Is Xiaohongshu’s path of becoming a “buyer e-commerce” feasible?

Xiaohongshu's e-commerce development faces problems such as trust and payment, and it needs to strengthen its e-commerce infrastructure to improve user experience. Read this article for details.

All of Xiaohongshu's actions are aimed at making it "easier" for users to place orders, but old e-commerce companies such as Alibaba and JD.com may be seeking change much faster than Xiaohongshu.

After wavering on the commercialization route for many years, Mao Wenchao seems to have finally made up his mind to further enhance the profitability of Xiaohongshu.

The addition of commercial talents is one manifestation of this. Representative figures include Zhao Weichen, former secretary of the board and general manager of the corporate development and investor relations department of Yika Technology, who joined Xiaohongshu as the head of commercialization; and Yun Fan, who has many years of experience in community operation and commercialization, who took over the position of community content director from Xie Yunwei. Whether in the commercialization department or the content department, Xiaohongshu's commercial atmosphere seems to be stronger than before.

In terms of performance, Xiaohongshu is also showing a trend of breaking through. According to the foreign media Financial Times, in 2023, Xiaohongshu achieved operating income of US$3.7 billion, a year-on-year increase of 85%; net profit of US$500 million, while the net profit loss in the same period last year was about US$200 million. This is also the first time that Xiaohongshu has turned losses into profits in 10 years since its establishment.

It is worth noting that in the current revenue structure, the revenue from commercial advertising still accounts for 70%-80%, while the e-commerce business, which will be the future revenue driver, still accounts for a relatively low proportion. This is the most powerful tool for monetization and raising valuations.

However, in the more than one year since the slogan of "buyer e-commerce" was shouted out last year, apart from Gigi Lai and Dong Jie, Xiaohongshu's e-commerce business has no "top-tier anchors" to show off; coupled with frequent changes in senior management of the department, Xiaohongshu has never been able to speed up the progress of its e-commerce business.

There is no doubt that the commercialization process represented by buyer e-commerce is one of the balance points that Xiaohongshu has found between community atmosphere and commercial value. Buyer e-commerce is crucial to the commercialization future of Xiaohongshu.

Therefore, when using Xiaohongshu, the e-commerce scenarios that ordinary users usually encounter often become the following two situations: one is based on the characteristics of their own information flow, and the information flow e-commerce advertisements of commonly used commodities are swiped, and the other is the notes of good things posted by individual users - it is not necessarily physical goods such as beauty products and shoes, but may also be "fragmented" products such as mobile phone camera preset parameters and high-definition mobile phone wallpapers. The average customer price is lower than that of general e-commerce products, but the repurchase rate is higher.

Generally speaking, these notes either have their own stores or are directed to Xianyu, Taobao, WeChat and other credit-enabled platforms in private chats. The reason is that Xiaohongshu's current e-commerce infrastructure cannot be compared with other established e-commerce platforms, so users have to use other platforms to buy the products displayed on Xiaohongshu and achieve a complete e-commerce consumption experience.

1. What do people buy on Xiaohongshu?

According to Lujiu Business Review, the categories of "miscellaneous" goods with higher order rates on Xiaohongshu are usually divided into the following categories based on the scenarios.

In office and study scenarios, PPT templates are more common. Take the following note as an example. A year-end report PPT template with a unit price of 139 yuan has sold nearly 8,000 copies in less than half a year. Of course, this is the unit price that can only be sold under the premise that the template is original. If it is not original, the price is usually around 10 yuan.

In the personal interest scenario, another common category is virtual goods represented by mobile phone wallpapers and camera parameters. There are two situations in which these goods are involved in the Xiaohongshu e-commerce scenario, one is used and the other is not used.

