How the direct selling market is reinventing itself with social commerce
It has always been very common to find resellers of direct selling brands like Natura, Boticário, and Avon on the streets, at work, and even within families. Since 2020, following the start of the COVID-19 pandemic, it has become even more common to see acquaintances selling products on Instagram and WhatsApp. And for good reason: by the end of 2019, online sales penetration in Brazilian retail was at 5 percent, and by the end of 2021, this number had reached 12 percent, according to research by MCC-ENET. More than 290,000 new online stores emerged during the pandemic alone, not to mention the people who began selling products or services through Instagram, WhatsApp, and other social networks, in what is now called social commerce.
The same happened with resellers, who since 2020 have had to reinvent themselves to learn how to sell their products on Instagram and WhatsApp. Much of the selling that used to happen in the workplace, door-to-door, or in physical stores has now shifted to social commerce, and it is unlikely that things will ever return to the way they were before 2020.
Brazil is undoubtedly one of the biggest global powers in the direct selling market. According to the World Federation of Direct Selling Associations (WFDSA), Brazil is the leading country in Latin America for direct selling, generating over 7 billion US dollars in revenue in 2021, and is the 7th largest market in the world by sales volume.
According to the Brazilian Association of Direct Selling Companies (ABEVD), there are 4 million formally registered resellers in Brazil. However, the actual number is expected to be even higher when including informal resellers who have not yet been mapped.
Changes in the direct selling market
For D2C brands (Direct-To-Consumer)
In Brazil, there are two main types of D2C brands: 1) those that sell directly to end consumers through resellers and 2) those that were born digital and use social media and their own e-commerce platforms to sell to consumers. These latter brands are known as DNVBs (Digitally Native Vertical Brands).
Both types have been increasingly investing in their digital presence. This includes branding, building communities that identify with the brand, partnerships with digital influencers, and especially leveraging social media and their own e-commerce platforms as sales channels.
As a result, selling online is becoming increasingly expensive, and many D2C brands are facing a rising CAC (Customer Acquisition Cost) due to the following factors:
More expensive advertising: With more brands and individuals advertising on Google, Facebook, Instagram, and YouTube, the cost per click has increased significantly.
Influencer partnerships: It is becoming common for larger companies to pay influencers for exclusivity. Surprisingly, some influencers are paid simply to avoid promoting other brands, even if they do not create any content or run any campaigns for the one paying them. This has heated up the influencer market, making it unaffordable for many smaller brands.
Customer experience: D2C brands are known for providing excellent, exclusive, and personalized purchase experiences. This includes targeted communication at every stage of the buying journey, logistics, and the famous unboxing experience, all designed to encourage repeat purchases, ideally at a higher value. Scaling this experience is costly, requiring dedicated teams, technology, and extensive data analysis.
For a D2C brand to capture a significant market share in its segment, it must explore both digital and physical sales channels. In other words, omnichannel becomes almost a fundamental strategy in this journey.
The main challenge for D2C brands today is to replicate their current customer experience in an omnichannel model while also reducing their CAC. Multibrand resellers who sell through social commerce may be the answer.
Marcela Quiroga, a direct sales expert, former Natura executive, and cofounder of Sync, believes that there is ample room for relationship-driven selling through social commerce resellers, who live alongside their customers and understand their needs closely.
She says, “The reseller’s recommendation can be precise because she understands the customer’s lifestyle, and her influence in the final purchasing decision presents a significant opportunity for D2C brands that invest in the buying experience and customer retention. This comes with a less volatile CAC and leverages a key trait of direct sales channels: reach.”
For resellers
A study by CVA Solutions in partnership with ABEVD found that resellers typically work with multiple brands, selling products from an average of three different companies. This behavior has existed for years but is becoming more pronounced.
This happens because resellers aim to increase their average ticket size per customer by offering a product mix from different brands to a single client.
As a result of this evolving behavior, the main changes for resellers include:
Resellers own their clients: The customers do not belong to the D2C brands but to the resellers themselves. These end customers are not buying a product because it is made by a particular brand; they are buying because the reseller recommended it, showed how to use it, answered their questions, and identified the best product for each person.
Entrepreneur ≠ reseller: Before, it was Anna Clara, reseller for Eudora, Avon, and Jequiti. Now it is Anna Clara Cosmetics. Anna Clara handles acquisition, customer relationships, sales, after-sales, and delivers an excellent experience to her clients.
Sales technology: It used to be common for resellers to depend on brands to provide tools and technology for selling. Since 2020, this has changed completely. Even when resellers receive ready-made digital catalogs from each brand, many prefer to use multibrand solutions to create their own websites where they consolidate products from all the brands they represent. This lets them offer a simpler, more unified shopping experience.
Relationship-based selling: This is the core characteristic of direct sales. It will never go away, but it is evolving. Relationship-building no longer happens door-to-door, but through Instagram (stories, direct messages, posts) and WhatsApp.
When we talk about sales technology and relationship-based selling, this is where social commerce has had the most impact, and it is also where the biggest opportunities lie for the coming years: increasing sales conversion.
E-commerce is not the solution for resellers because it cannot replicate relationship-based sales. Automating payment, shipping, and the entire online buying experience has not improved sales conversion in Brazilian e-commerce.
According to Experian Hitwise, the average conversion rate in Brazilian e-commerce is 1.65 percent. According to Sync, a social commerce company for resellers and entrepreneurs, when a relationship-driven approach is added to the online shopping experience, the sales conversion rate can reach 17 percent.
This is because relationship-based selling enters the picture at the point of payment, which is made directly via WhatsApp. In practice, the social commerce process starts with a customer selecting their products, building a cart, and placing an order. The key difference is that instead of entering payment details in a form, the order is automatically redirected to the reseller’s WhatsApp, where the payment is completed via PIX.
Sending a ready-to-pay order through WhatsApp without asking for payment or delivery details in a form makes the customer much more likely to complete the purchase. This is because the customer feels safer making the payment after confirming the order directly with the reseller via WhatsApp.
Key trends for the coming years
25 percent online retail penetration in Brazil: According to Ethan Choi, a partner at Accel (one of the leading global venture capital firms investing in tech companies), it is expected that over the next 10 years, e-commerce penetration in U.S. retail will reach 50 percent, while in Latin America, it will reach 25 percent. In Brazil, this number is currently 11 percent, so we can expect online sales to more than double in the coming years.
New D2C brands entering the market: D2C brands are gaining more strength and presence online, and we will likely see many new brands emerge. This growth will likely fuel the rise of new DNVBs and increase competition in a heated market.
Creator economy: This term refers to influencers who become owners of physical or digital products and launch their own brands to sell directly to their audiences. They are no longer interested in promoting other brands. They want to sell their own products and profit from sales. Examples in Brazil include Anitta launching an intimate perfume with CIMED, Gusttavo Lima releasing a fragrance with Adventures, and of course, the well-known Boca Rosa.
Direct sales through social commerce: In the pursuit of reducing CAC and scaling sales, D2C brands are likely to ride the exponential growth of social commerce. There is a clear opportunity for these brands to replicate their customer experience for thousands or even millions of new customers through a sales channel powered by multibrand resellers already active in social commerce. The more resellers who talk about, use, teach how to use, answer questions about, and actually sell these products on social media, the more these D2C brands will become part of everyday life in people’s homes, not just gaining likes on Instagram.
Leonardo Cecchetto is the founder and CEO of Sync, a startup that helps D2C brands scale their sales and customer experience through multibrand resellers active in social commerce. Sync has helped 40,000 resellers grow their sales.
