Chinese social media platform Xiaohongshu, the Instagram-style app where young consumers to share lifestyle tips, is seeking to become a new force in the country’s crowded e-commerce market by grabbing attention and revenue from established players such as Alibaba Group Holding and ByteDance’s short-video app Douyin.
Xiaohongshu, the platform also known as Red with 300 million monthly active users, held a two-day summit last Wednesday and Thursday in China’s e-commerce hub Hangzhou, the home city of Alibaba, to woo online vendors, brands and influencers to open shops on its platform. Alibaba owns the South China Morning Post.
Bearing the city’s scorching heat, the venue was bustling with merchants showcasing everything from durable goods such as custom-designed sofas, clothing, and home appliances to consumables such as snacks and soft drinks. Influencers also flocked to the event, seeking opportunities for collaboration.
“In the past year, the number of merchants with monthly sales exceeding 5 million yuan on Xiaohongshu has increased by 3.5 times, and the number of purchasing users has grown by 4.3 times,” Yin Shi, head of Xiaohongshu’s e-commerce unit, said at the summit. As part of the effort, Xiaohongshu will relocate its e-commerce unit to Hangzhou, the capital Zhejiang province known as a base for influencers, from its head office in Shanghai.
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The popularity of Xiaohongshu among young female Chinese consumers could make it a powerful player in China’s online shopping industry. Founded in 2013 by Stanford University graduate Mao Wenchao and Qu Fang, a former employee of German media conglomerate Bertelsmann, Xiaohongshu got its start as a cross-border shopping guide with a single PDF document. It gradually evolved into an online community where users find life hacks, travel tips, fashion inspiration and even job opportunities. Xiaohongshu’s home page is a double-columned tapestry of content for users to scroll through, and anyone who clicks into a live stream or short video can quickly scroll up and down to find new content, similar to Douyin, the Chinese version of TikTok.
As its fortunes have risen, the social media platform has been trying to convert user attention into revenue using its brand of “lifestyle e-commerce”. Since last year, influencers such as Chinese actress Dong Jie, Hong Kong celebrity Teresa Cheung Xiaohui, and Taiwanese singer Annie Yi Nengjing have been leading the charge in live-streaming e-commerce.
“Xiaohongshu has many users who pursue a high-quality life, predominantly women, who are very loyal to the platform,” said Dean Yang, co-founder of Hangzhou-based fragrance brand Emonster. “These users are exactly our target audience.”
Despite having fewer than 40,000 followers on Xiaohongshu, several Emonster products have sold nearly 10,000 units each. A promotion from a top live-streamer can generate hundreds of thousands of yuan in gross merchandise value – although top live-streamers often charge a commission of about 30 per cent.
According to Xiaohongshu, the number of users making purchases via live streams grew 6.3 times over the past year, with the average transaction value staying above 500 yuan (US$69). Eno, who sells artefacts targeting a younger audience, tried Douyin, but quit after realising that users are not being targeted. Xiaohongshu consumers proved more sophisticated and less price sensitive. She said the average price on Xiaohongshu is 4,000 yuan, five times that of other platforms.
Xiaohongshu’s e-commerce business is still in its infancy. The company made a net profit of US$500 million last year on revenue of US$3.7 billion, mainly from advertising, according to a Financial Times report in March. By comparison, e-commerce giant Alibaba reported 927.5 billion yuan in revenue in 2023.
Backed by heavyweight investors such as Alibaba and Tencent Holdings, the platform’s valuation peaked at US$20 billion in 2021. Its private market valuation has since dropped to about US$17 billion amid an overall downturn in China tech stock valuations. The platform’s initial public offering plans remain in the air.
Xiaohongshu is still a relatively small player in the market, but it has carved out a unique spot for itself.
“Different platforms attract different user demographics,” Zhou Qi, a fashion-editor-turned-brand-owner and live-streamer, said in an interview after the summit. “Only the right platform, combined with the right products, hosts, and users, can achieve harmony.”
