The next e-commerce "new bonus" is on Xiaohongshu

This article deeply analyzes the rise of Xiaohongshu e-commerce and the new bonus opportunities it brings to merchants. From the success story of designer home brand Zhiwu to the insights of industry analysts on e-commerce trends, the article reveals the importance of user stickiness, brand building and repurchase rate in the current e-commerce environment.

“Is Xiaohongshu for real?”

In March 2023, Nie Ping, the manager of the designer home brand Zhiwu, subconsciously raised questions when she was invited to join the Xiaohongshu e-commerce platform.

Zhiwu previously only promoted content on Xiaohongshu, guiding users to purchase products from his own stores on other platforms. Although he thought about opening a store on Xiaohongshu, he was not sure enough.

The person who made the invitation was "Yikekk", a home furnishing buyer on Xiaohongshu. It was also in March 2023 that Dong Jie went viral on Xiaohongshu with her live streaming products, which attracted the attention of the entire network to Xiaohongshu's live streaming and Xiaohongshu's e-commerce.

Yike KK gave a positive reply, and Zhiwu decided to join. In the first cooperation with Yike KK in April 2023, Zhiwu's four-season soft bed sold more than 100 out of more than 300 products on that day, which exceeded Nie Ping's expectations.

Half a year later, during the Double Eleven shopping festival, Nie Ping received another invitation, this time from the operator of Xiaohongshu, asking her to start a store broadcast. After thinking about it all night, she decided to start the broadcast early in the morning. However, in the first 10 days of the broadcast, almost no orders were completed until the planned store broadcast, with sales reaching 150,000 yuan per broadcast. This gave the team more confidence.

At the end of 2023, at Zhiwu's annual business meeting, Nie Ping and the team determined the strategic direction for 2024. "In 2024, the focus will be on building the brand and closing deals on Xiaohongshu."

Through relevant data, Yibang Power learned that during this 618 period, Zhiwu is expected to achieve more than 15 million GMV on Xiaohongshu during the 618 period, which exceeds the total GMV of Xiaohongshu e-commerce in 2023.

Zhiwu Furniture is live streaming on Xiaohongshu

A merchant from the fashion industry who entered the Xiaohongshu e-commerce business in September last year told Yibang Power that the company had begun to discuss repeatedly at the beginning of the year how much investment to make in the Xiaohongshu e-commerce this year. On the one hand, many of its peers had been operating in the past, and on the other hand, all major e-commerce platforms had demanded price cuts since Double Eleven last year, and they needed to find places where there was growth, profit, and the ability to retain brands and users.

"Everyone is talking about how Xiaohongshu and Video Accounts might be the next profitable platforms." A home furnishing merchant in Zhejiang is also studying how to enter Xiaohongshu. The core of his focus is on how to "create content" on Xiaohongshu, because he heard that by creating good content, there will be natural traffic, saving a lot of investment costs. But for merchants, creating good content also requires learning.

In-store live streaming has become a research direction for the aforementioned merchants recently. On June 12, at the 618 media exchange meeting held by Xiaohongshu e-commerce, Gintoki, the head of Xiaohongshu e-commerce operations, announced the interim data. As of June 10, the number of orders for Xiaohongshu e-commerce live streaming rooms was 5.4 times that of the same period last year, and the GMV of store live streaming reached 5 times that of the same period last year.

As the industry changes and merchants look for the next profitable area, will Xiaohongshu, known as the "new force in e-commerce," be the next answer?

01 New dividends: In addition to traffic, users, repurchase and brand become the focus

As a once active new consumer investor, Li Qing has rarely "pulled the trigger" in the past one or two years.

Starting from the second half of 2021, she told the CEOs of the invested new consumer companies that they must learn to generate their own blood and make money. The era of desperately buying traffic in exchange for growth and getting investment is over.

In the first few years of 2022, new consumer investment continued to be hot. People with executive backgrounds in brand marketing, product development and other fields can easily obtain large amounts of financing. By entering the live broadcast rooms of well-known anchors and impacting the platform rankings, sales and fame in the investment circle exploded rapidly.

“But gradually, everyone found that something was wrong. Many brands only had two or three hot-selling products in a year or two. Users might buy them on impulse and don’t even know what brand they bought, let alone repurchase. This is unsustainable for entrepreneurs and investors who don’t want to make a quick buck and run away,” Li Qing told Yibang Power.