Take the mobile phone wallpaper purchased by Lujiu Business Review as an example. The specific monetization method is as follows: First, display the wallpaper sample on the cover of the note. If you want the original picture, you first need to like and collect it, and you also need to "request the picture" in the comment area. The format is as follows:

After receiving the mobile wallpapers as expected, Lujiu Business Review found that, except for the "trial pack" of mobile wallpapers, the rest of the original images sent in private messages, such as tablet and computer versions, need to be purchased for a fee, and other wallpapers are placed in the blogger's homepage store. After checking, it was found that the unit price of wallpapers in the homepage store is almost all within 5 yuan. Under the premise of good quality of wallpapers, the threshold for "impulsive consumption" is actually very low.

The same is true for the preset parameters of mobile phone photography. Bloggers usually post the photos taken with the parameters on the cover of their notes, and then use their personal ID or comment area to attract traffic. After spending 8 yuan to place an order on Lujiu Business Review, more than 20 mobile phone-specific photography parameters were obtained. For those who are not good at taking photos, if 8 yuan can turn a mobile phone into a photography magic tool, most people are willing to pay this price.

However, in the process of transaction, Lujiu Business Review found that, except for the inquiry process, most transactions took place outside of Xiaohongshu. For example, in the purchase of camera parameters this time, only the inquiry was made in the private message window of Xiaohongshu, and then it was directed to WeChat, and the subsequent payment and "shipping" were also done on WeChat.

Of course, this is not the only medium. Xiaoyu, an archery enthusiast, told Lujiu Business Review that he had seen a very nice-looking mechanical-arm-shaped bow stand on Xiaohongshu. The blogger was from the same city as him and had a store on Xiaohongshu, but he sent private messages to the blogger several times but received no response. Finally, he contacted the blogger through private messages.

After discussing the product details, Xiaoyu decided to see the finished product offline first, so he went to the archery club where the blogger worked. After communicating at the club, he found that the bow frame was made of one-piece 3D printed material, and it took time to make. Therefore, the one-time payment form of ordinary e-commerce could not be successfully traded.

Finally, Xiaoyu used Xianyu as the transaction scenario, because he could pay the deposit first through Xianyu, and then pay the balance after he was satisfied with the product. At the same time, the blogger's Sesame Credit score was also used by Xiaoyu as a reference for "whether to trade".

2. Planting trees on Xiaohongshu, others enjoy the shade

It can be seen that whether it is physical small commodities or virtual electronic products, relying on the e-commerce "infrastructure" so far, Xiaohongshu still has some way to go if it wants to provide users with a complete and comfortable e-commerce experience.

Of course, there are many components of e-commerce experience, and the underlying factor is the construction of its ecosystem. The following only lists a few of the items involved in the above case.

The first is the trust of users in merchants. With the precise recommendation of Xiaohongshu algorithm, it is not difficult for users to be pushed notes to promote products. However, the products mentioned above all have a common problem. In addition to the content promotion itself, Xiaohongshu only relies on the qualification review of general merchants and has no other means to "gain the trust of consumers."

On other established e-commerce platforms such as Xianyu and Taobao, rating tools such as Sesame Credit have long been available as a means for users to screen merchants. If it is a few yuan worth of camera parameters or mobile phone wallpapers, it actually has little impact. Once it involves products with a unit price of hundreds of yuan, such as food and clothing, users will consider more factors when placing an order. But at this stage, Xiaohongshu lacks the "hard infrastructure" for this, such as a series of transaction services based on credit ratings.

There is one exception, that is, the influence and past performance of the "buyers" or celebrity anchors themselves as endorsements. For example, Dong Jie or Zhang Xiaohui's team, they either sell high-priced brand products or niche designer brands. Such products usually have stores on Taobao or other channels. In other words, Xiaohongshu can indirectly allow users to enjoy the infrastructure of other platforms through the seeding of these "buyers".

However, this is difficult for other smaller native merchants on Xiaohongshu to directly own.

