E-commerce is deserted, but offline is bustling: Why is Xiaohongshu's monetization fragmented?

This article starts with the shopping experience of Xiaohongshu store, objectively analyzes the current fragmentation of Xiaohongshu, and the reasons why Xiaohongshu "itself" always seems to be unable to make money. It is recommended for those who want to understand the future commercialization path.

What is the shopping experience like in Xiaohongshu store?

A few days ago, Kass tried to place orders on Xiaohongshu several times. Unfortunately, the shopping experience was not pleasant most of the time.

There are two main problems: the first is that the actual product received is quite different from the seller's picture, which seems to be a continuation of the "filter controversy" surrounding Xiaohongshu for a long time; the second is that the platform's e-commerce infrastructure has a worse experience than other platforms, including but not limited to simple product details pages, difficulty in tracking logistics, and difficulty in complaining to the platform.

Looking back at the "chronicle" of Xiaohongshu's e-commerce closed loop, it can be traced back to December 2014, when the cross-border e-commerce platform "Welfare Club" was launched on the site. In the meantime, in order to vigorously develop its own grass-planting community ecology, Xiaohongshu also "marginalized" its e-commerce business.

However, Xiaohongshu's public revenue data for 2020 showed that e-commerce revenue only accounted for about 20% of total revenue that year. After that, it was obvious that the official paid a lot of attention to the e-commerce business, and successively launched the live e-commerce function, launched the "Dandelion" platform, and introduced the "account and store integration" mechanism. At present, there is no public data to show how fast Xiaohongshu's e-commerce has developed in the past three years, but judging from the feelings and feedback of many Xiaohongshu users around me, the construction of the platform's e-commerce closed loop may still be a long way to go.

In sharp contrast to the downturn in the official e-commerce business, the "private transaction" market of platform users is booming. Kass observed that many individuals and businesses have brought traffic into the private domain on Xiaohongshu and run their small businesses in full swing. In addition, Xiaohongshu has also become a good carrier for many "offline businesses" that were difficult to complete in the past.

In fact, an interesting phenomenon is that almost no one doubts Xiaohongshu’s monetization ability, but Xiaohongshu “itself” always seems to fail to make money?

01After years of developing e-commerce, are you still planting seeds after returning?

Caizi, a heavy user of Xiaohongshu, felt a little amused and helpless after receiving a mobile phone case purchased from a store on the platform.

Compared with the pictures posted by the merchant, the real thing has a stronger "plastic feel" : in the photos posted by the seller, the material of the phone case looks like a heavy frosted mirror texture, and the color is also the recently popular pink and purple; while the texture of the case received by Caizi is closer to the ordinary plastic case that costs three or four yuan each on Pinduoduo, and its printing craftsmanship and color also look a bit cheap.

What made her feel cheated was that the laser-like little stars that attracted her at first sight in the seller's display pictures were only "supported" by a piece of aurora paper when they became real objects...

The "buyer's show" and "seller's show" of the mobile phone case. This mobile phone case, which costs nearly 20 yuan, has been "drifting" on the road for almost half a month. Caizi's expectations for it have been raised to the highest level. The gap between the "buyer's show" and the "seller's show" makes her a little unacceptable.

With the mentality of "Is it because I am greedy for a bargain", Caizi ordered the same phone case on Taobao for comparison, and deliberately chose a store with the same price as the one on Xiaohongshu. However, she was not disappointed when she received the actual product this time. When the two phone cases were placed together, she was more determined to give up shopping on Xiaohongshu for the time being.

Talking about this unhappy shopping experience, Caizi believes that it is not only the store's problem, but the Xiaohongshu platform also gave her a very bad experience.

"After placing an order, it was difficult to check the order. There was no conspicuous logo on the homepage (I placed the order in January, when the first-level entrance to the Xiaohongshu homepage was changed from shopping to video, and now the entrance has changed back to shopping). I fumbled for a long time before I found that I could enter the order page from the three horizontal rows in the upper left corner of the personal center. Later, I wanted to complain to the merchant that the goods were not what they said, but I found that the official complaint channel could not even provide feedback on the quality of the goods, so I could only suffer in silence. "

Screenshot of Xiaohongshu product complaint page There are more than one person who feels the same as Caizi. Kass went to the product page and found that the few comments were all complaints about it. Moreover, even though the product score was as low as 2.6 points, it was still the top seller of the store that month. In a sense, it seems to reflect the irrationality of Xiaohongshu's e-commerce traffic recommendation.

