26-11-2022

6 minutes to read

Little Red Book

Content:

As already noted, the majority of users come from cities of the first and second categories (57% live in cities of the first category). This means that most users of the platform have a higher purchasing capacity than users of other platforms, whose target audience is mainly residents of cities of the third and fourth categories.

In 2019, more than 200 million people use the application, including 30 million monthly active users (MAU). In addition, the application covers 200 countries and regions, providing its customers with an efficient services for delivery of the best products from around the world.

Reliable platform

Due to the fact that the application was independent of advertising from the very beginning, close ties were established between it and users, on the basis of which a high level of reliability was achieved. Trust, a sense of community and an exchange of opinions are attributable to the fact that Xiaohongshu relies entirely on user-generated content that ensure this reliability.

The platform is developing rapidly owing to the behavior of Chinese consumers. Indeed, Chinese potential buyers usually initially evaluate the quality of a product or service before making a purchase. They are looking for information from experts or other users, as well as reviews and reviews of the products they want to buy. Thus, Little Red Book is an ideal platform for finding such information.

Now Xiaohongshu has transformed from a platform for reviews and information exchange into a platform for shopping. A year after the launch, online stores also began to be hosted on the platform. Thus, a shop-in-shop structure was created at Xiaohongshu, where various companies can promote their brands.

Now a whole ecosystem has been created on the Xiaohongshu platform, within which users can exchange clothes, DIY, tips, recommendations and reviews of various products and services, while having links to these products in the description in order to buy them directly through the platform.

An excellent platform for foreign companies

Xiaohongshu offers a new way of consumption, more convenient and more in line with the interests of users.

Due to the fact that Xiaohongshu occupies an increasing share in the cross-border e-commerce market, it is very important for companies intending to launch their brand in China to take this factor into account.

Xiaohongshu allows creating a special relationship between the company and the consumer. A brand or product is promoted through the platform by a person known to the consumer (in most cases, a key opinion leader), which in turn helps attract more customers than in case should the company itself do it.

You will find more detailed information in this article about why Xiaohongshu is an excellent platform for foreign companies.

What is Xiaohongshu's place in the Chinese cross-border e-commerce market?

The cross-border e-commerce market in China is very competitive. The market leader now is Kaola platform, which controls almost 25% of the market share, followed by Tmall Global with 20.3% and vip.com with 15.7% market share.

In turn, Xiaohongshu is both a social network and an online trading platform and occupies 6% of the market. About the same share is controlled by its closest competitor – Yangmatou with a 5.8% market share.

Despite the fact that such a market share may not seem particularly impressive, in 2017, Xiaohongshu became the No. 1 platform during the celebration of Bachelor's Day (November 11) – an event when millions of Chinese visit electronic trading platforms in pursuit of discounts. Then it was visited by 15.4 million active users, which was almost three times the number of active visitors of the market leader – Kaola (5.3 million).

The platform is popular not only among users, but also among various companies. In 2018, Xiaohongshu established partnerships with many companies, including Innisfree, Estée Lauder, Lancôme, Rayban, etc.

Thus, Xiaohongshu is not just a fashionable social network and online trading platform, but also a new platform for foreign business in China. The company is growing rapidly. Two years after the launch, the total sales volume on Xiaohongshu was one million yuan, and then within just 6 months this amount reached one hundred million yuan.

It is expected that in the future Xiaohongshu will become the leading social network/e-commerce platform in China. In 2018, Xiaohongshu achieved total sales of 1.4 billion yuan and announced that the platform's turnover will reach three billion yuan by the end of 2019.

Chinese digital giant invests in Xiaohongshu

Indeed, Xiaohongshu is part of a very narrow circle of recipients of funds from such digital Chinese giants as Tencent, Alibaba, as well as GGV Capital, ZhenFund, Tiantu Capital, K11 Adrian Cheng and Genesis Capital.

At the beginning of 2018, Alibaba and other major Chinese e-commerce platforms participated in the financing of the company in the amount of $ 300 million. According to the representative of Xiaohongshu, this amount will be used to recruit new talented employees, as well as to develop market research programs and to increase the user platform.

Xiaohongshu's success has attracted both many independent Chinese investors and China's most important digital companies. Today, the platform is one of the most important and highly regarded unicorn companies in the world.

What is the Xiaosongshu community like? What are the main trends?

Xiaohongshu community mostly consists of men and women born in the 90s and 2000s. 66% of the audience is under 30 years old, and Miranda Qu Fan even stated in an interview that this community is getting younger and younger, since 70% of users were born after 1995. It is also worth noting that 88% of users are women.

