By Casey Hall
SHANGHAI (Reuters) – Tera Feng has amassed a following of over 500,000 people since she started sharing her glamorous Shanghai lifestyle, featuring art gallery visits and fashion events, on Chinese social media eight years ago.
While this number may seem small compared to China’s vast consumer market, Feng and the brands she collaborates with have noticed that her audience – predominantly financially independent urban Chinese women – are willing to make purchases.
In the past three months, Feng has transitioned to selling products through live streaming on the social media platform Xiaohongshu. She has successfully sold items ranging from a 15,000 yuan ($2,060) Carven suit to a 60 yuan 1 kg bag of rice, showcasing the platform’s diverse market.
Often likened to Instagram, Xiaohongshu has recently emerged as a crucial marketing tool in China. Despite previous unsuccessful attempts at e-commerce, the platform is now witnessing notable sales growth, especially for brands offering niche and high-end products.
Unlike other e-commerce platforms like Taobao and Pinduoduo, which heavily rely on discounts to attract customers, Xiaohongshu emphasizes aspirational lifestyles, drawing in users who are less price-sensitive.
Suya Wang, general manager at Early Data, a consultancy in Shanghai, highlighted the unique consumption power of Xiaohongshu’s user base, making it a desirable platform for brands. Many brands have begun leveraging partnerships with influencers to promote their products through live streams, benefiting from the platform’s focus on female-oriented lifestyle products.
Melody Zhao, an investor in Enya, a period care brand, emphasized the importance of Xiaohongshu for market expansion due to its user base seeking female-centric products. The platform’s integration of e-commerce and live streaming services has also proven effective, enabling influencers to engage with viewers in a more conversational manner.
Acknowledging the platform’s potential, Ian Hylton, president of Chinese designer brand Ms Min, shared his surprise at the sudden surge in sales on Xiaohongshu following a live stream featuring actress Dong Jie. The platform has transformed from a storytelling tool to a significant sales channel for many brands, prompting them to explore new strategies such as setting up brand sales associates as live stream hosts.
Luxury brands like Max Mara and LVMH are increasingly turning to Xiaohongshu as a key sales driver. With plans underway to establish stores and enhance live streaming capabilities, the platform is poised to deliver substantial sales growth for brands, with some already experiencing triple-digit gains.
Xiaohongshu, whose name translates to “little red book,” is a platform akin to Meta’s Instagram, enabling users to curate their lives through photos, videos, and text. The platform has become a go-to destination for young women seeking travel tips, anti-aging products, and restaurant suggestions. Despite its popularity, Xiaohongshu remains somewhat elusive about its e-commerce strategies, with the company opting not to divulge details about its sales revenue in response to media inquiries.
Having garnered a substantial user base of over 300 million, Xiaohongshu boasts a reported valuation of $17 billion following a recent funding round in July. Notably, the platform has attracted investments from prominent firms such as Hongshan (previously Sequoia China), Hillhouse, Boyu, and Citic Capital. Although the company declined interview requests from Reuters, industry experts and analysts have started to take notice of its potential for growth and expansion in the e-commerce space.
Jacob Cooke, the CEO of WPIC Marketing + Technologies, a consultancy specializing in e-commerce, has noted Xiaohongshu’s strategic recruitment of talent from competitors like Alibaba and ByteDance’s Douyin. This move signals the platform’s ambitious aspirations for future development. Cooke predicts significant growth in Xiaohongshu’s Gross Merchandise Volume (GMV) in the coming years, forecasting that the platform could surpass $100 billion in sales revenue by 2025.
While some industry observers remain optimistic about Xiaohongshu’s prospects for success and expansion, others are more skeptical, viewing the platform as likely to remain a niche player in the e-commerce landscape without posing a significant threat to larger competitors. Tmall, JD.com, and Pinduoduo currently dominate the Chinese e-commerce market, collectively accounting for more than 90% of the country’s total Gross Merchandise Volume (GMV) of $2.78 trillion, as reported by data consultancy Syntun.
Li Chengdong, a tech and e-commerce analyst based in Beijing, pointed out the comparatively small GMV of Xiaohongshu in relation to established industry giants, suggesting that its influence on the market remains limited. Despite its potential for growth and innovation, Xiaohongshu faces stiff competition from more established players in the Chinese e-commerce ecosystem.
As Xiaohongshu navigates its path to sustained growth and market relevance, industry experts remain divided on the platform’s future trajectory. While some anticipate significant expansion and market share gains, others caution that Xiaohongshu may struggle to break through as a major player in the highly competitive e-commerce landscape. Only time will tell whether Xiaohongshu can leverage its current momentum and user base to establish a more prominent foothold in the ever-evolving realm of online commerce.
