Xiaohongshu started e-commerce by selling 550,000 clearance items

Xiaohongshu is going to focus on "weeding out". Are merchants flocking to Xiaohongshu to "clear their stock"? What kind of customer base are attracted by these "clearance" products promoted through Xiaohongshu notes? Compared with other platforms, do "clearance" products really have price advantages? Let's take a look at this article to understand the "clearance" low-price cards played by Xiaohongshu. I hope it will be inspiring to you.

Xiaohongshu doesn’t want to just be a “grass-planting” service. In March this year, Dong Jie’s live broadcast had a GMV (platform transaction volume) of over 30 million yuan, with ballet shoes priced at 4,932 yuan and cardigans priced at 5,200 yuan all sold out. Users joked that “you can’t leave Dong Jie’s live broadcast room without spending five figures.” In April, Xiaohongshu restarted the “note-based shopping” service. Merchants can cooperate with influencers on the platform and click on the associated products to jump directly to the store on the Xiaohongshu platform to complete the purchase.

The live streaming sales that broke the circle and the restarted note-based shopping guides both show that Xiaohongshu is unwilling to be just a "life guide" lying in users' favorites, and has begun to explore new paths that are different from shelf e-commerce and social e-commerce.

Dong Jie's live streaming brings goods, and the average customer spending is quite high

Data released by business intelligence service provider QuestMobile in April 2020 showed that Xiaohongshu’s average sales conversion rate was 21.4%, far exceeding Douyin’s 8.1%, Kuaishou’s 2.7% and Weibo’s 9.1%. However, Xiaohongshu was previously seen more as a “channel”, and consumers were used to “planting grass on the site and making transactions outside the site”.

Xiaohongshu has made the market see the hidden consumption potential in the community and attracted merchants to compete for traffic dividends. Xiaohongshu obviously wants to build its own "planting grass-trading" field. The fastest ones are not brand merchants, but many new merchants with "clearance sale" logos. They quickly test the distribution of goods on Xiaohongshu, use one note after another to attract users to complete orders on the platform, and exchange experiences on how to do Xiaohongshu e-commerce in the community: "Don't sell too expensive, use clearance sale and special price to increase sales, and a note that goes viral can make a store popular."

This strategy is somewhat similar to the early paths of Douyin and Pinduoduo. Xiaohongshu uses traffic, data and new actions to tell an attractive story, uses benchmark cases (Dong Jie) to attract anchors/institutions, and attracts "clearance" merchants to quickly enrich the merchant volume. Xiaohongshu needs to combine benchmarks and volume to allow users to form a closed loop from planting grass to consumption on the platform.

1. 550,000 clearance items

Sun Yu, who is still a college student, has recently become addicted to "shopping" on Xiaohongshu. She likes brand clearance cosmetics, JK uniforms that are being cleared out at stores that have closed, and accessories that are being cleared out by OEM factories. "The average price is no more than 50 yuan, which is very suitable for us female college students."

Many clearance items on Xiaohongshu

These products marked as "clearance sale" attracted many users like Sun Yu to place orders, and many merchants also flooded into Xiaohongshu with various products marked as "clearance sale".

Searching for "clearance" on Xiaohongshu shows more than 550,000 items with the title and label "clearance". Observing these products, we can find that the SKUs are mainly concentrated on consumer goods for women. There is everything from women's clothing, cosmetics, accessories to daily necessities. The top two links with the highest sales are the hot girl camisole with a starting price of 15.9 yuan and more than 13,000 pieces sold, and the cast iron pot exported to Japan with a price of 39.8 yuan and more than 7,000 pieces sold.

"Clearance" often means low prices, but the "clearance" products on Xiaohongshu do not have a strong price advantage. If you search by image on other e-commerce platforms, you will find the same item at a lower price. The same item on Pinduoduo is priced at 15.9 yuan for the hot girl vest on clearance on Xiaohongshu, and the same cast iron pot on clearance can be found on Taobao for 29 yuan.

The same item on Pinduoduo is cheaper than the clearance price on Xiaohongshu

Youzi, who used to be the owner of a JK uniform store, started to clear out inventory on Xiaohongshu. "The threshold for opening a store on Xiaohongshu is low, the investment is small, and the traffic pushed is very accurate, and the competition is not fierce." When talking about the fact that some "clearance" products on Xiaohongshu do not have price advantages, Youzi said that it may be because Xiaohongshu users are "not sensitive" to prices.

