Chinese social media platform Xiaohongshu, known for its Instagram-like interface, is making a significant impact in China’s e-commerce market. It is attracting attention and revenue from major players like Alibaba Group and ByteDance’s Douyin. Xiaohongshu is positioning itself as an influential force in the industry.
Last Wednesday and Thursday, Xiaohongshu hosted a two-day summit in Hangzhou, known as China’s e-commerce hub and the hometown of Alibaba. The event encouraged online vendors, brands, and influencers to join the platform. Despite the sweltering heat, the summit was bustling with activity. Merchants displayed a variety of products, from custom-designed sofas and clothing to snacks and soft drinks. Influencers were also present, looking for new collaboration opportunities.
| Metric | Recent Growth |
|---|---|
| Merchants with >5M Yuan Sales | Tripled in the past year |
| Purchasing Users | Increased by over four times |
| Live Stream Purchase Growth | Increased by over six times |
| Average Transaction Value | Exceeds 500 Yuan (US$69) |
Xiaohongshu has seen rapid growth over the past year. The number of merchants with monthly sales exceeding 5 million yuan has tripled, and the number of purchasing users has grown more than fourfold. Yin Shi, head of Xiaohongshu’s e-commerce unit, announced at the summit that the unit would move from Shanghai to Hangzhou, known for its influencer community.
Founded in 2013 by Stanford graduate Mao Wenchao and former Bertelsmann employee Qu Fang, Xiaohongshu began as a cross-border shopping guide and evolved into a lifestyle community. 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, making it easy for users to discover new live streams and short videos.
Xiaohongshu has become popular among young Chinese women, making it a significant player in online shopping. Influencers like Chinese actress Dong Jie, Hong Kong celebrity Teresa Cheung Xiaohui, and Taiwanese singer Annie Yi Nengjing have been leading 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. Even with 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.
In 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.
Xiaohongshu’s e-commerce business is still in its early stages, but the platform reported a net profit of US$500 million last year on revenue of US$3.7 billion, primarily from advertising. In comparison, e-commerce giant Alibaba reported an income of 927.5 billion yuan in 2023.
Backed by major 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 remain uncertain.
Featured Image courtesy of China Travel News
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