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What Experts Say? - The Impact of Xiaohongshu in China (Opinion from the key people @ DLG, Jing Daily, Full Jet, Nude and Double V. Consulting)

Posted in E-commerce on October 11th 2018
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Thanks to Xiaohongshu's growing popularity, the platform has certainly become a hot topic for discussion. Some people are praising it while the others are still doubtful about its impact on Chinese e-commerce. So what to make of Xiaohongshu? We have consulted some of the most influential digital experts in China. In the first entry of the "What Experts Say?" series, we are honored to interview:

  • Pablo Mauron
    Managing Director and Partner at DLG (Digital Luxury Group) China
  • Lauren Hallanan
    VP of Live streaming at The Meet Group / Contributing Writer and Editor at Jing Daily / Contributor at Forbes
  • Victoria Glanz
    Partner and CEO at Full Jet China
  • Miro Li
    Co-founder, China E-commerce Consulting at Double V. Consulting, an agency specialized on Xiaohongshu
  • Benjamin Joly
    General Manager at Nude Agency Shanghai

Xiaohongshu, also known as Little Red Book or RED, is one of the rising stars in the Chinese e-commerce market.

It started out as a social platform for consumers with the same interests to share their shopping experiences but has recently evolved by adding e-commerce functionalities and has effectively become one of the major cross-border e-commerce platforms in China, allowing consumers to buy directly from the site. By combining authentic user-generated contents and effective e-commerce model, Xiaohongshu is expected to be a useful channel for brands to leverage social commerce trends and boost their online sales in the Chinese market.

Some impressive numbers about Xiaohongshu:

  • Launched in January 2014
  • Gained 40,000 new users 70 days after the launch
  • Reached 100 million users by May 2018

Due to Xiaohongshu's growing popularity, the platform has certainly become a hot topic for discussion, with countless people praising it and laying down strategies for brands to leverage it. At the same time, some people are feeling doubtful about Xiaohongshu’s model. So what to make of Xiaohongshu? What kind of impact will it have on Chinese e-commerce? Does it have the potential to become a staple in a brand’s marketing mix in China? If so, which industry can benefit the most from it?

We have asked these very questions to some of the most influential Chinese digital experts, who were kind enough to share their opinions with us. Without further ado - let’s find out what they think of Xiaohongshu.










Pablo Mauron

Managing Director and Partner at DLG (Digital Luxury Group) China







 

What is your take on Xiaohongshu? What kind of impact do you think it will have on Chinese e-commerce as a whole?

The interesting thing about Xiaohongshu is that it doesn't try to integrate social elements into an e-commerce platform – it integrates e-commerce elements into a social platform, and this is where its success lies. While most of the social commerce initiatives are now led by e-commerce, Xiaohongshu focuses on building its community and establishing itself as an authority on the topic of overseas shopping before developing its e-commerce business model.

Beyond the usual mix of inventory, price, and services that e-commerce platforms are competing on, Xiaohongshu manages to stand out by leveraging another key element: The value of community. This community not only helps users discover new brands and products but also presents itself as a trustworthy source of recommendations.


Does it have the potential to become a staple in a brand’s marketing mix in China?

Xiaohongshu perfectly illustrates how quickly e-commerce models are evolving in China. It is now a relevant e-commerce player, considered by many brands for promotion or actual distribution. This is quite unique, bearing in mind that it started out as a travel shopping recommendation platform. Besides indicating that Chinese are increasingly being viewed as the global consumers, the success of Xiaohongshu also demonstrates that brands are increasingly willing to leverage third-party platforms that have established trust with a qualified consumer base.


If so, which industry/brand do you think can benefit the most from it?

Because of its history, Xiaohongshu is naturally relevant for beauty brands and enjoys a strong authority on this front. However, looking at the audience base of Xiaohongshu, and its association with overseas shopping, we can see the platform is also beneficial to product categories targeting sophisticated consumers who are interested in foreign brands. These product categories include fashion, accessories, or even hotels – across various price points. The advantage of this platform is that it allows product performance to be tested through content seeding and working with KOUs (key opinion users), which involves a low level of initial investment from brands.