Then there is the logistics and return link. Some users who shop on Xiaohongshu told Lujiu Business Review that the current logistics of Xiaohongshu merchants mostly rely on the Cainiao system, that is, SF Express and Jitu Express for terminal delivery. Before the systematic cooperation, the delivery of Xiaohongshu e-commerce was roughly equivalent to that of Taobao before 2017, and the basic experience was similar.

So what is the difference? Specifically, if you want to return or exchange goods on Xiaohongshu, the merchant still provides the return address and the user has to send it back at their own expense. However, for established e-commerce companies such as Taobao, the current Cainiao Logistics can already do a one-time door-to-door pickup on the return interface, without any other additional operations.

The threshold for this is still that the user's credit score reaches a specified level. Obviously, this is an ecological infrastructure that Xiaohongshu cannot make up for in the short term.

It should be pointed out that these gaps do not affect the "planting grass" stage of users in the first half of the shopping decision. But when it comes to the "pulling grass" stage, due to the lack of various e-commerce ecological infrastructure, users will inevitably be diverted to other e-commerce platforms, both subjectively and objectively, resulting in a situation where "Xiaohongshu plants trees while others enjoy the shade."

3. The biggest obstacle for Xiaohongshu to become a deep e-commerce company

As a content community that thrives on promoting content, Xiaohongshu’s value is recognized by brands, capital, and users. Otherwise, it is impossible to explain why, despite the fact that the Internet market has been in existence for many years, the user scale has still achieved counter-cyclical growth, becoming the "promised land" for brands and advertisers.

This value comes partly from the continuous creation of the kocs active on Xiaohongshu and the excellent algorithm recommendation level of Xiaohongshu itself, and partly from the search scenarios based on users' initiative and the platform's intentional support. This is also one of the reasons why Xiaohongshu has replaced Zhihu and Baidu and become the search engine for young people.

The latest data shows that Xiaohongshu has more than 20 million monthly active creators, with an average of more than 3 million notes published every day. 70% of monthly active users conduct high-frequency searches on Xiaohongshu, with an average daily search query volume of nearly 300 million times, and 88% of all search behaviors are active searches.

The amount of "broad content" in this part of the content has become a difficult balance - on one hand, there is the trust of users in Xiaohongshu's content and community atmosphere, and on the other hand, there is the platform's own grasp of the degree of commercialization. Before the change of leadership this year, Xiaohongshu largely tilted the balance towards content, but the consequence was long-term unprofitability. This year, the overall acceleration of Xiaohongshu's commercialization pace seems to change this situation.

But problems also arise. On the one hand, based on Xiaohongshu's traditional double-column layout, users have more choices than single-column layouts such as Douyin. If there is too much commercial content, users will be more repelled by Xiaohongshu's content, and the community atmosphere will be reduced.

On the other hand, Xiaohongshu's previous characteristics of "strong content and light users" also led to one thing, that is, users pay more attention to the content than to the bloggers themselves. In other words, it is easy for a note to become popular, but it is more difficult to convert attention than on other platforms.

The necessary condition for these buyer e-commerce to achieve scale is that they have a large fan base. However, the long chain of conversion of user attention by the platform itself will inevitably lead to the "primitive accumulation" process of these anchors, which is longer than that of platforms such as Douyin. For the commercialization team, both the time cost and the money cost are greater investments. Not to mention the lack of the aforementioned ecosystem, it has also formed an obstacle for users to shop directly on Xiaohongshu.

Of course, for now, all of Xiaohongshu's actions are to make it "easier" for users to place orders, and Xiaohongshu e-commerce is still trying to forge its own unique path. However, Alibaba, JD.com, Pinduoduo and other established e-commerce companies are changing fast, and Douyin e-commerce is changing even faster than Xiaohongshu. So, how much time does the market have left for Xiaohongshu e-commerce?

Author: Hu Jiaming; Producer: Daman

Source public account: Lujiu Business Review (ID: liujiucaijing69), the truth cannot be revealed, it can only be approached.