XiaoHongShu (lit. ‘Little Red Book’) also known as RED, is the first ecommerce platform that successfully managed to fuse social media with e-commerce.
XiaoHongShu is a combination of Instagram and Pinterest i.e. a product search engine where users will search specific keywords and hashtags to find posts about the product, brand, or topic they are interested in learning more about.
Xiaohongshu is an essential tool for (mostly female) users to read and write product reviews. Buyers use it to do research before purchasing products.
If you are new to China, selling primarily fashion and beauty products and are looking to test the waters, launching an online shop on XiaoHongShu may be a good option.
XiaoHongShu describes itself as “a sharing platform for young people’s lifestyles through deep-rooted User Generated Content (UGC) shopping sharing community“.
The platform is designed to help users discover and purchase products, share recommendations, and provide helpful tips.
Xiaohongshu has definitely found its niche in the very competitive environment of Chinese social networks.
What makes XiaoHongShu different and successful is the process by which the user forms an opinion of the products before purchasing it.
Users often go on XiaoHongShu to investigate products and look for in-depth reviews and tutorials created by other users.
Just like Instagram and Pinterest, you can save posts you like, interact with content and other users, create your own content, connect with brand pages, etc.
With XiaoHongShu, you get the added bonus of in-app purchasing, a stronger sense of community, and more lengthy, detailed blog-post type content.
Followers can follow other users or be followed.
Users don’t always have a specific purpose. They look at things in a casual way, hoping that they might find something.
Users like to search product or brand name to find other people’s comments and reviews, especially beauty and fashion products.
XiaoHongShu is a highly content driven-platform. Users can only write original content with photos or videos, including production review, shopping experience, travel tips, etc.
XiaoHongShu is an open platform. Users can see everyone’s post. The system pushes posts to you according to your interest.
2. How to make cash
How does XiaoHongShu make cash
XiaoHongShu derives its revenue mostly from Platform and Sales Commission.
However, the platform has struggled to convince its active users to buy products directly on the platform. Instead, users tend to learn about products on the platform, but then head to Tmall or WeChat Mini-programs to purchase them.
In an effort to attract merchants to promote their products on the platform, XiaoHongShu announced in July 2020 that it would reduce its platform commission from ~20% to 5%.
This new commission is now identical to the commission charged by Tmall in the fashion and cosmetics industries, making the platform more competitive for merchants.
Xiaohongshu’s sales commission has also decreased to 3%.
With this adjustment to its commission rate, XiaoHongShu might convince merchants to invest more in Key Opinion Leader (KOL) and advertising resources to drive direct conversions.
This trend could lead end-users to gradually get used to buying directly from XiaoHongShu.
How do YOU make cash
XiaoHongShu provides you two options to sell your products through the platform:
Option 1: let XiaoHongShu pre-purchase products from you.
Option 2: Open your own brand store (however XiaoHongShu currently doesn’t accept individual sellers).
Note: On January 1, 2019, the China’s new e–commerce law took effect, requiring all cross-border ecommerce merchants to be linked with a Chinese entity.
Since then you, as a merchant, are required to provide the following documents from your associated Chinese entity:
– Business License
– Customs Registration License
– Authorization Letter from the Merchant designating the Chinese Entity
– Letter Of Consent from the Chinese Entity
Products to sell:
The most popular categories of products on XiaoHongShu are beauty, skincare, and female fashion.
However, growing categories now include: Travel, Fitness, Male Fashion and Grooming, Mommy-baby, and Food.
3. Admission process
Step 1 – Set-up an official Brand Account
1) Log in to the platform using your original XiaoHongShu user account.
2) Submit the necessary documents for verification.
3) Get Verified (XiaoHongShu will process your application in 3 days)
Step 2 – Set-up a digital store
The following steps walk you through the process of opening a brand store.
1) Register: Register on XiaoHongShu’s enterprise system, then log in with your registered email (must be a company email) and default password.
2) Fill in registration information: Fill in company information, financial information, details about the online shop and related documents for proof.
3) Qualification review: XiaoHongShu will review the submitted information and process your application.
4) Sign the contract: You can sign the agreement online. After checking, XiaoHongShu will send you an original paper contract.
5) Complete the training: You can open an online store and access to the enterprise management system after completing the training provided by XiaoHongShu.
4. Expected income
You should not expect sales volume as huge as Tmall.
However, things evolve quickly on the chinese market and it might be the right move to do, at least to get used to the platform before XiaoHongShu becomes even bigger.
Before starting, make sure that as an oversea company your business will be compliant with laws and regulations relating to exports and to/from China namely the E-Commerce Law from 2019.
6. Site preview
Mat is the founder of cashtipsandtricks and has been working in the financial sector in Luxembourg for the past 10 years and brings his insights as an investor and entrepreneur.