Lauren Hallanan

VP of Live streaming at The Meet Group
Contributing Writer and Editor at Jing Daily
Contributor at Forbes






 

What is your take on Xiaohongshu?

I shared my opinion pretty clearly in this article, so head there to find my thoughts on Xiaohongshu. To sum it up, I believe that although Xiaohongshu is not considered to be in the same league with WeChat or Weibo just yet, it is a platform that brands cannot miss. Thanks to its focus on content and social, it represents a great opportunity, especially for marketers trying to reach affluent millennial females.


What kind of impact do you think it will have on Chinese e-commerce as a whole? Does it have the potential to become a staple in a brand’s marketing mix in China?

I think brands need to be less concerned with how to sell on Xiaohongshu and instead focus on using the platform to raise brand awareness in China. It is a very powerful tool for word of mouth marketing.

It doesn’t have the potential to be a staple in a brand’s China marketing mix - it should already be a staple in a brand’s China marketing mix. It already has a huge impact on e-commerce in China, but an indirect one. Oftentimes consumers use the platform as a research tool but end up purchasing the product they’re interested in on another site. Even though they don’t buy from Xiaohongshu, the content on the platform can highly influence their purchasing decisions.

Personal example - I am looking to buy a new wallet so as a fun experiment I went on Xiaohongshu to search for wallets and actually found the one I like. It is sold at a great price point by a small, up-and-coming, high-quality American brand. I’m currently living in the US so if I decide to buy it I will probably purchase it directly on the brand’s official site. I found the post on Xiaohongshu really useful because it included a ton of pictures that weren’t photoshopped and included a hand in some of the photos so I was able to get a better idea of the size, quality, and features.

Xiaohongshu also enjoys many benefits in terms of SEO. Currently, the best social networks for search engine optimization in China are Weibo and Xiaohongshu. Both Weibo’s and Xiaohongshu’s posts are indexed by Baidu and other search engines in China. (Read more)


If so, which industry/brand do you think can benefit the most from it?

While best known for makeup and skincare products, Xiaohongshu is trying to diversify their content to draw more users to the app. Travel, health & fitness, mommy baby and fashion all have great potential; pretty much any of the categories you find at the top of the ‘Explore’ page. Xiaohongshu is also trying to attract more male users (currently the large majority of users are female) so I think male skincare, fashion, and fitness could also be big in the near future.

(N.B. to read more about Lauren’s opinion on Xiaohongshu, check her article on Jing Daily)












 

What is your take on Xiaohongshu? What kind of impact do you think it will have on Chinese e-commerce as a whole?

At first glance, one could see the Red as the perfect merger of social media and e-commerce. But it is not. It is firstly a social network. What makes it so exciting to marketers is the community it bonds together. It’s a community of users who want to share their opinions on products and behaviors. It’s a network of user reviews. This is what makes all brands fantasize.


Does it have the potential to become a staple in a brand’s marketing mix in China?

Brands think that because the Red aggregates people in a pre-buying/info gathering mindset, it is likely to be the network of potential buyers and therefore the best place to generate preference. Building on that fantasy, the Red has started offering e-commerce opportunities for brands. But the platform doesn’t seem to perform particularly better than others in terms of sales conversion. This could have to do with the fact that the flow is a bit random, mimicking a browsing shopping experience.


If so, which industry/brand do you think can benefit the most from it?

Also, it may not be the best place for all categories. High involvement categories, which generate a substantial amount of discussions, naturally have a place on the Red. It may less be the case for low involvement ones. Nevertheless, it can be a good place to advertise for small to middle-sized brands with good-quality products who find it hard to achieve substantial success on Tmall.










Miro Li

Co-founder, China E-commerce Consulting at Double V. Consulting, an agency specialized on Xiaohongshu






 

What is your take on Xiaohongshu?

