Retail Spotlight: packaging plays a key role in direct selling in emerging markets

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Euromonitor International: packaging key to direct selling

Euromonitor International: packaging key to direct selling

In the fourth Retail Times and Euromonitor International Retail Spotlight, we focus on the relevance of packaging in direct selling FMCG products in emerging markets

Despite the rapid development of modern store-based retailing, direct selling remains an important distribution channel in emerging markets. Asia Pacific and Latin America account for 67% of the global direct selling value sales of FMCG products (US$89.1bn in 2011). The channel reaches many consumers where store-based retailing remains limited, while selling at group events is embraced socially in Latin America, boosting its popularity. It may not be obvious, but packaging serves several purposes in marketing products through direct selling. 

Showcasing quality

Beauty and personal care represents the largest FMCG industry for direct selling in 2011, with a combined US$30bn sales value for Asia Pacific and Latin America. However, the real value of these products often needs explaining to consumers. Direct selling companies keep marketing activities and costs to a minimum; therefore packaging becomes an essential tool for conveying a product’s higher quality.

In Asia Pacific, direct selling largely benefits bath, shower and hair care HDPE bottles below 200ml and squeezable plastic tubes. For example, Avon Naturals’ range of body wash/shower gels are packaged in 150ml HDPE bottles. Contrast this with the traditional flexible plastic sachets used to demonstrate affordability in India, Indonesia and the Philippines. The higher cost per unit of the rigid plastic containers justifies any substantial product margins.

In colour cosmetics and skincare, high-end positioning and differentiation from mainstream retail products are sometimes achieved through using secondary folding cartons like those used by Mary Kay for its Botanical Effects skin care range. Functional closure types such as spray and lotion closures and various applicators also help showcase a product’s unique applicability, especially when demonstrating to a consumer. The pack type can even sometimes set the product apart from others available in store. One of the leading direct selling companies in Asia, Perfect (China), offers its Essential Beauty skin moisturiser kit in a folding carton with an inner plastic tray and 10 single-serve glass vials of 1ml each.

Showcasing quality takes a deeper meaning if one considers drinking water. In many areas where drinking water safety, retailing facilities and logistics remain real issues, the direct selling of bottled still water allows brand owners such as Nestlé SA to reach consumers. In this case, large water cooler bottles become an ideal option for providing maximum volume and value for money to often price-sensitive consumers and boast some of the best forecast growth prospects to 2016. Examples include the 10-litre PET bottles and 20-litre polycarbonate bottles in Mexico. 

Importance of direct selling to continue in long term

The face of direct selling is changing globally, with internet advertising and sales ever more important options to brand owners. This means packaging may become more challenging to use as a marketing tool. Yet with forecast value sales of 3% and 6% CAGR respectively for FMCG direct selling value sales to 2016, Asia Pacific and Latin America hold the best prospects for unit gains of packaging within the distribution channel. They are characterised by low internet value sales, a fast growing consumer base and income levels. Together these factors are boosting demand for food and beverages as well as home and personal care products.