Youzi told E-Commerce Online that a large number of JK uniform stores closed down last year, and merchants began to clear out their remaining stock in various channels. The prices on other platforms would be 5-10 yuan cheaper than on Xiaohongshu, but many female users of Xiaohongshu would not compare prices. "Some merchants without sources directly purchase goods from other platforms and sell them on Xiaohongshu after adding a markup."

In the past, merchants and brands positioned Xiaohongshu more as a platform for "planting grass" and attracting traffic, or a position to build brand image, rather than a sales channel. In 2021, Xiaohongshu launched the "account and store integration" to lower the threshold for opening a store. Many merchants and influencers have begun to try it out. Huazai, which sells cosmetics, is one of the merchants who tested the waters.

Xiaohongshu’s “account and store integration”

In Huazai's opinion, the current traffic value of Xiaohongshu is greater than its sales value. "It has high requirements for content and requires extra effort. Without exquisite pictures and content, it is difficult to get good traffic." Huazai tried to open a Xiaohongshu store in 2022. Unexpectedly, a note about clearing out lipsticks became a hit, directly clearing out all the inventory, and also boosted the data and product sales of other notes on the homepage.

These merchants who started out by "clearing inventory" are almost all small businesses, and many of them are sellers without sources of goods. Some communities that teach side jobs have even launched "Little Red Book's no-source e-commerce tutorials." "Little Red Book's e-commerce is in its bonus period," "The entry threshold is not high," "You can open a store and place orders even if you have 0 fans, and a monthly income of over 10,000 is not a dream," the merchants throw out attractive stories and work hard to promote their businesses.

2. One note, 20,000 yuan profit

Xiaohongshu has been engaged in e-commerce for nine years.

In 2014, Xiaohongshu first started cross-border e-commerce by making shopping guides popular. Later, it also developed e-commerce businesses such as Xiaohong stores and its own brands. However, the splash has not been big. The main reason is that Xiaohongshu was previously hesitant about e-commerce.

In 2017, Qu Fang, co-founder of Xiaohongshu, publicly stated that Xiaohongshu is not an e-commerce company but an amusement park. "Everyone comes to this amusement park to browse and play. If you see something you want to buy, you can buy it, that's all."

Xiaohongshu has been emphasizing its "grass-planting" attribute for a long time and focusing on the community. It has no shortage of potential consumers, but lacks merchants and goods. Even though the content of the notes has a strong shopping guide advantage, Xiaohongshu has been making wedding dresses for others, and users have developed the habit of "planting grass on Xiaohongshu and pulling out grass on Taobao and other platforms."

Until the end of 2022, the e-commerce department, which was originally a first-level department, was transferred to the community department and managed by the community leader Conan. Xiaohongshu's e-commerce and community were further integrated. In March this year, Xiaohongshu also upgraded its live broadcast business to an independent department, further strengthening its e-commerce direction, and many merchants began to smell the scent.

Nian Nian opened a store on Xiaohongshu in 2021, but she clearly felt that the platform was not so "powerful" in promoting traffic to the store. Some notes with product links might even be restricted. "It was not until the end of last year that I felt that Xiaohongshu was constantly pushing traffic to merchants."

Merchants who sensed the trend quickly entered the market to grab the traffic and dividends on the platform. "Clearance" is more of a "hook" to attract traffic on Xiaohongshu.

Nian Nian has opened three stores on Xiaohongshu, with a monthly turnover of about 80,000 yuan. All three stores grew in volume thanks to a hit note, one of which directly brought in more than 20,000 yuan in profit. "Xiaohongshu's traffic is decentralized, and accounts without fans may also have hit notes."

Many merchants believe that Xiaohongshu has a unique long-tail traffic effect. The traffic on other content platforms is basically within 7 days, and some platforms even only have 3 days, while a popular note on Xiaohongshu can still have a lot of traffic after 7 days. Fan Yi, who sells Xiaohongshu e-commerce courses, told E-commerce Online that on other platforms, as long as it is cheap enough, there will be sales, but on Xiaohongshu, attractive content can make consumers impulsively place orders.

Now merchants know that hot-selling notes can drive the entire store, but they still have no idea how to make hot-selling notes. They can only cross the river by feeling the stones and imitate writing copy and making pictures.

Two different businesses, but the homepage content is highly similar

Everyone is imitating and copying, which has led to serious homogeneity of content for many businesses. Clicking on the homepage of a Xiaohongshu business selling pajamas, all the notes have highly similar titles, "Best friend praised her gentleness", "A style that has been asked a lot of questions", "I love it so much, it's really like a fairy", and the homepage of another business selling pajamas also has notes in a similar style. Even users feel aesthetic fatigue and complain: "Why is everything 'I love it so much'? I can't love it anymore."

