June 24, 2022
Nu Skin Enterprises Inc. (NYSE: NUS), the beauty and wellness company with $2.7 billion in 2021 revenue, has embarked on a journey to evolve from a direct selling firm to what its top executive described recently as a “social commerce company.”
During its “investor day” presentation in February, the Provo, Utah-based company announced “Nu Vision 2025.”
In a letter to shareholders regarding its 2021 results, Nu Skin President and CEO Ryan Napierski described Nu Vision 2025 as “our transformational roadmap to becoming the world’s leading integrated beauty and wellness company powered by our dynamic affiliate opportunity platform.”
Nu Skin has set a goal of increasing its “affiliate-powered social commerce” business to comprise half of its global operations by 2025. Nu Skin distributes products in around 50 markets around the world, and its largest markets are in the U.S. (20% of 2021 revenue) and mainland China (21%).
Nu Skin’s three primary brands include its beauty products brand Nu Skin, its wellness products brand Pharmanex and its anti-aging brand ageLOC.
“Clearly, over the course of time, with social media emerging in the early 2000s, the way people communicate has evolved,” Napierski said during a June 9 conference hosted by Stifel, a wealth management and investment banking firm.
Nu Skin’s network of distributors reflected that evolution.
“We began to see our independent distributors at the time begin to use social media to promote our products,” shared Napierski, who’s been with Nu Skin 27 years, most of that time outside the U.S. “They shifted their business model from purchasing products at wholesale and reselling those products to referring customers to the company’s website, and needing to transact directly—what we call digital direct-to-customer.”
Nu Skin began to observe the transition in 2015 and 2016, according to Napierski.
“At that point, we realized that the whole model was going to shift that direction,” he said during the Stifel Cross Sector Insight Conference. “Fortunately, it’s always good to be where your customers are, and the reality is traditional advertising, traditional television, has evolved and now social media—or what’s now being called social commerce—is emerging as the preeminent form of commerce.”
Nu Skin’s transformational approach includes a beauty and wellness strategy to provide smart IoT (Internet of Things) devices, leveraging such technologies as artificial intelligence to gain better insights into its customers, according to Napierski’s letter to shareholders. The company plans to introduce IoT devices in the third quarter.
To further help meet Nu Vision 2025, the company will continue to leverage its “person-to-person marketing model as we supercharge it with the power, scale and reach of social media to grow brand awareness and engagement through our authentic global affiliate channel,” Napierski wrote.
Nu Skin’s network of “micro- and nano-influencers” share its “products with consumers seeking authentic product recommendations from people they trust,” he added.
Nu Skin also will invest in technologies and capabilities to help scale its business, including its integrated product and social commerce strategies, Napierski wrote.
The company is investing $500 million in technology, Nu Skin Chief Financial Officer Mark Lawrence said during the Stifel conference. Nu Skin, for example, has invested in a platform called Mavely to help its affiliates more effectively build their social businesses.
Nu Skin’s markets are in different places as far as the business-model transition is concerned.
“Our Asia business historically has been very successful with that legacy model, direct sales model, whereas our Western markets in the last 20 years really struggled with that model,” Napierski said.
The latter markets have been quicker than the business in Asia to adopt the new model, Napierski shared. He referenced “younger demographics” in Western markets who have joined Nu Skin and “are naturally inclined to share products on social media.”
That’s not to say Asia doesn’t hold much promise over the long term: Adoption of social media in Asia is higher than in the West, Napierski noted. He said training would be important to helping support the new business model in Asia.
But due to the pandemic, it’s been difficult to train the sales force in such places as China, Korea and Southeast Asia, he shared.
“We can do limited things via digital Zoom and [Microsoft] Teams, but it’s not the same as bringing them into conferences,” Napierski said. “Our optimism comes as we see the rest of the world kind of pulling out of Covid.”
Nu Skin executives suggested the transition to a social commerce company would give it stronger relationships with its end-user customers.
“In our model today, if that affiliate chooses to stop selling Nu Skin for whatever reason, nine times out of 10, that customer is lost because they were the conduit,” Lawrence, Nu Skin's CFO, said during the Stifel conference.
He described the new business model as more “triangulated” rather than the present “linear” transaction involving Nu Skin, its affiliate and the end customer.
“The affiliate does have the ability to inform a customer’s purchase, but the company now has the ability to effectively monitor the whole equation,” Lawrence said.
As of the first quarter of 2022, Nu Skin had 1.3 million customers, around 250,000 “paid affiliates,” and over 50,000 “sales leaders.” In the three months that ended March 31, 2022, Nu Skin reported EPS (earnings per share) of 76 cents and revenue of $604.9 million. That compared to EPS of 91 cents and revenue of $677 million in the prior-year period.
In a May 4 earnings release, Napierski said the results topped guidance in spite of obstacles related to the pandemic and increased global uncertainty. Nu Skin is forecasting 2022 revenue of $2.51 to $2.62 billion.
"We produce a lot of cash as a company, and we have the wherewithal to invest for the future," Lawrence said during the Stifel conference.
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