Chinese E-commerce market is hyper-competitive and complicated. Consumers have a high expectation of the product quality and services. Xiaohongshu is just facing the same difficulties that every developing platform encounters at the beginning – product authenticity and after-sale services. It takes time to improve and become mature. What is more important is the unique “social media + e-commerce” model which distinguishes Xiaohongshu from the others.


What kind of impact do you think it will have on Chinese e-commerce as a whole?

It makes e-commerce more and more content-driven.

Instead of only looking for low prices, consumers are more and more attracted by good content, which is significant to user stickiness. It increases the number of active users, encourages users to stay longer in the app and generate more good content, and at last converts users to customers.

Internet unicorns like Tencent and Alibaba are also developing their “content + e-commerce” model. For example, Tencent’s WeChat official account started as a content-only social media platform. Now with the integration of mini-programs, it allows users to place orders with only one click after they read an article. Recently, Alibaba has also paid a lot of attention to WeiTao, a community section inside Taobao, encouraging both users and sellers to generate more good content.


Does it have the potential to become a staple in a brand’s marketing mix in China?

In my opinion, Xiaohongshu is currently the most suitable platform for new foreign brands to take their first step into the Chinese market. These brands can benefit from Xiaohongshu because they can use their foreign identities to set up a shop without worrying about cross-border payment or logistics. They can also use it as a social platform to build WOM (words of mouth), which is very important for a new brand. For other well-known brands, Xiaohongshu may not be the most important channel for them.


If so, which industry/brand do you think can benefit the most from it?

Beauty, baby & maternity, health food, and fashion are the most popular categories on RED. Although the majority of the users are female (88%), you should not ignore men care brands. Another rising industry is the travel industry. Xiaohongshu is a very good place to promote tourist spots or restaurants.












 

What is your take on Xiaohongshu?

For a consumer, Xiaohongshu is a very useful tool to get inspirations and recommendations and to buy retail products without having to switch between different websites or apps. Compared to a traditional e-commerce platform such as Tmall, Xiaohongshu makes you feel that you are following trends rather than just products. It also gives you more confidence regarding the authenticity of the recommendations or the products sold.

The only downside is that Xiaohongshu is getting too popular, which makes the platform lose its hype, its niche positioning, and its high-quality user-generated content. We are afraid that you won’t be able to find niche brands on the platform anymore, or that the quality of the content will decrease as more and more people may publish junk posts to benefit from the increase in traffic.


What kind of impact do you think it will have on Chinese e-commerce as a whole?

We do not see Xiaohongshu as a threat to the main e-commerce platforms, but rather as a new piece in the huge Chinese e-commerce puzzle. Chinese shopping culture will not change in a snap, people are still considering various options, seeking peer recommendations, and comparing prices. You will always need Tmall or JD to be around.

Xiaohongshu is offering a C2C point of view for e-commerce - it is like shopping by watching people getting out of a shopping mall. The main challenge of Xiaohongshu is ensuring the authenticity of the recommendations. There should be a clear line between KOL-generated content and user-generated content. (Authenticity of products should not even be in the discussion)


Does it have the potential to become a staple in a brand’s marketing mix in China?

Having a presence on Xiaohongshu will become mandatory for brands whether they want it or not. People may talk about your products even if they are not sold on the platform.

I am not sure how brands can manage their official presence except for the e-commerce aspect. But naturally, we would say that brands will have to listen to the feedback from the customers and try to optimize their brand experience, or they should pay more to get the endorsement from KOLs.


If so, which industry/brand do you think can benefit the most from it?

All the traditional industries that are currently selling online.


CONCLUSION

Although there are various opinions about Xiaohongshu, its huge impact on the Chinese social commerce ecosystem can’t be denied. All 5 digital experts we interviewed recognized the influence of Xiaohongshu these days and stated that the unique selling point of this rising-star platform is the social element playing a major role during the customer journey. High-quality content, especially from the KOLs, together with an effective e-commerce model, has greatly contributed to the success of Xiaohongshu and brands operating on the platform. It is expected that Xiaohongshu will become a useful channel for brands who want to create a positive buzz around their offerings and drive more online sales at the same time.