Ten years of “e-commerce dream”: Can Xiaohongshu find the answer to “monetization” through store broadcasts?

As a content community platform, Xiaohongshu has a highly active and sticky user group that other e-commerce platforms envy, but how to balance the conversion of users and achieve maximum commercialization is a problem. This article takes us to understand the latest developments of Xiaohongshu e-commerce and is recommended for Internet friends to read.

If Xiaohongshu becomes Taobao, will you shop on it?

According to 36Kr, "Xiaohongshu's e-commerce buyer operation business has been merged with the merchant operation business to form the e-commerce operation department, becoming a secondary e-commerce department." Industry insiders analyzed that "Xiaohongshu has developed from focusing on buyer live broadcasts to promoting buyer live broadcasts, and then to store live broadcasts in a coordinated manner, in order to achieve the unity of "people" and "goods."

It has been observed that the recommendation page on the homepage of Xiaohongshu has increased the emphasis on the promotion of "live streaming of opening a store". In the live streaming column, two of the four displayed contents are "quitting your job and opening a potato store at home" and "how to create an account for a newbie". In addition, some live streaming stores also use slogans such as "make friends" and "give discounts to the Little Red Potato Sisters".

From the traffic generated by notes, the order stimulation from buyers’ live broadcasts, and the support from store broadcasts to merchants, it can be seen that Xiaohongshu has put a lot of effort into e-commerce this time.

However, Xiaohongshu is faced with the problem of how to strike a balance between content ecology and commercialization after years of unsuccessful listing. After ten years of e-commerce, can Xiaohongshu find the answer to monetization through store broadcasting this time?

1. Open up a new path for "monetization" through store broadcasting

Last year, Xiaohongshu achieved profitability for the first time, which was a rare opportunity for Xiaohongshu to stand up straight. Later, there were rumors that it would go public, but Xiaohongshu still denied the news. Regarding the fact that it has not been listed, industry analysts said, "Xiaohongshu's profitability remains to be seen, its business model is too single, and its valuation is also facing the risk of decline."

In itself, the commercialization model of content communities is single: generally relying on advertising, the other is e-commerce that converts traffic into GMV.

Xiaohongshu also relies mainly on advertising, which accounted for nearly 80% of its total revenue last year. However, the platform’s inherent nature of posting notes and promoting content highly matches the needs of e-commerce users. Based on this, e-commerce has always been the path that Xiaohongshu is most looking forward to commercializing.

Xiaohongshu has been engaged in e-commerce for nearly ten years.

In 2014, Xiaohongshu launched the Welfare Club, providing users with a channel to directly purchase recommended products.

This was Xiaohongshu’s first attempt at a new commercialization approach and also the beginning of its e-commerce dream.

Later, Xiaohongshu tried various methods such as self-operation, live streaming, and notes, but unfortunately, it did not make much of a splash and did not form a shopping mindset among users. Industry analysts said, "Xiaohongshu's early e-commerce investment was blindly following the trend or was indecisive, which led to poor performance."

The real turning point was in 2023, when Xiaohongshu brought out top "buyers" such as Dong Jie, Zhang Xiaohui, and Yi Nengjing, driving the scale growth of the platform's e-commerce.

On last year's Double Eleven alone, Gigi Lai's sales in a single event exceeded 100 million yuan.

Also last year, Xiaohongshu shouted the slogan "The era of buyers has arrived" and cut off its own e-commerce platforms such as Xiaolvzhou and Fulishe with poor performance. At the same time, it set the flag of "supporting 1 million buyers" and "1 million merchants" to promote the regularization of store broadcasts.

It can be seen that Xiaohongshu’s ambition in store live broadcasting has already been shown.

This time, not only did it merge the buyer operation business and the merchant operation business to form a second-level e-commerce department, but Xiaohongshu also "poached" people to join the e-commerce department many times this year.

At the beginning of the year, Xiaohongshu hired Wu Yingbing, the former head of Didi's supply and demand strategy, and Zhang Rui, the former head of Didi's ride-sharing business. Wu Yingbing is responsible for part of Xiaohongshu's e-commerce business, while Zhang Rui joins the commercialization team.

In March, Ye Heng, the former head of e-commerce products at Kuaishou, was hired as the head of Xiaohongshu's e-commerce C-end products.

Until this time, the second-level e-commerce department was headed by Gintoki, the former head of Xiaohongshu's live broadcast business, and he reports directly to Conan, the chief operating officer (COO) of Xiaohongshu.

From the front end of e-commerce products to the entire merged e-commerce department, there are professionals responsible for each level of business, which shows Xiaohongshu's determination to expand its e-commerce business this time.

From a strategic perspective, the merger of buyer operations and merchant operations also marks that Xiaohongshu's e-commerce landscape is becoming clearer and clearer. After building a live streaming ecosystem with buyers, it has gradually enriched the supply side of store live streaming, forming a closed loop of "people" and "goods".

Moreover, the advantages of the store live broadcast promoted this time are more than just this.

