Favo is a community group buying platform focused on micro-locations that enables participants to make purchases through social media. The startup aims to change the way Latin Americans shop for consumer goods and simplify logistics and delivery services. The company was founded in Peru and expanded to Brazil — servicing 3,000 partners in the two countries.
By registering as a seller on Favo’s platform, partners or community leaders have access to a personalised online store that offers a product catalogue comprising 2,000 retail items. The community leader is central to the success of the model and responsible for promoting their site, receiving the goods, and fulfilling last-mile delivery services or providing a pick-up point for goods. Community leaders set up a WhatsApp group or Facebook page, and share links with their network.
Community leaders could be stay-at-home moms or local neighbourhood stores, who act as influencers and community marketers and earn a commission. Community leaders could earn between 500 Peruvian Sol ($135) and 1,000 Sol ($270), depending on their sales.
Currently, Favo operates in São Paulo and Lima but plans to expand its operations in 2021 to other cities in Mexico and Colombia. The company was founded by Alejandro Ponce and Marina Proença and received a BRL 35 million ($6.3 million) investment from Global Founders Capital and Raise Equity to drive expansion.
Community platforms have been very successful in China, and research by eMarketer/Insider Intelligence indicates that sales for his business model could reach $363 billion in 2021 in China, an increase of 36% over the previous year. Sales on social commerce platforms account for 13% of total ecommerce sales in the country.
China’s social ecommerce platforms remain mostly unknown outside of the country, but the models have had a big impact on China’s ecommerce sector — lowering the acquisition cost for tech companies and bringing affordable goods to Chinese consumers — especially in lower-tier cities.
Pinduoduo is the third-largest ecommerce player in China behind Alibaba and JD.com, and is growing faster than its major rivals. Average monthly active users rose to 643 million in 2020, according to Bloomberg. Shihuituan is another Chinese company that is tapping into the success of social ecommerce or group buying. Like Pinduoduo, Shihuituan sells consumer goods such as fresh fruits, vegetables, and packaged goods — targeting lower-tier Chinese cities with less competition.