Why We Invested in Elenas: The Great Social Commerce Opportunity

Selling products door to door with a catalog in hand is a very common business and practice in Latin America (“LatAm”). This industry, direct catalog sales, has been a dominant retail channel for many years in the region, helping millions of people have an additional source of income and helping brands gain mass distribution. However, there is no denying that the aforementioned traditional business model is antiquated and inefficient. Elenas, one of the region´s leading social commerce platforms, was created to disrupt and innovate the way direct selling is carried out while empowering thousands — and hopefully millions — of women and men to become digital micro-entrepreneurs.

Elenas was launched by Zach Oschin in 2019. Zach´s research into the inefficient and antiquated direct-sales business model that is so prominent in LatAm, combined with the fact that internet usage trends and e-commerce penetration have been skyrocketing in LatAm for the last few years, convinced him to venture into the social commerce space.

When we first spoke with Zach, we were astonished by some of the data he showed us:

• There are over 11 million women in LatAm selling products door-to-door through the traditional direct catalog sales channel, each month[1]
• The social commerce opportunity globally is expected to grow exponentially in the coming years. It has been growing at a CAGR of 26% and is projected to reach US$1.2 Trillion by 2025[2]
• Mexico and Colombia are the second and third biggest countries of LatAm in terms of direct retail sales. Mexico represents a 24.5% share of the direct retail sales in LatAm, while Colombia represents 9.3%[3]
• Today, social commerce represents 10% of the total e-commerce sales, but it is expected to represent up to 17.1% of the total e-commerce sales by 2025[4]
• Social commerce penetration in China is 46%, while in Mexico it is 21%. This goes to show that there is still an immense opportunity for Mexico and other developing countries in LatAm to grow their social commerce sales[5]
• According to a survey carried out by WTC, what would make shoppers use social commerce more are deals and discounts (37%), ease of purchase (31%), exclusive offers (27%), greater product availability (20%), and service and delivery updates (17%). All of the above are things that social commerce, and Elenas in particular, are leveraging through data analytics and a digital DNA to drive up sales and average order values[6]
• In 2020, 53% of respondents used WhatsApp during their purchasing process, which is Elenas Sellers´ main channel of sales8[7]

After a deep dive intothe direct sales market and realizing just how inefficient and risky the traditional business model is, we were convinced that leveraging social media platforms to promote and sell products can have an enormous impact on the direct sales business model. We developed a high conviction in social commerce´s ability to bring online shopping to a massive, underserved segment that has historically faced high barriers to entry. Furthermore, data indicates that social commerce is the fastest growing e-commerce format in the world, with emerging markets leading the way.

We did some research and spoke with many other companies venturing into the social commerce space, but after weeks of diligent calls and analyses, we were convinced that the model Zach and his team are building is the right one to capture the emerging social commerce opportunity in LatAm. Elenas, which has the technology and a product focus in its DNA, has already created an asset-light marketplace model which has proven to have a great fit in the Mexican and Colombian markets, offering providers and Sellers several key advantages.

First off, through the Company´s platform, suppliers have access to tens of thousands of Sellers who can act as their sales agents. Similarly, through the Company´s B2B2C marketplace, Sellers have access to over 100,000 products at wholesale prices, enabling them to create their own digital catalogs and sell them via digital channels (WhatsApp, Instagram, Facebook, etc.), and removing the need for them to take on inventory risk and delivery operations. In other words, Sellers do not have to buy any products until they have sold the products in their digital catalogs to their clients. This has enabled Elenas to have a rapid market expansion, an asset-light business model, and profitable gross margins since its launch.

The Company has also created an innovative distribution model which integrates with 3rd party logistics providers that pick up the products directly from suppliers´ warehouses to deliver them to the end customers. This distribution model has also allowed Elenas to scale efficiently without the need to invest heavily on CAPEX. Furthermore, it takes care of payment recollection and offers end customers different payment methods that meet their needs, expanding its serviceable and obtainable market size. Utilizing this distribution model, Elenas has profitably delivered orders to over 1 million end consumers living in over 1,000 cities and towns across Colombia and Mexico.

Through its digitized marketplace model, the platform reaps the benefits of acquiring data on suppliers´ products, Sellers´ needs, and end customers´ preferences to better serve them in the future, increasing satisfaction and promoting retention. With all the data it gathers, Elenas can provide actionable insights that result in effective product pricing, efficient customer acquisition strategies, transparency, and trust-based purchasing.

Moreover, Elenas is a high-impact company, empowering entrepreneurship for millions of women and men who currently employ the traditional direct-sales business model in the region and giving them the opportunity to have an additional source of income without having to worry about operational hassles.

We are delighted to have led the Elenas Series B! We have table-pounding conviction in Zach and his extraordinary team, who have already disrupted the direct sales business model in Mexico and Colombia and will continue to do so as they expand into other countries within the LatAm region.

Let´s Keep Rising!

[1] https://polymathv.com/library/articles/the-rise-of-social-commerce-in-latin-america

[2] https://www.accenture.com/us-en/insights/software-platforms/why-shopping-set-social-revolution

[3] Ibid.

[4] Euromonitor

[5] https://www.statista.com/statistics/1252481/social-buyers-worldwide-countries/

[6] WTC- The Future Shopper Report

[7] https://www.accenture.com/us-en/insights/software-platforms/why-shopping-set-social-revolution