As already noted, the majority of users originate from the cities of the first and second tier (57% of users live in the cities of the first tier). This means that most users of the platform have a higher purchasing power than users of other platforms, whose target audience is mainly residents of cities of the third and fourth tiers.

This makes Xiaohongshu one of the best platforms to attract young and wealthy female customers.

What is the main trend on the Xiaohongshu platform? What are the buying preferences of its users?

Based on the fact that Xiaohongshu is mainly used by women, the most popular products on the platform are those that relate to the interests of women. Consequently, the top-selling products are as follows: clothing, cosmetics, food products, products for mothers, accessories, fitness equipment and vitamins.

It would be a big mistake to believe that Western and Chinese youth act and think alike. The Chinese have their own consumer habits and their own special consumer behavior. To be successful on the platform, companies that place their products on Xiaohongshu must adapt to these conditions.

How does Xiaohongshu work?

We can picture the company as a mixture of Pinterest (posting various content), Instagram (where it is now possible to display products on images) and e-commerce platforms. As already noted, initially only articles, images and product reviews were posted on the platform.

Now Xiaohongshu is something bigger. Users can do the same as before, but in addition to this, shop-in-shop products are placed in pictures and articles, which have a direct link to the store built into the Xiaohongshu ecosystem. Thus, the decision-making and purchasing can be made within a single application - Xiaohongshu.

The display on the main menu of the application is similar to Pinterest: photos and videos displayed in windows with names. The main menu corresponds to the “faxian” page (English discover). This page displays the content of accounts that the user is not subscribed to.

Two other pages are displayed at the top: "guangzhu" and "fujin". "Guangzhu" is the page of the account to which the user is subscribed. "Fujin" is a very useful page, as it analyzes the content created nearby. This means that if the user is traveling, the user can use fujin in order to get a review of the store, restaurant and entertainment nearby.

Guangzhu

When you open a post, you are provided with an in-depth analysis on the chosen topic. In this example, we have clothes with links to each product, comments on quality, etc.

As in Pinterest, the accounts you subscribe to are placed in the news, where you see their posts in the form of numerous windows with photos and videos.

Fujin

When you open the fujin page, you have access to a list of all shops, restaurants and cafes.

When you open a post from the list, you get an in-depth analysis of a place with a lot of pictures. Users can also check the comments to find out other people's opinions about this place.

At the bottom of the page you will see a small button with a “+" sign. It is used to publish content such as small texts, images and videos. Notification center and information about your profile is provided to the right of this button. The store's logo for direct access to the platform is provided on the left.

Sharing function

Recently, Xiaohongshu has developed a sharing feature that allows users to share posts on other social networks, such as WeChat and Weibo, as well as by e-mail and text messages. Initially, Xiaohongshu sought to keep its content within the framework of the platform, but now this content is becoming more and more integrated into the Chinese digital ecosystem.

What place does Xiaohongshu occupy in the daily lives of users?

Xiaohongshu has definitely taken its niche in the very competitive environment of Chinese social networks. Chinese users tend to search for detailed information about the products they are going to purchase. In this regard, Xiaohongshu has become an ideal application for achieving these goals and perfectly meets their needs.

In addition, Xiaohongshu is a social network that can be a source of inspiration like Pinterest and Instagram. So, users like to spend time there even if they are not going to buy anything. Xiaohongshu is an excellent social network where you can be inspired by publications on fashion, make-up, art, photography, cooking and so on.

The principle of working with Xiaohongshu is addictive - the user scrolls through the news feed, looks at photos and videos, various tutorials, DIY and so on. As soon as a post is opened, the user continues to scroll down the feed to search for similar content.

Xiaohongshu users are very active. The platform gives them the opportunity to share content, like and comment on posts. This is exactly the part of the platform that attracts people, as well as the reason for the trust of users.

Algorithm for current content

As in many other social networks, in order to create relevant content, Xiaohongshu has an algorithm for adapting content to user preferences. This algorithm is based on what the user likes, what he looks at and comments on the most, as well as on the type of content that the user posts and on the accounts to which he subscribes.

Is Xiaohongshu a search engine?

Being a highly entertaining app, Xiaohongshu positions itself as a search engine for its users. Why? Because Chinese users trust the recommendations of experts or people who have already checked the products they are interested in. Thus, before making a purchase, Chinese users usually visit Xiaohongshu in order to study the company/ brand, read reviews, look at images, and also find out what authoritative opinion leaders think about a particular product or service.

How to sell products on Xiaohongshu?

In order to use Xiaohongshu as a trading platform and social network, companies need to create an official account. Due to the fact that Xiaohongshu relies on cross-border e-commerce, Little Red Book account creation process is not as complicated as it can be on other platforms.

