Today we are going to talk about Xiaohongshu e-commerce

This article analyzes and explains Xiaohongshu's e-commerce. It first briefly introduces the history of Xiaohongshu's e-commerce, then explains content e-commerce, and finally explains the current status of Xiaohongshu's e-commerce. This article is suitable for brand owners to read and rationally judge the pros and cons of Xiaohongshu's e-commerce.

Whether you are a heavy user of Xiaohongshu or not, you can hear its footsteps into the e-commerce business: in the past two years, it has been improving the resources and status of live streaming sales; this year, Dong Jie and Zhang Xiaohui’s live streaming sales became a hot topic; and on August 24, it held its first-ever "E-commerce Partner Week" event.

Strictly speaking, there are only two biggest topics in the e-commerce industry in 2023 - WeChat Video Account and Xiaohongshu. For brands, MCNs and e-commerce KOLs, whether to operate these two platforms is no longer a question (the answer is yes); the only question is how much resources to invest in these two platforms and how to do it?

Interestingly, there has been constant controversy over the e-commerce ambitions of Video Account and Xiaohongshu. Optimists believe that they will become the most mainstream e-commerce platforms, while pessimists accuse them of "lacking e-commerce genes" and "making a lot of noise but achieving little".

Today we will not talk about video accounts, but only talk about Xiaohongshu. It is not the first year that it has been engaged in e-commerce. To be precise, since 2014, it has tried various e-commerce formats such as self-operation, live streaming, and note-based sales.

Xiaohongshu is probably the most important "grain planting platform" in China, and there is absolutely no doubt about this. However, you should often hear another question: "Is the grass planting platform really suitable for weeding?"

Retail e-commerce is a systematic project, which is essentially an organic combination of "people-goods-market", and no part of it can be a shortcoming. As a content community with the slogan "Mark my life", it would be strange if Xiaohongshu did not engage in e-commerce; only by doing e-commerce well can the ceiling of commercialization be fundamentally opened and a virtuous circle be entered at the enterprise level. So the question is: where are the characteristics and differentiation of Xiaohongshu's e-commerce reflected?

"Content e-commerce" is not a new concept in China. Over the past few years, Kuaishou, Douyin, Video Account, etc. have all been scrambling to enter the e-commerce market, trying to drive e-commerce with content, and generally have achieved some results.

However, after carefully studying the above e-commerce platforms, it is not difficult to find a common point: they are all concentrated on the left end of the consumer "smile curve", focusing on white-label consumer goods with low customer unit prices. In a sense, they all started out as the same type as Pinduoduo.

First, let’s review the concept of the consumer “smile curve” (this concept was proposed and elaborated in a research report in December 2019). In the current Chinese consumer market, the two types of goods are the easiest to scale and profit:

The first type is products with low brand awareness, which have not occupied the minds of consumers and mainly rely on low prices and the "single product hit" model to expand sales, generally referred to as "white-label products". The main battlefields of white-label products are Pinduoduo, second-tier e-commerce, and live-streaming e-commerce platforms such as Douyin and Kuaishou.

The first type is products with high brand recognition, deep penetration in consumers’ minds, and relying mainly on quality, scarcity, and brand premium to expand sales, which are generally called “big brands.” The main battlefields of big brands are Tmall, JD.com, etc.

It can be seen that there is a huge depression, or "blank space", in the middle of the "smile curve". In China, the survival space of so-called mid- and low-end brands seems to be extremely narrow, and it is even difficult for people to remember them; the mid- and low-end sub-brands of top brands are also easily marginalized.

For merchants, they can either grit their teeth and run to join the ranks of big brands, or rely on low prices to increase sales, but they cannot stay at the level of "neither high nor low". This is actually very special and very abnormal - you can hardly see this phenomenon in developed countries in Europe and the United States, or even in major consumer markets around the world.

Why does the “smile curve” appear?

