Chinese social media platform Xiaohongshu, often referred to as "Little Red Book", is aiming to become a significant player in the country's bustling e-commerce market. The Instagram-style app, popular among young consumers for sharing lifestyle tips, is looking to steal attention and revenue from established players like Alibaba Group Holding and ByteDance's short-video app Douyin.
With 300 million monthly active users, Xiaohongshu recently hosted a two-day summit in Hangzhou, Alibaba's home city and a hub for Chinese e-commerce. The event aimed to attract online vendors, brands, and influencers to open shops on the platform.
The summit was abuzz with merchants showcasing a wide array of goods, from custom-designed sofas, clothing, and home appliances to snacks and 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," said Yin Shi, head of Xiaohongshu's e-commerce unit, at the summit. As part of its expansion, Xiaohongshu will relocate its e-commerce unit to Hangzhou, a city known for its large influencer base, from its Shanghai headquarters.
Xiaohongshu's popularity among young female Chinese consumers could make it a powerful player in the country's online shopping landscape. Founded in 2013 by Stanford University graduate Mao Wenchao and Qu Fang, a former employee of German media conglomerate Bertelsmann, Xiaohongshu began as a cross-border shopping guide. It gradually transformed into an online community where users find life hacks, travel tips, fashion inspiration, and even job opportunities. Xiaohongshu's homepage resembles a double-columned tapestry of content that users can scroll through. Like Douyin, the Chinese version of TikTok, anyone clicking into a live stream or short video can quickly scroll up and down to find new content.
In recent years, Xiaohongshu has focused on converting user attention into revenue through its "lifestyle e-commerce" approach. Since last year, influencers such as Chinese actress Dong Jie, Hong Kong celebrity Teresa Cheung Xiaohui, and Taiwanese singer Annie Yi Nengjing have led the charge in live-streaming e-commerce on the platform.
"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 were not the right target. Xiaohongshu consumers proved to be more sophisticated and less price-sensitive. She noted that the average price on Xiaohongshu is 4,000 yuan, five times that of other platforms.
Xiaohongshu's e-commerce business is still in its early stages. 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 uncertain.
Although Xiaohongshu is still a relatively small player in the market, it has carved out a unique niche for itself.
"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."
It remains to be seen whether Xiaohongshu can successfully scale its e-commerce business and compete with the giants of the Chinese online shopping industry. However, its unique positioning and growing popularity among a valuable demographic suggest that it has the potential to become a significant force in the market.