Screenshot of the merchant's Xiaohongshu account

In August 2021, Xiaohongshu launched the "account and store integration" mechanism, which lowered the threshold for users to open stores on the platform. Since then, the number of influencers opening stores on Xiaohongshu has increased significantly, including content influencers who migrated from platforms such as Douyin and Kuaishou, as well as many native platform users who have never tried e-commerce sales.

In the eyes of outsiders, Xiaohongshu's strength lies in the strong atmosphere of grass-roots promotion within the community, and the interaction and feedback between users are relatively real and friendly. All these favorable factors can promote the development of Xiaohongshu's e-commerce.

But at present, Xiaohongshu's own construction and operation obviously haven't "kept up". The reason is that founder Qu Fang once clearly stated: Xiaohongshu is not an e-commerce, but an amusement park. "The essential logical difference is that users don't come to buy things. The content community is the horizontal underlying architecture of Xiaohongshu, and e-commerce is just a vertical monetization method." Therefore, for a long time, the development of Xiaohongshu's e-commerce seemed slow.

It is worth noting that Xiaohongshu’s previous “falling behind” has made it miss the opportunity to attract merchants. The lack of platform traffic, customer base, and experience have made merchants retreat and hesitate to join. Many of the “merchants” currently active on the platform are just “middlemen” without any supply chain, and they don’t even take the responsibility of self-delivery.

Screenshot of Xiaohongshu user notes A heavy Xiaohongshu user said that he had recently ordered a lot of spring clothes on Xiaohongshu, but the merchants shown on the logistics page were almost all from Pinduoduo. "There are even Pinduoduo merchants who directly mark on the courier bag that this Xiaohongshu order is from Pinduoduo, asking me to place the order directly on Pinduoduo, where the price is nearly half of that on Xiaohongshu."

It seems that Xiaohongshu has not yet escaped the fate of promoting products for other e-commerce platforms.

02Booming offline business

Unlike the relatively slow progress of its official e-commerce business, the "private transactions" among its users seem to be getting better and better.

During the Spring Festival, the "pet care business" on Xiaohongshu was quite popular.

Little Red Book

Hedgehog is a college student in Beijing and a pet sitter who has completed professional training. She usually attracts customers through platforms such as Xiaohongshu, Xianyu, and Miaoxiang, and works part-time as a pet caregiver. The fee for feeding each pet ranges from 30 to 100 yuan.

She told Kas that this year's Spring Festival orders were particularly large, several times that of previous holidays. At most, she had to visit 10 households a day, and had to reject many orders. Among these customers, many found her through Xiaohongshu.

"I will post some videos of myself taking care of cats and dogs on Xiaohongshu every day, and then clearly state my order standards and fees. Users who have needs will directly chat with me privately."

In fact, Hedgehog has less than a hundred fans on Xiaohongshu, but this kind of "useful" information can be well disseminated on the site, and offline business customers that are difficult to obtain on other platforms seem to be "easy to come by."

This is mainly due to the overall atmosphere of the Xiaohongshu community, and the fact that most of the users on the platform are young women living in first- and second-tier cities, who have a stronger sense of trust in each other. Therefore, for risky behaviors like letting strangers enter the house alone to take care of pets, people seem to prefer to find suitable partners on Xiaohongshu.

Recruitment ads posted by Xiaohongshu users

When it comes to the cost, Hedgehog admits that the fees on Xiaohongshu are relatively cheaper, because they are all private transactions, and there is no platform commission. "In fact, I trained for a pet care license on Miaoxiang, and I can also receive orders there, because it is a platform dedicated to pet care, and the facilities are more complete. But firstly, the fees there are higher, and secondly, the traffic is much smaller than that of Xiaohongshu, so in most cases I still receive orders from Xiaohongshu." Hedgehog said.

In addition to pet-sitting, many offline businesses and services have found fertile ground for survival on Xiaohongshu. The reason for this may be that as a platform where users share various life contents, Xiaohongshu may be the closest to the concept of "local life" that is often mentioned nowadays.

