Direct selling continues to be the most relevant channel in Latin America, representing about a quarter of beauty and personal care sales in the region.
Since 2020, direct selling has flatlined due to several challenges. Euromonitor takes a closer look at how direct selling in Latin America changed after the COVID-19 pandemic and what to expect in 2023 and beyond.
What changed after COVID-19?
Latin America can be considered the most mature region for direct selling in beauty and personal care accounting for 25% of overall value sales of the industry, while the global average is only 8%. In some countries, like Peru and Bolivia, it can represent up to 40%. Euromonitor predicts still positive but decelerated growth of mid-single digits in 2022 and continued deceleration in 2023.
Consultants are a key pillar of direct selling in Latin America; players invested heavily in training consultants to strengthen the channel. Due to digitalisation trends and the pandemic, several small jobs like call centre assistance, data digitalisation, and administrative tasks became possible remotely more broadly. There was a migration of direct selling reps to those work-from-home options. Combined with fewer new sales reps entering the field in favour of a fixed monthly income, direct sellers’ salesforce numbers either stagnated or declined.
The added pressure from inflation reduced purchasing power and pushed most consumers in Latin America towards trading-down, becoming budgeteers. According to Euromonitor’s Voice of the Industry: Beauty and Personal Care survey, almost three quarters of beauty and personal care respondents from Latin America stated that inflation extensively impacted their company in 2022. Consumers in the region are expected to navigate towards cheaper brands, private label products and discount channels to spend less in 2023.
Digitalisation also came with the entrance of a new generation – Gen Z – and their needs and values do challenge the direct selling channel. They want everything immediately and are very informed consumers and digital natives. This poses many challenges, such as how to improve logistics, ensure effective online presence through every channel and communicate in the best way for this younger generation not targeted by direct sellers before.
How is the channel evolving in Latin America?
While at regional level the direct selling situation seems relatively steady, the challenges vary by country and category.
In general, most Central American countries saw direct selling performance improve in 2022. This was especially true for less digitalised countries such as Ecuador and El Salvador, where e-commerce and virtual from-home job alternatives are not so accessible.
In more digitalised countries like Chile, direct selling has been experiencing slight cannibalisation from e-commerce.
Direct selling has been performing relatively poorly in Chile, where beauty sales are heavily concentrated in pharmacies and grocery retailers. E-commerce’s rise in 2020 came to stay in Chile, and digital strategies from direct selling players have not yet been successful. Despite the flexibilisation of payments, improvements are needed in logistics, finding digital native sales reps and addressing a younger type of consumer.
The e-commerce boom of 2020 was more transitory in Colombia, and the channel has returned to normal in most categories, specialising in some categories like skin care, fragrances and colour cosmetics. Since direct selling companies tend to focus on those categories, there is cannibalisation, with the added challenge of losing space also to beauty specialists, a channel driven by premiumisation trends.
Direct selling is negatively impacted in 2022 in colour cosmetics and fragrances but remains resilient in skin care
Direct selling is particularly strong in fragrances, with a market penetration of over 50% at the regional level. However, the share seems to be decreasing over time. This is explained by the confluence of two consumer movements: premiumisation, transitioning from the everyday use of fragrances to a premium one just for special occasions, and inflationary pressure happening just when direct sellers were expanding their portfolio towards a masstige positioning, not suitable in terms of prices for the bottom-of-the-pyramid consumer.
Colour cosmetics also saw direct selling’s penetration shrink in 2022. Colour cosmetics grew as a category in 2022, driven by a return to pre-pandemic behaviours. However, the new sensitivity of consumers towards skin health led to a shift from mass to premium colour cosmetics to protect the skin. Most consumers felt comfortable without make-up during the pandemic, and many chose to use make-up for defined occasions, allowing a higher disbursement even in an inflationary context.
Future outlook: Omnichannel evolution and premiumisation
Direct selling must face its challenges, both on sales reps and on consumers’ needs, to boost its business. Understanding category evolution by channel will be key to uncover trends and channel specificities. The channel remains strong and with untapped potential, like the recent development of direct selling marketplaces like Novaventa in Colombia, displayed like a department store and with known brands like Neutrogena, Lubriderm, Maybelline, Vogue or Nivea.
The direct selling channel will remain relevant in Latin America, but premiumisation of some categories like fragrances and skin care (dermocosmetics), the emergence of e-commerce in some countries, the expansion of private label assortments by pharmacy operators, and increasingly unstable consumer behaviour are issues that must be addressed.