Even if businesses imitate each other in writing copy and making pictures, they may not be able to create a hot-selling note. In order to have more possibilities for promotion, some businesses will post their own notes in the community to ask for mutual help and likes, and even buy comments to create a "false prosperity" in the comment area.

3. Xiaohongshu needs to make up for the "e-commerce infrastructure"

The low prices during “clearance” are inconsistent with Xiaohongshu’s labels of “refined, middle-class, and fashionable”, but Xiaohongshu currently needs this group of merchants offering “clearance” low prices.

From the integration of accounts and stores in 2021 to Dong Jie's current live streaming sales breaking the circle and restarting the sales through expert notes, Xiaohongshu is accelerating the pace of creating a closed loop of e-commerce within the platform. With Dong Jie's live streaming sales as a benchmark, many white-label merchants have quickly enriched the volume within the platform. The combination of the two has made up for Xiaohongshu's shortcomings in "people" and "goods".

But at the same time, Xiaohongshu also needs a better "place", returning to the infrastructure of the e-commerce platform, cultivating consumers' consumption habits on the platform, allowing users attracted by low prices and top anchors to stay on the platform for a long time, and completing the closed loop from planting grass to consumption.

In March and April this year, many merchants who engaged in private transactions and traffic diversion received warnings from Xiaohongshu. Mei Zi, who sells handicrafts, told E-commerce Online, "The official said that if transaction diversion is detected, the entire site will be banned and it will take 7 days to recover. Moreover, if it is detected again, it will be restricted and banned." In order to prevent being banned again, Mei Zi opened a Xiaohongshu store and took the initiative to let customers who inquire about orders come to the store to communicate, "I was scared by the traffic restrictions and bans." Xiaohongshu prevents merchants from diverting traffic and private transactions and allows merchants to return to the platform. On the other hand, it diverts merchants and subsidizes merchants on the platform with real money.

In January this year, Xiaohongshu's "Video" replaced "Shopping" which was originally in the bottom navigation bar, but now when you open Xiaohongshu, "Shopping" has returned to the bottom navigation bar. It is more convenient for users to enter the Xiaohongshu mall, and merchants are more likely to gain exposure.

Xiaohongshu’s “Surprise Box”

When Xiaohongshu users browse notes and products, a "surprise box" will pop up, which often contains a 5-yuan coupon for the entire store. Many Xiaohongshu users have expressed that they have noticed an increase in the frequency of "surprise boxes" this year. Coupons with low usage thresholds can facilitate orders and attract traffic to merchants.

Xiaohongshu’s frequent moves in e-commerce are all efforts to create a “place” suitable for consumption. However, in addition to “people, goods, and places”, the e-commerce foundation that runs through the entire process is the most critical.

Hua Zai told E-commerce Online that many merchants around him did not have a deep understanding of Xiaohongshu e-commerce. "Some merchants did not know that they had to download the Xiaohongshu merchant version to receive messages from users to customer service, resulting in many users sending messages but no customer service reply." Many users also shared their experiences of merchants not replying to messages. One user said that after she finally contacted the merchant, the merchant advised her to place an order on other platforms because "she had not yet figured out how to use Xiaohongshu."

In the subsequent fulfillment stage, "merchants fail to deliver goods" is the focus of many users' complaints. Some users waited for a month after placing an order but did not receive any logistics information, so they could only apply for a return. They also did not receive a satisfactory response when they complained to Xiaohongshu's official customer service.

Place an order on Xiaohongshu and have it shipped by Pinduoduo

Many people complain that the goods they buy on Xiaohongshu are not what they pictured. Merchants without sources of goods have made Xiaohongshu a "distribution" channel for other platforms. "When I shopped on Xiaohongshu, I actually received goods shipped by Pinduoduo."

This year, the competition among e-commerce platforms has returned to the essence of pursuing efficiency, products and services. Xiaohongshu needs to improve its "people, goods, places" and e-commerce infrastructure. The entry of many white-label merchants can supplement Xiaohongshu's "goods", but clearance sales at low prices can only attract a short-term wave of traffic. White-label merchants cannot bring long-term healthy development. Pinduoduo and Douyin, which previously relied on white-label merchants to increase their volume, are also constantly introducing brand merchants in the later stage to improve the e-commerce ecology within the platform.

As an e-commerce company, Xiaohongshu needs to tell a story beyond “clearance sales at low prices”.

Author: Wang Zhan

Source: WeChat official account: "E-commerce Online (ID: dianshangmj)"