Direct seller Nu Skin turns to “social commerce”
Nu Skin Enterprises Inc. (NYSE: NUS), the beauty and wellness company with 2021 revenue of $2.7 billion, has embarked on a journey to evolve from a direct selling to what its top executive recently described as a “social commerce business.”
During its “Investor Day” presentation in February, the Provo, Utah-based company announced “Nu Vision 2025.”
In a letter to shareholders regarding its 2021 results, Nu Skin President and CEO Ryan Napierski described Nu Vision 2025 as “our transformational roadmap to becoming the world’s first integrated beauty and wellness company. world, powered by our dynamic platform of affiliate opportunities”.
Nu Skin has set a goal to grow its “affiliate-powered social commerce” business to account for half of its global operations by 2025. Nu Skin distributes products in approximately 50 markets across the world, and its largest markets are in the United States (20% of 2021 revenue) and mainland China (21%).
Nu Skin’s three main brands are its Nu Skin beauty brand, its Pharmanex wellness brand and its ageLOC anti-aging brand.
“Obviously, over time, with the emergence of social media in the early 2000s, the way people communicate evolved,” Napierski said at a June 9 conference hosted by Stifel, a company wealth management and investment banking.
Nu Skin’s distributor network has reflected this development.
“We started seeing our independent distributors back then start using social media to promote our products,” said Napierski, who has worked at Nu Skin for 27 years, mostly outside of the United States. “They’ve changed their business model from buying products from wholesale and reselling those products to drive customers to the company’s website and having to transact directly, which we call direct-to-customer digital.
Nu Skin began observing the transition in 2015 and 2016, according to Napierski.
“At that point, we realized that the whole model was going to change that direction,” he told the Stifel Cross Sector Insight conference. “Fortunately, it’s always good to be where your customers are, and the reality is that traditional advertising, traditional television, has evolved and now social media – or what’s now called social commerce – is emerging. as the predominant form of commerce.”
Nu Skin’s transformational approach includes a beauty and wellness strategy to deliver smart IoT (Internet of Things) devices, leveraging technologies such as artificial intelligence to better understand its customers, according to shareholder letter of 2021 from Napierski. The company plans to introduce IoT devices in the third quarter.
To further help achieve Nu Vision 2025, the company will continue to leverage its “person-to-person marketing model by supercharging it with the power, scale and reach of social media to increase brand awareness and engagement. brand through our authentic global affiliate channel,” Napierski wrote in the shareholder letter.
Nu Skin’s network of “micro- and nano-influencers” shares its “products with consumers seeking genuine product recommendations from people they trust,” he added.
Nu Skin will also invest in technologies and capabilities to help scale its business, including its integrated product and social commerce strategies, Napierski wrote.
The company is investing $500 million in technology, he told the Stifel conference. Nu Skin, for example, has invested in a platform called Mavely to help its affiliates grow their social enterprises more effectively.
Nu Skin’s markets are in different places with respect to business model transition.
“Our business in Asia has always been very successful with this legacy model, the direct selling model, whereas our Western markets over the last 20 years have really struggled with this model,” Napierski said.
The latter markets were quicker than Asian companies to adopt the new model, Napierski explained. He referred to a “younger demographic” in Western markets who have joined Nu Skin and “are naturally inclined to share products on social media”.
That’s not to say Asia isn’t very promising in the long run: Social media adoption in Asia is higher than in the West, Napierski noted. He said the training would be important to help support the new business model in Asia.
But the pandemic has made it difficult to train the sales force in places like China, Korea and Southeast Asia, he said.
“We can do limited things via digital zoom and [Microsoft] Teams, but that’s not the same as having them in conferences,” Napierski said. “Our optimism comes as we see the rest of the world pull out of Covid.”
Nu Skin executives suggested that transitioning to a social commerce business would give it stronger relationships with its end-user customers.
“In our current model, if that affiliate chooses to stop selling Nu Skin for any reason, nine times out of 10 that customer is lost because they were the channel,” said Mark Lawrence, chief financial officer of Nu Skin, during the Stifel conference.
He described the new business model as being more “triangulated” than the current “linear” transaction involving Nu Skin, its subsidiary and the end customer.
“The affiliate has the ability to inform a customer’s purchase, but now the company has the ability to effectively monitor the whole equation,” Lawrence said.
In the first quarter of 2022, Nu Skin had 1.3 million customers, approximately 250,000 “Paid Affiliates” and more than 50,000 “Sales Leaders”. In the three months ended March 31, 2022, Nu Skin reported EPS (earnings per share) of 76 cents and revenue of $604.9 million. That compares to EPS of 91 cents and revenue of $677 million in the prior year period.
In a May 4 earnings release, Napierski said results beat expectations despite pandemic-related hurdles and increased global uncertainty. Nu Skin forecasts revenues of $2.51 billion to $2.62 billion for 2022.