How Blockchain Technology Can Transform the Social Selling Economy

Centralization in the social selling industry means it is walled off by a few companies with too much power.

Social Selling and its Current Challenges

The social selling industry (what used to be called “direct selling”) began over a hundred years ago when brands started working with independent representatives (“sellers”) to sell their products door to door. Iconic images of door to door encyclopedia salesmen, vacuum salesmen, and carpet salesmen still persist in the cultural imagination. Yet, the social selling model has evolved dramatically over time. The recent rise of social media and the expansion of the gig economy have fostered explosive growth in recent years. Increasingly, online social tools are being used to find, research, and engage prospective customers with relationship building strategies. Today, the social selling industry is worth $180 billion globally and is growing at a rate of 10% per year.

Yet, the centralized nature of the social selling economy means that it is walled off by few companies that have too much power. A small number of giants dominate, like Amway, Avon, and Mary Kay. These merchants are middlemen in the relationship between brands and sellers and they control a majority of exchanges in the social selling economy today. As a result, these giants can often get away with overpriced products. They also have too much leverage and power in their relationship with sellers in a number of ways.

The centralization of information in the digital age has let merchants hold sellers captive by making it difficult, if not impossible, for them to transfer customer data, transaction data, and network data if they want to work with different brands or merchants. Sellers risk losing income and a customer base they worked hard to earn should they seek mobility in the industry. At the same time, the barriers to entry for new merchants are very high because fragmented and expensive technological systems are needed to manage many aspects of the social selling business, including commissions, reward systems, accounting, customer service, and back office operations limiting the number of new merchants. This leads to a lack of market entrants, which further reduces sellers’ options and allows large companies to continue to corner the growing industry.

Blockchain Solutions

Blockchain-based alternatives to the merchant monopoly model of social selling have great potential to disrupt the current power imbalances and open up the industry to the broader retail sector. The reason is that blockchain technology is decentralized and open source. These features can empower sellers to work with whichever merchants they wish because their customer data will not be centrally controlled. The open source aspect of blockchain technology lowers entry costs, allowing new merchants to enter the space.

There are a few blockchain-based social selling platforms have already begun to emerge. I recently came across a proof-of-concept social selling marketplace called BOUTIQUES, which was launched in July 2017. BOUTIQUES gives sellers the ability to choose brands and products they want to sell and invites brands from the broader retail economy to participate in the marketplace by integrating their catalogs into the platform. BOUTIQUES has attracted 3000 sellers and 8 brands generating 7-figure annualized merchandise sales within 9 months of launch. This rapid growth proves that retail brands want to participate in social selling and sellers desire freedom.

Another interesting project that is being developed by Gemstra is ASTRA, which is a broader solution aimed at opening up social selling to the general retail economy. ASTRA will be a blockchain-integrated platform serving as a technological infrastructure for social selling businesses. Unlike BOUTIQUES, Gemstra is planning to make the ASTRA software open source and create a software development kit for merchants and brands so they can easily deploy a social selling business on ASTRA. ASTRA’s blockchain technology also allows sellers to keep customer and network data they worked hard to generate. It also allows merchants to host transactions between multiple brands and sellers, while brands can offer customized commission and rewards as well as a portable catalog. In this sense, ASTRA creates a trustless ecosystem for all actors in the social selling economy.

Conclusion

Social selling has been with us for a long time and seems to be evolving along with the digital revolution. With the development of blockchain technology, the time is coming for social selling to be freed from its current constraints related to technological and data centralization. Companies like Gemstra are building novel blockchain infrastructures that unlock social selling for the benefit the broader retail economy and individual sellers by providing a framework for them to interact with retailers and brands in a more balanced and equitable ecosystem.


How Blockchain Technology Can Transform the Social Selling Economy was originally published in Data Driven Investor on Medium, where people are continuing the conversation by highlighting and responding to this story.