I think it is the result of three factors: China's manufacturing industry is too developed and the cost is too low; sales channels and consumption scenarios are underdeveloped and relatively simple; at the same time, consumers' cognition and preferences are still developing.

Price, as the most direct and concise product information (and the information that most people care about the most), can quickly reach consumers and influence their minds.

Brand is also an important type of product information, but it is much more indirect and complex, so only the best (big brands) can influence consumers' minds.

As for style, culture, differentiation, sense of design... these factors are certainly important, and some people do care about them, but they are often mixed in with a lot of noise and are difficult for consumers to clearly identify and accept.

Let’s recall the two most popular live-streaming e-commerce platforms in China: In Li Jiaqi’s livestreaming room on Taobao Live, you can see top-tier products from international beauty brands everywhere. These products have strong brand appeal, and a good discount is enough to arouse your desire to buy.

In the live broadcast rooms of Douyin or Kuaishou, you often see unknown brands or even no-brand products, with the main selling point being absolutely low prices, with the hosts shouting at the top of their lungs, "You can't get cheated with ten yuan"...

Regardless of the type of live broadcast room, the anchor usually spends very little time explaining each product, and rarely explains the product in a specific usage scenario. Is this really "content e-commerce"? There is certainly a content component, but it is difficult to say how much it is.

Some people believe that there is a clear concept of "consumption upgrade" or "consumption downgrade" in the domestic consumer market: before 2020, consumption upgrade was the main trend, so big-name products were popular, Tmall, JD.com and other platforms grew rapidly, and Pinduoduo also focused on branding;

In recent years, consumption has been mainly downgrading, so white-label products have made rapid progress. Douyin, Kuaishou, and Pinduoduo have all opened up the market with white-label hot-selling products, while traditional shelf e-commerce is on the decline.

The above view is true, but it is oversimplified. In reality, what really happens is often not a one-way "consumption upgrade" or "downgrade", but "consumption differentiation".

For example: a young woman in a first-tier city loves perfume and is willing to spend more than 1,000 yuan every month on it; a otaku in a second-tier city loves games and decides to save 8,000 yuan to buy a 4080 graphics card - then they have to save so much money in daily consumption, and an important way to save is to buy white-label products such as power strips, towels, slippers, socks, etc. through platforms such as Pinduoduo and Douyin.

"Spending money desperately on important things and saving money desperately on unimportant things", these two things can happen to the same person. This is the essence of "consumption differentiation"!

This consumption differentiation will inevitably lead to the transformation of the "smile curve" to the "W curve" - ​​when a person attaches great importance to and likes a certain consumer vertical field, he will inevitably develop distinct consumption preferences and attach higher weight to style, differentiation, and design sense.

This gives designer brands and D2C brands more space. They are neither white-label nor big-brand brands. They are based on specific user groups (rather than all users) and pay more attention to "steady and long-term" rather than "flooding" marketing promotion.

If you are a Xiaohongshu user, you should be particularly familiar with this trend, because this is what is happening on Xiaohongshu now, and it is also the basic foundation of Xiaohongshu's e-commerce!

Take my personal experience as an example: I have been looking at home decoration (especially soft furnishings) recently. This is a bottomless pit. From style to price to individual items, it is enough to make people study until late at night every day.

After trying many platforms, I found that Xiaohongshu is indeed the best channel to learn home improvement knowledge; when I asked friends for advice, they often threw me links to "Xiaohongshu Home Goodies Collection".

Before researching through Xiaohongshu, I only knew about a few large home furnishing stores such as IKEA, Red Star Macalline, and JuRan Home; now I know the names and addresses of more than 30 niche vertical home furnishing stores in Beijing.

For me, the biggest advantage of Xiaohongshu notes is that it stands from the perspective of lifestyle and design style, rather than "selling things" or "facilitating transactions"; it often records non-standard products rather than standard products that can be found everywhere - this is the real "planting grass".

