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Why direct-to-consumer brands are turning their customers into salespeople
Brands are trying to harness the power of the personal recommendation by turning their customers into sellers.
Towards the end of last year, Deven Machette decided to make some big life changes. She left her role as a digital marketer, and set up her own agency, All Thorns, Co. She also decided to try her hand at affiliate marketing.
Machette – who has over 6,600 followers on Twitter and 5,200 on Instagram – says she earns anywhere from $250 to $300 per month by posting her affiliate link on her accounts. “It’s not like it gives me wild security outside of what I’m doing [for work], but it does give me spending money for things that I maybe wouldn’t necessarily buy,” she explains. “It covers groceries for the month, which is a helpful bump.”
House of Wise – which announced a $2 million seed round earlier this month – is not the only brand that’s trying to get customers to sell its products for them. Others – such as Snif and Rae Wellness – take a softer approach, sometimes sending samples out to customers in the hopes they will gift them to friends and family, leading to further sales. Refer-a-friend programs are used by the likes of Everlane, Outdoor Voices and home gym brand Tonal.
Glossier’s representative program, which launched in 2016, sets customers-turned-sellers up with their own shopfronts, where they earn commissions on products sold through their pages. Some of its ambassadors have gone on to build even closer relationships with the brand. In 2018, Glossier rep Devin McGhee set up Glossier Brown, an Instagram account that posts photos of people of color wearing the brand’s products. In November 2020, she was awarded a Glossier Grant for her own adaptogenic beauty brand and education platform, Deon Libra.
Why do brands want to turn customers into sellers?
Funneling money into Facebook and Instagram ads is becoming less appealing for brands. Not only are costs going up, but efficacy may be diminishing, too. According to Kantar Media, 54% of people say ads based on past online activity feel intrusive, while an April update to Apple’s mobile operating system, that allows users to stop ads from tracking them, makes it even more difficult for brands to pull this maneuver.
Personal recommendations, on the other hand, are one of the most compelling ways to get someone to hand their money over for a product. The Kantar survey found that 93% of people trust shopping intel when it comes from friends and family. In 2014, a study commissioned by the Word of Mouth Marketing Association put the yearly value of word-of-mouth recommendations at $6 trillion of global sales.
“When I think about DTC companies that are raising VC dollars, they are funneling a huge majority of that money back to Facebook and Google,” says House of Wise’s founder, Amanda Goetz. “We’re at this inflection point of e-commerce where I truly believe people are the distribution channel. We are turning to humans over brick-and-mortar and paid ads.”
Finding the right sellers can be a time consuming process, as Fohm, which sells a dispenser that turns regular toilet paper into flushable wipes, is currently experiencing. Shopify plugins such as Carro, which alert brands when someone with a substantial social following has purchased a product, are trying to streamline this process.
“If the product happens to be a natural fit with what we’re offering and what their audience is looking to them for, it becomes a very compelling value proposition,” cofounder Jerry Staub explains, adding that Fohm currently works with two micro-influencers in the IBS and Crohn’s disease communities. “But it’s very time consuming. You have to find partners with a true following, instead of [someone] who has a bunch of bot followers and who’ll shill any product for a flat fee.”
Reinventing affiliate marketing
Another tricky thing for brands to navigate is the negative reputation surrounding some forms of affiliate selling, such as multi-level marketing (MLM), where sellers are encouraged to recruit others and make money from the sales occurring further down the chain.
MLMs are notorious for promising participants they can build businesses and earn a healthy living, when the reality is that most people make nothing, or even lose money. According to an FTC analysis, this outcome is the case for 99% of people who join an MLM.
The direct-to-consumer brands covered in this article do not use this model – their sellers aren’t expected to recruit other members, and they don’t require sellers to purchase products to sell upfront, therefore reducing the risk involved.
Some brands do ask for buy-in, however. Beautycounter asks its sellers to pay a $50 annual membership fee, plus $50 for a digital enrollment kit when they sign up. In an August 2020 interview with Courier, Gabi Lewis, the cofounder of protein cereal brand Magic Spoon, said that half of the first million dollars in financing the company raised was from influencers. “We brought onboard people with 100,000 to maybe 500,000 followers in the health and wellness world, and they invested various amounts,” he said. “We give them revenue share on what they promote as well. So there’s a double incentive – if they post about us and sell $50,000 worth of cereal, they'll get a nice chunk of that, but they also own a piece of the company, so they're going to see it again in the future if we sell the business.”
Goetz is clear that House of Wise’s ambassadors are free to sell as much or as little product as they like, and that they do not have to make any purchases in order to keep their affiliate link working. “There’s no upfront cost. Obviously we want you to experience the product, and we give discounts to our Wise Women so they can, but after that they can just order what they want,” she explains. “That’s the biggest difference – [and] there’s no recruiting. MLMs make money off the consultants, not the end consumer.”
In a November 2020 blog post outlining its affiliate program, House of Wise spells out the difference between affiliate sales and MLM, and also explains the problems that people can get into with MLM schemes. “We have to continue to remove the stigma around affiliate marketing, because there have been so many bad players in the space that – rightfully – it has bad connotations,” Goetz says.
Will more customers become sellers?
The rise of brands turning to their consumers to sell products is indicative of the economic times in which we live. While cash-rich startups are pouring as much as 50% of their funding dollars into Facebook and Google ads, many of their potential consumers are dealing with their own precarious financial situations.
In 2019, a report by New America found that millennial wages in 2016 were 41% less than those who were at a similar age in 1989. On average, millennials currently earned 20% less in 2019 than boomers did at the same stage in their lives. This lack of wage parity is thought to be the knock-on effect of graduating during a global recession, where there were fewer jobs and lower wages. The pandemic hasn’t helped: income inequality has intensified, and unemployment has risen.
As a large swath of young workers reconsider their careers and sources of income, selling for brands may become an appealing source of cash on the side.
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