Store live broadcasts are different from the well-known live broadcasts by experts such as Li Jiaqi and Xiao Yangge. The former are broadcast by stores, eliminating middlemen, while the latter have their own high traffic from anchors, and the sales effect is good but the commission is also expensive. The most important thing is that the exposure to brands and merchants varies with the level of commission.

Therefore, live streaming by anchors has been very popular in recent years, but more and more small and medium-sized businesses have found that the cost has increased and it is more difficult to survive. Store broadcasting has given small and medium-sized brands the opportunity to develop, and it has also cut out the middlemen and passed the real benefits to users.

Store live streaming has gradually become a battleground for e-commerce platforms.

Over the past year, Taobao, JD.com, and Pinduoduo have all released battle reports on related store broadcasts. "Bosses" from various industries, such as Zhong Xue Gao Lin Sheng and Hongxing Erke Wu Rongguang, have rushed into the live broadcast rooms and held one store "competition" after another.

This year, Xiaohongshu announced the 618 battle report in advance. The number of merchants broadcasting live was 3.8 times that of the same period last year, and the GMV of store broadcasts was 4.2 times that of the same period last year. The official emphasized that "store broadcasts have become the strongest growth engine for merchants."

Obviously, store live streaming has also become a new growth engine for Xiaohongshu.

Compared with other e-commerce platforms, Xiaohongshu’s advantage in store live streaming lies in the fact that it has been engaged in e-commerce for many years but is still in a “blank period”.

For merchants, the untapped high-traffic e-commerce market on Xiaohongshu provides brands with greater development opportunities;

Second, the platform’s strong support for store broadcasts also provides greater development possibilities.

Based on this, more and more merchants are willing to come to Xiaohongshu to try new money-making opportunities.

Just like Xiaohongshu, it is also exploring more commercial possibilities for e-commerce.

2. How to balance the “sophisticated” female users?

No matter how big Xiaohongshu’s e-commerce ambitions are, speaking from the user level, will people really choose to place orders on Xiaohongshu?

Xiaohongshu has always been an image of a community platform for content promotion. Now if people have any questions, they don't have to ask Baidu, but can choose to go to Xiaohongshu to find answers to real reviews. But if they want to shop, Xiaohongshu may not be the first choice.

The author is also a user of Xiaohongshu. What is visible to the naked eye is that there are more shopping links or store live broadcasts on the platform’s homepage, but I am still more accustomed to reading bloggers’ notes and placing orders on major e-commerce platforms.

The factors that influence placing orders include habit, but the more critical factors still depend on the platform's complete functions, rich product variety and guaranteed after-sales service.

At present, Xiaohongshu has not yet formed a complete shopping closed loop.

Xiaohongshu uses buyers and store live broadcasts to promote users to place orders and cultivate people's shopping mentality. It then uses store live broadcasts to attract more merchants to settle in, forming a preliminary layout of people arriving at the store. However, to stimulate users to repurchase, it is not only necessary to have a rich variety of products, but also to improve the platform's functions and ensure after-sales maintenance.

At present, the Xiaohongshu shopping cart interface is also more hidden. It is in the secondary interface of 618, not in the primary interface of the platform. When entering the shopping cart, it can be found that there is no function like finding the same item for price comparison, which shows that the functionality is not perfect enough.

At the same time, the variety of products on the platform is obviously not as mature as other e-commerce platforms, and the selection is also more limited. From the sales volume and reviews, it can be seen that:

Take Anta flagship store as an example. On Taobao, its best-selling items have sales of more than 100,000, but on Xiaohongshu, its best-selling items have only more than 3,000, and there are only 1,034 reviews. The sales of other unknown stores on Xiaohongshu are even lower, with single-digit or no reviews.

All this reveals that the "pool" of merchants or products within Xiaohongshu is not big enough.

Looking at after-sales service, Xiaohongshu’s current cooperation with the express delivery company is Fengchao, which provides a 24-hour return and exchange service, which can meet the user's diverse needs in terms of usage time, delivery scenarios, and operation methods.

However, its shortcomings have also been revealed. Fengchao's reputation has declined in the past two years due to the charging incident. At the same time, its strength is not as good as other logistics companies of the "Three Links and One Delivery". It can be inferred that the after-sales guarantee provided by Xiaohongshu may not be as strong as that of other e-commerce platforms.

The most important point is how to "balance" the sophisticated female users on the platform.

As a content community platform, Xiaohongshu has a highly active and sticky user base that other e-commerce platforms envy, but how to balance user conversion has always been the biggest obstacle to its commercialization.

In the past, Xiaohongshu was concerned that excessive commercialization would affect user experience and destroy the community atmosphere, so it was always cautious in its monetization process. As a result, its lack of commercialization capabilities led to its failure to go public and was questioned by investors. Now Xiaohongshu has finally opened up its e-commerce business to buyers and store broadcasters, but what kind of user feedback can it get?

After all, Bilibili, also a content community, is now stuck in the quagmire of losses. In the past two years, it has been rejected by many users or caused user loss due to the introduction of advertising and gaming businesses.

Can Xiaohongshu strike the right balance?

Author: An Xiao

Source: WeChat official account: "Bohu Finance (ID: bohuFN)"