristics of Trade in Developing Economies

Trade in developing economies exhibits unique characteristics compared to developed economies.

“One of the key features is the prevalence of informal trade, also known as general trade or traditional trade, which refers to economic activities that are not regulated by the government and often do not contribute to official GDP statistics,” adds Steve.

In many developing countries, informal trade can account for a significant portion of the economy, sometimes as much as 50-60%.

Informal trade is typically not taxed, which can be a double-edged sword for these economies. On one hand, it allows for greater economic participation by those who might otherwise be excluded from formal employment opportunities.

On the other hand, it limits government revenue and complicates economic planning and development efforts. Governments in developing economies often struggle to monitor and regulate informal trade due to limited resources and enforcement capabilities.

Developing economies are generally growing faster than their developed counterparts. For example, countries like Vietnam and Ethiopia have seen annual GDP growth rates of 6-8% in recent years, compared to the 2-3% growth typical of developed economies.

This rapid growth is driven by factors such as industrialization, urbanization, and increasing foreign direct investment (FDI).

Challenges in Monitoring Trade Transactions in Developing Economies

Steve says that monitoring trade transactions in developing economies presents significant challenges. A large proportion of transactions are conducted in cash, which complicates efforts to track and document trade activities.

Cash transactions, prevalent in both urban and rural areas, are difficult to monitor, making it challenging for governments to collect accurate data on economic activity and enforce tax laws.

“The distribution of goods in developing economies is often convoluted, with a complex network of small-scale distributors and retailers operating in high-density areas. These small retail outlets, known as microenterprises and with many localised names such as Spazas, Souks and Dukanis, are widespread and play a critical role in local economies.

However, their sheer number and decentralized nature make it difficult for governments to monitor and regulate them effectively.

Frontline Research Group are Developing Economy Specialists

Steve says, “Given the fact that most of the worlds fastest growing economies and some of the biggest economies have massive traditional trade sectors it is essential for big business to gather data on trade in these sectors.”

It takes a market research company with a well-developed research network and lots of experience in these markets to be able to gather useful and effective data.

Frontline Research Group’s mission and vision is to be just such a company.  They have conducted market landscape studies, retail census and a retail tracking in many of the developing economies in Africa and now Asia too.

“We have been working in traditional trade since 1996 and have developed skills, systems and experience to provide not only granular data, but support to our clients in various levels of analysis, insights, and direction too,” reports Steve.

FRG is continues to invest in innovative ways to gather and interpret data.

“Our emphasis on relationships and collaboration underscores our holistic approach to client engagement. We transcend the role of a mere data provider a seek to become a trusted advisor invested in our client’s success,” concludes Steve.

For more information or a demonstration contact Steve Johnson, Managing Director on Tel: +27 (0) 84 2000 111 or email: steve@frontlineafrica.com