Chinese social media platform Xiaohongshu, known for its Instagram-like interface, is making waves in the country's bustling e-commerce market. By attracting attention and revenue from giants like Alibaba Group Holding and ByteDance's Douyin, Xiaohongshu aims to establish itself as a significant player in the industry.
Last Wednesday and Thursday, Xiaohongshu hosted a two-day summit in Hangzhou, China's e-commerce hub and Alibaba's hometown. The event, held to encourage online vendors, brands, and influencers to set up shop on its platform, was vibrant with activity despite the city's sweltering heat. Merchants showcased various products, from custom-designed sofas and clothing to snacks and soft drinks. Influencers were also present, seeking new collaboration opportunities.
Rapid growth and strategic relocation
In the past year, the number of merchants on Xiaohongshu with monthly sales exceeding 5 million yuan has tripled, while the number of purchasing users has increased by over fourfold. Yin Shi, head of Xiaohongshu's e-commerce unit, announced at the summit that the unit will move from Shanghai to Hangzhou, a city known for its influencer community.
Founded in 2013 by Stanford graduate Mao Wenchao and former Bertelsmann employee Qu Fang, Xiaohongshu started as a cross-border shopping guide and evolved into a lifestyle community where users share life hacks, travel tips, fashion ideas, and job opportunities. The platform's interface, similar to Douyin's, features a double-columned content feed that users can scroll through, making it easy to discover new live streams and short videos.
Influencers and a high-quality audience
Xiaohongshu's popularity among young Chinese women has made it a significant player in online shopping. Influencers such as Chinese actress Dong Jie, Hong Kong celebrity Teresa Cheung Xiaohui, and Taiwanese singer Annie Yi Nengjing have led the platform's live-streaming e-commerce efforts since last year.
“Xiaohongshu attracts users who seek a high-quality lifestyle, predominantly women, who are very loyal to the platform,” said Dean Yang, co-founder of the Hangzhou-based fragrance brand Emonster. Despite having fewer than 40,000 followers, several Emonster products have sold nearly 10,000 units each on Xiaohongshu. A top live-streamer's promotion can generate substantial sales, although such influencers often charge about 30% in commission.
Live-streaming boosts sales
Over the past year, the number of users making purchases through live streams on Xiaohongshu increased by over six times, with the average transaction value exceeding 500 yuan (US$69). Eno, a seller of artefacts aimed at younger consumers, switched from Douyin to Xiaohongshu after finding its users more sophisticated and less price-sensitive. On Xiaohongshu, her average product price is 4,000 yuan, significantly higher than on other platforms.
Although Xiaohongshu's e-commerce business is still in its early stages, the platform reported a net profit of US$500 million last year on revenue of US$3.7 billion, primarily from advertising. In contrast, e-commerce giant Alibaba had an income of 927.5 billion yuan in 2023.
Backed by significant investors like Alibaba and Tencent Holdings, Xiaohongshu's valuation peaked at US$20 billion in 2021 but dropped to around US$17 billion amid a broader decline in Chinese tech stock valuations. The company's plans for an initial public offering are still uncertain.
Despite being a minor player, Xiaohongshu has carved out a unique niche in the market. “Different platforms attract different user demographics,” said Zhou Qi, a fashion editor turned brand owner and live streamer, in an interview after the summit. “Only the right platform, combined with the right products, hosts, and users, can achieve harmony.”