For example, during the epidemic last year, Kas saw many posts on Xiaohongshu about changing medicine, sending medicine, and requesting medicine. During the most difficult period when ibuprofen was hard to come by in Beijing, many young people found sources of medicine through Xiaohongshu.

For example, many real estate agencies have gradually flocked to Xiaohongshu. Just based on the ones that Kas has actually seen, there are real estate agencies, study abroad agencies, medical service agencies, etc. Even when users leave a message under the photos of houses shared by some home bloggers saying that they like them, an agent will reply that they have houses to recommend.

What people talk about most is the wave of store visits and check-in crazes that have been triggered by Xiaohongshu. According to media reports, many "old stores" have become popular online celebrity stores under the enthusiastic recommendations of Xiaohongshu users, especially saving the business of many merchants during the difficult times in the past.

Xiaohongshu Merchant Notes

03Why is Xiaohongshu’s monetization “fragmented”?

According to the publicly available data, the proportion of Xiaohongshu's advertising and e-commerce revenue is seriously unbalanced, resulting in a single revenue model, which is not conducive to the further development of the platform. This is also the reason why Xiaohongshu has been quite active in building an e-commerce closed loop in recent years. However, as mentioned above, since its inception, although Xiaohongshu has undergone multiple iterations and upgrades, it has always maintained its original intention of being a content community. Therefore, many changes have focused on product content upgrades, lacking breakthrough innovations in the e-commerce level.

In Kas's opinion, the main reason for the various "monetization split" problems currently occurring on the Xiaohongshu platform lies in the relationship between people and goods. As mentioned above, Xiaohongshu is not even short of supply at this stage, but has no supply. Many merchants active on the platform do not have their own supply chain, but simply transfer product information from other platforms to Xiaohongshu to make money from the information gap. In this case, on the one hand, the quality of the goods is difficult to guarantee, and on the other hand, it is almost impossible to maintain old users. In the long run, the reputation of the platform on the e-commerce side will only continue to decline.

As for people, if the bottom line of a business deal is the trust of consumers in merchants, then Xiaohongshu users do not distrust Xiaohongshu merchants, but rather they trust merchants too much and lose their perception of how the platform works. In other words, Xiaohongshu users currently trust other users on the platform, rather than the Xiaohongshu platform itself.

As a content community, Xiaohongshu has never managed to build users' trust in itself as an e-commerce platform. People consume on Taobao, JD.com, and Pinduoduo out of trust, but it is almost impossible for fans to consume on Xiaohongshu out of trust.

Of course, cultivating user trust is multifaceted. As mentioned above, at this stage, Xiaohongshu does not even have complete basic e-commerce facilities. Naturally, it is difficult to catch up with the giants and win the hearts of users in a short period of time.

Xiaohongshu may have lost its advantage in traditional e-commerce, but fortunately, it still has its own unique advantages. The high stickiness, strong consumption power and content preference of the crowd can help Xiaohongshu continue its grass-growing business. "Usefulness" will always be Xiaohongshu's core competitiveness, which enables it to stand firm even in the face of "siege" by large companies.

Since the second half of last year, Xiaohongshu has also been working hard to improve the "twisted" state of the platform's commercialization and continue to expand the platform's advertising and marketing value. According to reports, Xiaohongshu's splash screen ads now support jumping to Taobao brand event pages. Users can click "Jump to a third-party page or app" at the bottom of the splash screen to complete the jump. But in addition to this, Xiaohongshu's notes and live broadcasts currently do not support jumping to external links. In addition, the platform has also made new moves in the cooperation between brands and bloggers on business notes.

In January this year, Xiaohongshu upgraded the Dandelion brand mark component, upgrading the original "brand cooperation mark" to a "brand mark component", and brands can choose to display or not display it based on their marketing needs. In other words, in the future, brands and bloggers can decide whether to display the "cooperation mark" in the report notes based on their wishes. This change will be more friendly to the interactive data and traffic recommendations of high-quality business notes, which is good for both bloggers and brands.

Obviously, Xiaohongshu has planned more directions for its future commercialization.

Author: Jiangbei

Source: WeChat public account "CaasData (ID: caasdata6)"