Under the "Home Goods Notes" section of Xiaohongshu, people often ask: "How do I buy these things?" Unfortunately, many designer brands and offline boutiques only have Xiaohongshu homepages and no stores, so it is impossible to place orders directly.

Therefore, many users suggested that Xiaohongshu home furnishing KOLs should simply play the role of "buyers" themselves and open Xiaohongshu stores to sell their favorite products.

This is exactly the development direction of Xiaohongshu e-commerce at this stage! Let more and more KOLs serve as "buyers" and provide options for pulling out the grass while planting grass. If it is operated well, it will be a virtuous cycle.

In fact, the home furnishing category values ​​offline experience, and the demand for online shopping is not that strong. If it is replaced with clothing, beauty, sports and outdoor... these non-standard categories, the "planting/pulling" closed loop potential will be greater.

Coincidentally, a few days ago I had coffee with a friend who works in the financial industry. His wife happens to be a KOL on Xiaohongshu, who mainly produces lifestyle content (including home furnishings). This girl only works on Xiaohongshu and Weibo.

Because it mainly consists of picture and text notes, it does not do much on Douyin and Kuaishou; because its content category is lifestyle, other picture and text platforms are obviously not as good as Xiaohongshu, and Weibo is the second communication platform for "going out of the circle".

In previous years, due to the underdeveloped commercialization of Xiaohongshu, KOLs like her often had to try to make money through video and multi-platform operations after reaching a certain size.

However, since the beginning of this year, Xiaohongshu live e-commerce has grown rapidly, and she has made a lot of money from it, so she has become more determined to stick to Xiaohongshu. I believe this case is quite representative.

As far as I know, the hot-selling products on Xiaohongshu this year are often fashion, home furnishing and other products with good customer unit price, certain quality and design. . Some people may wonder, in the context of "consumption downgrade", is there still demand for these products?

However, as I have analyzed above, simply talking about "consumption upgrade" or "downgrade" is one-sided. What is really happening is "consumption differentiation". The above-mentioned demands will not only exist, but also have a growing trend. Such demands will be met by non-standard products of D2C brands, designer brands and buyer stores, and these businesses just can't do without content!

Strictly speaking, the "content e-commerce" of short video platforms is still traditional e-commerce under the banner of "content", focusing on impulse consumption of white-label standard products, and the so-called content scenes are often "shouting-style live broadcasts". However, in the non-standard categories that focus on long-term consumption, there is still a lot of uncultivated virgin land.

Short video platforms have certainly seen these needs, but their product forms and operational ideas will not prioritize meeting these needs. Moreover, these non-standard categories located in the middle of the consumer "W curve" are difficult to quickly increase in volume by high-profile promotions, and can only be slowly cultivated and intensively cultivated. This leaves Xiaohongshu e-commerce with a unique and broad space.

So, can Xiaohongshu e-commerce become a scalable e-commerce platform? My answer is yes. Moreover, Xiaohongshu e-commerce may become the only platform among the mainstream e-commerce channels in China that specializes in the middle section of the "W curve" and excels in non-standard products, D2C, designer brands, etc.

There are thousands of "buyers" in the huge KOL group of Xiaohongshu, some of whom have already tasted the sweetness. Once the momentum is formed, they will not have to operate on multiple platforms like many predecessors to find monetization opportunities, but will take root on the Xiaohongshu platform; this will also mean the solution to the commercialization problem of Xiaohongshu KOL itself.

Of course, as mentioned above, e-commerce is a systematic project and cannot be achieved overnight. In particular, technical infrastructure, fulfillment and customer service are all dirty and tiring work that requires years of hard work; this is why many content platforms have not been successful in their transformation into e-commerce.

This article only points out a possibility for Xiaohongshu's e-commerce success from the perspective of users and products. Whether the possibility will turn into inevitability depends on long-term efforts and strong execution. Let's wait and see.

Author: Pei Pei, leader of the Phantom Thieves WeChat public account: Internet Phantom Thieves