After shutting down its welfare club which had been in operation for 9 years, has Xiaohongshu’s e-commerce reached a new turning point?

Author | Chang Mei, Art Editor | Qiu Yuan

Xiaohongshu Welfare Club Closed

"This is not only a farewell, but also a new beginning. We sincerely welcome everyone to join us in the increasingly rich Xiaohongshu e-commerce."

In this farewell letter, Xiaohongshu also mentioned that it will concentrate its resources and efforts to serve more buyers, managers, merchants and brands in the development of e-commerce.

This also reveals the reason why the welfare club was shut down: self-operated e-commerce is no longer the focus of Xiaohongshu, but attracting more buyers, merchants and brands to do e-commerce on Xiaohongshu.

A person close to Xiaohongshu Welfare Club responded to the media that Xiaohongshu hopes to focus its energy and resources on developing diversified e-commerce in the form of buyers.

Xinbochang found that just last month, Xiaohongshu Welfare Club held an offline event and opened a beauty store in the vegetable market. In addition, the official public account of Xiaohongshu Welfare Club has been updated and released live broadcast previews.

Therefore, the sudden closure of Xiaohongshu Welfare Club came as a surprise to many users.

On the afternoon of September 15, many users came to the live broadcast room of "Fulishe" to ask "Why is Fulishe closing?" Netizens said: "Why is it so sudden? I have been buying here for so many years", "Such a cheap overseas shopping store is gone just like that"...

The anchor said in the live broadcast room that the welfare club live broadcast room will end on September 28, and consumers can still place orders before November 15.

Xiaohongshu Welfare Club was launched in 2014. At that time, in the comment section of Xiaohongshu, which was established more than a year ago and focused on outbound travel shopping guides, users kept asking "how can I buy directly after being recommended by Xiaohongshu?" In order to meet the needs of users and bring benefits to users, Xiaohongshu decided to set up a "welfare club".

Xiaohongshu Welfare Club is positioned as a cross-border self-operated store, and its product types cover many overseas shopping categories such as skin care, cosmetics, fashion, household items, mother and baby, etc. Its main competitors at the time were NetEase Kaola, Tmall Global and JD Global Shopping.

It is reported that the GMV of the welfare club exceeded 300 million yuan in the first year of its launch.

However, in the 9 years since it was launched, Xiaohongshu Welfare Club has also received a lot of negative information. For example, many users have complained that the products they bought at the welfare club were suspected to be fakes.

At the end of August, a user posted on "Black Cat Complaint" that he bought an Estee Lauder Advanced Night Serum from Xiaohongshu Welfare Club on August 21. After receiving the goods, he found problems and suspected that he had bought a fake. However, when applying for a refund, the customer service only emphasized that they were authentic. When he contacted Estee Lauder officials, they said that this platform was not a cooperative sales channel and would not respond to authenticity questions.

However, in the opinion of industry insiders, the closure of the welfare agency was not sudden.

Especially when combined with Xiaohongshu's e-commerce actions in recent times, we can see that this is not the first time that Xiaohongshu has taken action on its own e-commerce business, nor is it the first time that Xiaohongshu has sent out a signal of adjusting its platform's e-commerce strategy.

First of all, a week ago, Xiaohongshu announced the closure of its e-commerce platform, Little Oasis, which focuses on outdoor sports scenes.

"Little Oasis" is a self-operated e-commerce project launched by Xiaohongshu in early 2022. In the early stage, it mainly sold comprehensive categories including beauty, skin care products, fragrances, fashion home furnishings, etc. Later, as the topic of outdoor camping continued to be hot, the number of related notes and topics on Xiaohongshu soared, and the platform immediately changed its positioning and turned to focus on sports scenes such as camping, cycling, and hiking.

Secondly, it was rumored that Xiaohongshu was adjusting its organizational structure.

According to LatePost, Xiaohongshu has integrated its e-commerce business with its live streaming business and established a new transaction department, which has become a first-level department parallel to the community department and the business department. Previously, the e-commerce business was a second-level department under the community department, with Conan as the head of the new department.

