Social Commerce trend has grown dramatically in the past years, recent research has forecasted that e-sales will exceed $735 billion by 2023. According to emarketer, retail e-commerce sales in Latin America grew 63.3% in 2020 to $104.60 billion. Elenas, Latin America’s first Social Commerce Marketplace, is a good example of the rapid acceleration of the social commerce trend, which is powered by the virality of the marketing model and the establishment of existing social platforms.
Social commerce is a new way of doing business, it is no longer about digitizing traditional channels or leveraging social media channels to increase traffic conversion. This new way of commerce enables new buying behaviors, where traditional stores, websites, or even apps are no longer the first destination for new customers. As this new model evolves and takes over Latin America, we talked to Zach Oschin, Founder & CEO of Elenas to learn about how they developed the concept and his vision of the rise of social commerce in the region.
Elenas: The Story
In 2017, young American Zach Oschin moved to Colombia from South Africa, where he worked for a start-up company of e-commerce and logistics, to join Polymath Ventures in the research and design of new business models for the Latin American middle-class. He joined one of the ideation processes of the company, which at the time was researching working women in Latin America.
Before founding Elenas, the team went through different iterations to actually understand the need and expectations of the segment. In the process, the team explored different solutions to get closer to working women, our core segment. These solutions led them to explore the after-school space, online psychological services, and the direct sales model. Ultimately, the core need of the segment was to generate extra income for their household, while securing high levels of productivity and efficiency.
Elenas was launched in 2018 and by October of 2020, they raised a $2 million seed round from Alpha4 Ventures, Amador Holdings, Polymath Ventures, and Meesho. Then, in March 2021, it raised a $6 million A round. Since its foundation, the team led by Zach has achieved remarkable milestones, proving the relevance of this new business model in Latin America and the impact it can generate in thousands of women, or ambassadors as they call them, looking to achieve social and economic growth.
With a competitively attractive environment, Latin American e-commerce has developed rapidly during the COVID-19 epidemic. In 2020, the business of Elenas has increased by 25 times. In May 2021, Elenas expanded to Mexico.
According to Shuang Bin, Elenas’s consultant and expert in the China-Latam supply chain, Latin American e-commerce is still in its early stage, with a shortage of supply and monotonous business models. Amidst this opportunity, Elenas is choosing the social commerce alternative, which connects the suppliers with local communities, also enabling increased access in areas where some of these services have never landed.
How to gain customers’ trust with social networks?
In 2017, the team realized Colombia’s local e-commerce business was at a relatively early stage. Though there existed many e-commerce companies in Latin America, they only owned 0.5% of the market in many categories.
Latin American is wealthier than other emerging markets, and the penetration of the Internet and smartphones is higher. According to Statista, in 2019, smartphones accounted for 69 percent of all mobile connections in Latin America, and the share is expected to increase to 80 percent by 2025. In the same time period, the share of the population in the region who has access to a mobile phone will increase from 68 to 73 percent. So, if the overall behavior is healthy and the ecosystem is ready to foster new digital behaviors, why didn’t e-commerce rise?.
In order to tackle this question, Zach and the team interviewed hundreds of Colombian citizens. Through the process, they found that lack of confidence was the first barrier, users preferred corner grocery stores over e-commerce platforms. Besides, selling happened via traditional direct channels, where people probably ordered products from magazines shared by friends. According to Zach, in China, daily necessities e-commerce has a 70% penetration rate, while in Latin America this number declined to about 50%. In Peru and Brazil, the rate is 25% and 17%, and the main reason is the direct selling tradition. The global No.1 direct sale company, Natura, is Brazilian. The key learning was that in Latin America, community culture has a strong foundation, social contact is crucial to unlocking trust, people want to share recommendations and exchange information about the product.
At the time the direct sales model filled this gap, however, the model was not efficient and created unnecessary barriers to both the final customer and the seller. For example, direct sellers had to order products to their own places before pushing them to the customers, they spent time and took associated risks, in some cases they even had to pay upfront for the product before receiving the client’s payment.
Precisely to disrupt these inefficiencies and to create an impactful channel for thousands of women in Latin America looking to increase their income, Elenas was born. This Social Commerce Marketplace has built a selling network of tens of thousands of ambassadors, over 90% of them are women, that are enabling their own digital businesses thanks to the extensive cooperation with both local factories and importers, which gives them access to more than 45k types of products.
Elenas is leveraging the power of social connections to maintain the familiarity of the direct sales model, empowering ambassadors to sell to friends and family members. At the same time they are leveraging the most critical learnings of the traditional models to enhance the experience for both the ambassador (seller) and final customer through digital solutions and a growing network of local and international brands.
Elenas mission to empower women in Latin America
At the beginning, the core topic of the research was working women and the expectations put on “guerreras” (female warriors!), as they referred to themselves, as they worked to balance family, relationships, and career. And as the team learned since the launch of the venture, the impact of Elenas is directly related to the social and economic conditions of the countries in which it operates, especially regarding issues of gender equality.
Today, most of its sellers or embajadoras are housewives and university students, and a large proportion of the sales comes from small cities and rural areas. Lizbeth, a young 24 years old woman, living in Duitama, sustains her household expenses thanks to Elenas. In December of 2020, she earned over $3,000 US, which allowed her to pay the maintenance of her car, grocery shopping and rent.
Elenas enables the opportunity to earn extra income while working from home and reducing barriers and risks. According to Zach, some of the most successful ambassadors who work full-time in the platform can earn thousands of dollars per month, up to 10x more than in the traditional direct model. Also, the sales commissions can go from 10% up to 40% for the ambassadors, which gives them incremental opportunities to earn more.
25x growth during the pandemic
In 2020, the outbreak of COVID-19 changed the pace of Latin American e-commerce. At the beginning of the epidemic, Elenas faced several difficulties. With Chinese borders closed, many imported products could not arrive in Colombia. Then, the virus in Colombia cut the logistical network, so Elenas could not transport products from Bogotá to Medellín.
However, when the Colombian logistics industry adapted to the epidemic, local e-commerce exploded just like in other regions around the world. In 2020, with the fastest sales growth, Latin America beat the Asian-Pacific region and became the champion of the e-commerce retail market. It has been estimated that 13M people across Latin America made an online transaction for the first time last year.
Elenas won from two different aspects. First, customers were looking for new shopping possibilities. They spent more time on the Internet and social media and hoped that products could be directly delivered home. Second, many were looking for a platform to earn money at home, which means more potential Embajadoras went to Elenas. Eventually, sales of Elenas increased 25x in 2020.
In May 2021, Elenas landed in Mexico. As Polymath Ventures have learned in his extensive research, Latin American people share similar behaviors. Generally speaking, due to lack of opportunities for female workers, women from small cities are looking for extra income, and they are used to traditional catalog sales. At the same time, the region is showing similar patterns of digital growth, presented in smartphone adoption and internet penetration.
As Zach stated, “some of our top embajadoras receive more than 100 orders every month”. Today, 11M housewives are selling products via direct sales channels, said Zach, demands exist there, so we need to extend our scope and bring more people to Elenas.