A startup focused on the community group buying concept (an e-commerce model based on micro-locations, in which entrepreneurial partners make purchases through social networks). That’s Favo, a one-year startup headquartered in Brazil and Peru. The platform is already a source of income for more than 3,000 partners, citizens becoming entrepreneurs through digitization. Favo has delivered over 170,000 parcels for them.
The startup goal is to promote a change in the way Latin American families shop, especially in grocery stores and supermarkets, and simplify the supply chain process. Through its platform, Favo connects community-leading entrepreneurs to end consumers.
By registering as a seller on Favo’s platform, partners have access to a personalized online store that offers the entire Favo’s product catalog, which today consists of more than 2,000 retail items at reduced prices. It is up to each partner to promote their online store and sell to their community – the most common way is through social networks like WhatsApp or Facebook.
Imagine community leaders sharing their online stores’ links to their neighbors; these communities adhere and start shopping through the platform (there is no minimum order nor delivery fees). In the end, for each sale, the virtual store’s “owner” receives a commission.
“Favo was born to transform groceries’ shopping into an easier and cheaper task. And this only succeeds through a neighborhood partnership, in which the neighbors unite to buy and generate income for those in need. It is a possibility for anyone, no matter their training or economic class, to have an activity and remuneration,” explains Marina Proença, Favo’s co-founder.
Born in Peru in 2019, Favo landed in Brazil in February 2020, weeks before the COVID-19 pandemic profoundly transformed the economy and social and work relations. The unemployment increase plus average income reduction in thousands of Brazilian homes boosted Favo’s target audience: those who cannot have their own business, but have good networking and need a source of income.
Currently, Favo operates in the cities of São Paulo and Lima, the capital of Peru, but plans to expand its operations in 2021 to other cities, in addition to Mexico and Colombia, driven by the BRL 35 million round received from venture capital funds such as Global Founders Capital and Raise Equity.
The startup does not disclose its revenue, but says it reached a 30% growth month by month and, with the funding round, plans a tenfold increasing revenue.
Favo’s surfs a trend: how social commerce crossed Chinese borders and became popular in LatAm
Social commerce, Favo’s business model, was born in China and seeks to strengthen e-commerce through the networks of people who live in the same region (city, neighborhood, condos).
Research by eMarketer/Insider Intelligence shows that sales made in this business model could reach $ 363 billion in 2021 in China, an increase of 35.5% over the previous year. Sales on social commerce platforms will account for 13% of total e-commerce sales in the country.
The rapid development of the telecommunication infrastructure and consequent popularization of smartphones in China has introduced millions of people from rural communities to e-commerce. These communities were crucial to leverage the Chinese social commerce platform Pinduoduo, which was the fastest-growing e-commerce site of all time. According to the eMarketer report, the platform reached a revenue of $251.76 billion, just five years after it started.
The model is becoming popular in other countries. Social commerce is estimated to move $36 billion in 2021 in the United States, equivalent to 4.3% of American e-commerce.