Integrating e-commerce and live streaming businesses and raising the status of the department means that Xiaohongshu's exploration of live streaming e-commerce has been further accelerated, and the commercialization of the platform is also speeding up.

Finally, just last month, Xiaohongshu e-commerce made its first high-profile public statement and proposed the concept of “buyer e-commerce”.

On August 24, Xiaohongshu e-commerce made its first public appearance to the outside world, holding a talk themed "The Buyer Era Has Arrived" at the Link e-commerce partner week in Shanghai. At the meeting, Xiaohongshu COO Conan said that in the past year and a half, the number of Xiaohongshu buyers and managers has increased by 27 times, the number of active merchants has increased by 10 times, and the number of purchasing users has increased by 12 times.

In order to encourage more buyers to emerge, Gintoki, the person in charge of Xiaohongshu's live broadcast business, said at the meeting that the platform will launch the "Million Buyers Plan", and will provide 50 billion traffic to support "millions of buyers" and help 1 million Xiaohongshu authors create a new career.

Therefore, whether it is closing the Little Oasis and the Welfare Club, or adjusting the organizational structure and upgrading the e-commerce and live streaming businesses, Xiaohongshu’s meaning is obvious: concentrate all its efforts to engage in platform e-commerce and buyer e-commerce.

Xiaohongshu started to focus on e-commerce not too late, but has never made any significant breakthroughs in GMV.

In 2014, Xiaohongshu launched the Welfare Club; in 2016, Xiaohongshu opened up to third-party merchants and charged a certain percentage of commission; in 2018, Xiaohongshu launched its own brand REDelight; and at the end of 2021, Xiaohongshu launched Xiaoluoshu.

In 2020, Xiaohongshu's e-commerce GMV was US$1 billion, and Douyin's e-commerce exceeded 500 billion yuan in the same period. 36Kr reported that Douyin's e-commerce GMV target this year is no less than 2 trillion yuan.

Take the live streaming e-commerce business as an example. Xiaohongshu’s layout is actually not too late.

As early as June 2019, it was rumored that Xiaohongshu was testing its live streaming business. However, an organization revealed to Xinbochang at the time that the official stated that the purpose of live streaming was social sharing rather than commercial monetization. It was hoped that this kind of product promotion would be the sharing of good things by influencers from the bottom of their hearts, rather than pure selling in the form of shouting at stalls.

This has always been a contradiction between content and commercialization. This is Xiaohongshu's restraint and also a constraint on commercialization.

However, this year is indeed a little different.

Xiaohongshu has already produced many leading cases in the live streaming e-commerce market, such as Dong Jie, Zhang Xiaohui and Yi Nengjing, and has also established the foundation for its live streaming business: it does not have such a strong commercial style, but is truly a sharing of good things by experts from the bottom of their hearts.

According to Xiaohongshu COO Conan, buyers, managers, small businesses and other individuals "are the most dynamic e-commerce force of Xiaohongshu." Any ordinary creator who loves life may become a Xiaohongshu buyer. Xiaohongshu buyers are a group that "uses their sincerity, love and aesthetics; uses their own product selection, service and communication to create purchasing scenarios, and connects users and products through live broadcasts or notes."

Just like Douyin’s “interest e-commerce”, Kuaishou’s “trust e-commerce”, Xiaohongshu’s “buyer e-commerce” is also in line with its own community atmosphere and user groups.

The typical development path for a Xiaohongshu buyer is to manage the account through daily notes and accumulate fans; then reach users through live broadcasts to select products and complete transaction conversions in the live broadcast room.

Although it was four years late, and although the live streaming e-commerce track was already in full swing, Xiaohongshu still found the live streaming e-commerce direction that the platform wanted to pursue.

However, some merchants have said that Xiaohongshu's path is destined to make it very slow and difficult for merchants to create an account.

"You can't sell goods directly. Instead, you need to build a personal image through a large amount of content, and you also have to choose products that match the persona." An industry insider once said that this means that Xiaohongshu's live streaming sales path will be highly dependent on content and operations, and it will require a long-term process and it will be difficult to explode in a short period of time.

Whether this path can go far requires more stories.