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'The biggest story in the history of capitalism'

Susannah Lee

“Some people call it the biggest story in the history of capitalism, and it’s a big story. There’s a billion people joining the consumer class,” said Kevin Carter, the founder of the Emerging Markets Internet & Ecommerce ETF (EMQQ). Carter is referring to the rising middle class in emerging markets. “They’re moving up the income spectrum and as they’re moving up, they’re consuming more, better food, they’re wearing better clothing… and increasingly they’re doing that online."

The reason Carter gives for the heavy e-commerce volume from consumers in emerging markets is simple. “Most of the developing world, they don’t have a Walmart (WMT) or Target (TGT), and so when they get a smartphone, and it’s connected to the web, via broadband, it’s giving them access to goods and services for the first time,” he said.

The huge wave of consumption coupled with doing most of that shopping online is creating both business and investing opportunities. Carter points to the “explosive growth" at Alibaba (BABA) as one example. Mercadolibre (MELI) is another U.S. listed stock Carter likes. “They have the number one market share in Brazil… and from Mexico to the tip of South America.” The e-commerce leader also gives exposure to places that aren’t yet on the investment grid since the company is not “just in developing markets but a lot of frontier markets including Nicagua, Costa Rica.”

Beyond same-day delivery, emerging markets consumers may have extra perks that online shoppers in developed markets don’t have. “In Nigeria, people want to see and try on the item before they pay for it,” said Carter. “The delivery person will actually wait for the buyer to open the box and to look at the item, maybe even try it on.”