Direct selling is set to see a marked drop in value growth in 2020, after consistent y-o-y growth over the review period. There are a variety of factors underpinning this trend.
Direct selling representatives have relied on social media like WhatsApp and Facebook in Costa Rica for years, using them to demonstrate new products, solidify relationships with their customers (many of whom are already friends, family or colleagues) and strengthen their own status as a kind of small-scale influencer. This has also allowed consumers to click through from the app to make purchases and place orders with the distributor, a feature that helped offset the decline in face-to-face transactions brought about by the pandemic.
The collapse of the country’s tourist industry thanks to the pandemic has led to a sharp spike in unemployment in Costa Rica. The most heavily affected have been the lower income households with less formal incomes that are the largest part of the consumer base for direct selling, and as a result, household incomes have plummeted for many.
Direct selling sales are set to recover over the forecast period as soon as the economy is fully reopened and restrictions on consumer movement and socialisation are eased. In current terms, values are set to return to pre-pandemic levels by 2022; however, in real terms, sales are not anticipated to fully recover before the end of the forecast period.
Effective digital strategies are set to become more important for direct sellers over the forecast period over the next five years, with direct selling representatives coming to resemble digital influencers more closely than traditional direct selling reps. The popularity of influencers has expanded significantly in Costa Rica in recent years, and consumers may become more likely to shop from a rep who presents themselves publicly as an influencer more than from a rep who is more focused exclusively on discussing their company’s products.
Multi-level recruitment is expected to become easier for direct sellers over the next five years, partly because the country’s emergence from the economic impact will be slower than hoped, and the consumer base is likely to face rising austerity measures. However, a shift in the sales model is also a factor in this.
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This report originates from Passport, our Direct Selling research and analysis database.
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