Not long ago, she saw a set of figures that the advertising revenue of a certain rising e-commerce platform grew much faster than the revenue from transaction commissions, which means that the cost of advertising for merchants is greater than the growth in sales revenue, and traffic is becoming more expensive compared to revenue, so the profits of merchants will be correspondingly thinner.

Repurchase rate and profit have now become the data that Li Qing pays the most attention to, and have also become the most concerned numbers in the e-commerce industry.

Industry analyst Dong Yiwei is also paying attention to a set of statistics. He found that in the data released by Taobao, the number of new merchants entering Tmall is increasing. Excluding other factors, he believes that when merchants are forced to engage in low-price competition among various platforms, they are also looking for places to accumulate fan users and brands.

"When everyone actively or passively flocks to low-price competition, then on the other side, the opportunities to build brands, increase repeat purchases, and accumulate user groups will instead increase," said Dong Yiwei.

Yibang Power also learned from its communications with many merchants that they have very different attitudes towards low prices and brands.

Some white-label merchants in industrial belts have explicitly stated that the current competition between platforms will provide traffic to products with lower prices, which is an opportunity for industrial belt merchants because only industrial belt merchants can reduce costs as much as possible. In this process, it is not necessary to build a brand in order to have a large amount of traffic and orders. The extra costs brought by branding may even be disadvantageous to them.

Many merchants also emphasize the importance of branding. In their view, building a brand means repeat purchases, premium space, and profits, and their business can be truly stable and lasting. At present, a large number of merchants are involved in low-price competition and will reduce their investment in brands accordingly. The competitive pressure in this regard may be weakened, and it may be a bonus period for repeat purchases, crowd accumulation, and branding.

In fact, the differentiation of the above views shows that the dividends of the e-commerce industry are becoming more diversified from a single new traffic dimension.

Previously, the e-commerce bonus was almost equal to the traffic bonus: a market with insufficient supply, sufficient demand, and less sufficient competition. The earlier the entrants, the easier it is to have the original exclusive bonus, and they can leverage huge growth by using effective methodology and relatively small resources. However, the cruel reality that the survival rate of new brands after five years is less than 1% proves that rapid success does not mean permanent success.

In addition to traffic dividends, crowd (user) dividends, repeat purchase dividends and brand dividends are attracting attention from the e-commerce industry.

02 Xiaohongshu Live Broadcast and People Who Get Bonuses

After Xiaohongshu held the Link E-commerce Partner Week on August 24 last year, Li Li, the founder of body care brand Yujian, decided to gradually increase investment in content notes, buyer cooperation and other aspects on Xiaohongshu.

In early 2024, at the invitation of Xiaohongshu, Li Li considered trying store live streaming. To be precise, she was the host of the live streaming.

From receiving the invitation in January to the official launch of the live broadcast on March 28, Li Li spent more than two months building a team while thinking with the team about what to do. "What should I tell users in the live broadcast room? What expressions and speaking speeds do users like? Will users listen to my leisurely way of telling stories?"

Li Li decided to give it a try. On March 28, she held her first live broadcast as a manager. There was no preset GMV target for the live broadcast. The core task was to test what the style of the live broadcast room should be and to prepare for the upcoming daily store broadcast.

During the live broadcast, in order to remind Li Li, who usually speaks very fast, her colleagues put a note on the live broadcast board in front of her - speak slower.

After the entire live broadcast, the GMV of live broadcast sales reached more than 300,000, which is a good level in store broadcasts. The greater gain is that Yujian’s team realized how to do store broadcasts. Yujian does not regard Xiaohongshu store broadcasts as a pure sales venue. Even the store broadcast hosts are called "brand recommendation officers". They do not shout or force orders, but explain the products and brands clearly. Even the host's clothing, live broadcast color, live broadcast room background, etc. are all the responsibility of the brand department.

Yujian's core business path in Xiaohongshu's e-commerce is to attract attention by relying on high-quality note content, forming conversions in the live broadcasts of managers and store broadcasts, while trying to accumulate and settle in the community.

"We regard the live broadcast on Xiaohongshu as a place where we can truly communicate with consumers about the brand and content," said Li Li. In Li Li's monthly live broadcast, she found that when new users asked questions that she had asked before, other users would answer them for her in the live broadcast room, "which shows that they are our real fans of the brand."

Zhao Jialiang, the owner of the women's shoe brand "SONDER PLAN", also likes to interact with users in the live broadcast room. SONDER PLAN's live broadcast room has its own style: a pair of leather shoes is placed under the spotlight in the center of the screen, without fancy backgrounds or sales urging.

Sometimes, Zhao Jialiang would take out his drawn design sketches in live broadcasts and notes and let users choose, and then make adjustments based on their comments and feedback. These interactions and surveys also enable him to prepare goods more specifically.

In the first month of operation on Xiaohongshu e-commerce, the Xiaohongshu note for SONDER PLAN's first pair of shoes received more than 1,700 likes, and the sales volume in the first month reached 1 million. So far, SONDER PLAN has accumulated more than 24,000 fans in a short period of time.

Many merchants contacted by Yibang Power said that the notes posted by brands on Xiaohongshu can currently obtain good natural traffic. One merchant said that without investment, he achieved hundreds of thousands of sales in a single month through the form of notes plus store broadcasts.

The core reason comes from Xiaohongshu's decentralized traffic distribution mechanism. As e-commerce integrates into the community, high-quality content that is liked by users is likely to gain traffic. For merchants, low-cost natural traffic is more attractive.

Some businesses also pointed out to Yibang Power that Xiaohongshu's content community characteristics enable it to bring in more precise user groups, whether in notes or live broadcasts. This is reflected in the live broadcast room. Although the number of these users may not be high, their viewing time, order rate and repurchase rate are much better.

03 Buyers and store broadcasts are not a matter of choice

At the media exchange meeting held on June 12, Gintoki said that the growth of merchants on Xiaohongshu showed two paths: one was relatively mature brand merchants like Zhiwu, who started cold through cooperation with buyers, and soon opened up store live broadcasts, forming a business model with "buyer live broadcast + store live broadcast" as the core.

The other category is a large number of growing businesses, or businesses with certain content capabilities, which have established stable operations through the form of "notes + live broadcast + community".

Among these two paths, store live streaming, which can be controlled independently by merchants, constitutes an important link.

At the Link E-commerce Partner Week held in August 2023, "opening a store and broadcasting, maintaining stable operations" was one of the three steps in the business operation plan released.

On Double 11 in 2023, Xiaohongshu proposed to encourage the development of store live broadcasting and invited merchants to open store live broadcasting. This attitude became clearer during the 618 this year. In the investment promotion plan released to the public at the end of April, it was proposed to encourage the development of live broadcasting, especially store live broadcasting, and proposed corresponding support in terms of traffic incentives, store live broadcasting gameplay, product upgrades, etc.

This series of voices even made the outside world wonder whether Xiaohongshu’s buyer live broadcasts and store live broadcasts are growing at the expense of each other.

Gintoki said that buyer live streaming and store live streaming are not a multiple-choice question. The two forms each have different advantages. The core of Xiaohongshu is to focus on live streaming and build a complete ecosystem of "buyer live streaming + store live streaming".

Some media reported that on the eve of 618, Xiaohongshu's e-commerce buyer operation business announced a merger with the merchant operation business to form the e-commerce operation department, which is a secondary e-commerce department. This is another important change since Xiaohongshu completed the closed loop of transactions. The media and industry insiders analyzed that the signal released by this is that after Xiaohongshu established the mentality of live streaming with buyers, it is gradually enriching the supply of store live streaming, forming a state of parallel development of buyer live streaming and store live streaming.

"The iteration of Xiaohongshu's e-commerce products is very fast." Li Li, the manager of Yujian, said when talking about his feelings after joining Xiaohongshu's e-commerce for nearly a year.

Merchants are entering Xiaohongshu at a rapid pace. Data shows that taking fashion trends and home furnishings, two important industries of Xiaohongshu e-commerce, as examples, the number of new merchants entering in 2023 increased by more than 6 times and 4 times year-on-year respectively.

The entry of a large number of merchants means that more requirements are put forward for Xiaohongshu e-commerce. In addition to supporting store broadcasts, there are more product upgrades and improvements in business methodologies, so that merchants can truly obtain growth dividends and brand dividends on the platform.

For Xiaohongshu e-commerce, which is already running, it must accelerate further.