Company account

To create an official account, the company must first create a personal account, and then provide Xiaohongshu with certain documents including:

Company name, logo and trademark
The industry in which the firm conducts its activities
Company description
Headquarters address
Name and contacts of the responsible person
A letter attesting to the company's authentication
Business registration or certificate of registration

Registration of an official account is much cheaper than on large platforms (for example, Alibaba or JD).

However, the official account also has disadvantages, namely:

A higher percentage of commission charged on the goods sold

Open an online store on Xiaohongshu

Before opening your online store on Xiaohongshu, you need to choose the type of business model your company will use to work on the platform.

There are two options:

Xiaohongshu supports your products and buys them in advance
The company creates its own store

Therefore, there are various steps leading to the opening of the store:

Registration on Xiaohongshu platform via the company's e-mail
Filling in information for registration, including:
- Basic information about the company (responsible person, trading model, headquarters address)
- Company qualification (business registration or certificate of registration)
- Financial information (bank name and address, currency for settlement, SWIFT code and IBAN)
- Additional documents for companies selling products of various brands: a power of attorney from the brand owners to sell products on Xiaohongshu (with the official seal of the company)
Once these steps are completed, Xiaohongshu will analyze your registration application and process it.
The final step is to sign the agreement online and in paper form
The company has access to its online store, as well as to various trainings on the Xiaohongshu management platform

What will the official account and online store look like?

In general, this trading platform is similar to any other platform. The real value of posts on the platform is that the products posted on it are directly linked to the online store.

This is the main page of the company's official account with a small introduction consisting of its history and products, as well as posts and articles from customers.

User content about Gucci bag

How is logistics managed?

In March 2019, the government launched new regulations for domestic and cross-border e-commerce.

How do these new measures affect foreign companies on Xiaohongshu?

Firstly, a company that wants to enter the market must comply with the laws and regulations related to exports to China and imports from China. Chapter 5 of the E-Commerce Law states that China should promote the development of cross-border trade. In order to promote such development, it is necessary to provide foreign enterprises with the necessary management services and tools.

In this regard, China also wants foreign companies to merge with Chinese legal entities, for example, companies engaged in cross-border e-commerce are registered at Chinese customs through a company registered in China.

Every company operating in the field of cross-border e-commerce and not registered was cut off from the Chinese market in April.

Documents required to start a business:

Business license
License for customs clearance
Power of attorney from a firm choosing a Chinese company
Consent letter from a Chinese company

Xiaohongshu logistics

There are two main ways to implement logistics on Xiaohongshu:

Store goods in Chinese warehouses and use local logistics services (usually used for small, widely used goods)
Use international logistics services to deliver the product (used for larger and more expensive goods)

If Xiaohongshu wants to maintain control over the supply chain, it means that it confirms the partnership with the company and guarantees decent quality of goods and services for users of the platform.

It is based on this model that Xiaohongshu has developed a logistics network made up of 7 international distribution centers, 10 transport centers and 9 import clearance centers. In addition, the quality of the product is checked at Xiaohongshu warehouses, and along with this the faster delivery to the customer is ensured.

Xiaohongshu also provides a sixty-day free storage period (excluding diapers, bedding, etc.). The storage fee is charged after this period. In addition, this logistics management method allows companies working with Xiaohongshu to incur very small logistics costs. Xiaohongshu's fee is only 5%.

Another advantage of delivery using Xiaohongshu logistics services is that the company does not need to sacrifice its reputation. They can adapt the packaging to the brand (color, logo, etc.).

How much will it cost to launch a business on Xiaohongshu?

Xiaohongshu is a rather expensive platform. When creating an account, several payments are charged: a fee both for opening an online store and for its management.

Deposit

When creating an account, the company must make a deposit, the amount of which depends on the type of business it conducts. This amount also depends on the type of online store that the company wants to create. The average deposit amount is 20,000 yuan (almost $2,900).

Current expenses

The deposit does not include current expenses which are a fixed and are paid monthly. This amount varies from 10,000 to 60,000 yuan ($1,450 - $8,800)

These payments will need to be paid after the contract with Xiaohongshu is signed. A fee is charged from the company in the amount of 15 to 20% of the cost of selling in the platform.

Commission

Xiaohongshu also charges a commission on every sale on the platform. Undoubtedly, this percentage depends on the company, as Xiaohongshu enters into partnership agreements with certain companies, thereby attracting the flow of goods. At first, the fee was charged in the amount of 5% of sales revenue. In 2019, this figure varies on average from 10 to 15%.

Other payments

All these payments do not take into account the cost of marketing and advertising companies, which are an important factor contributing to a successful start on the platform.

These additional payments include advertising companies from reputable opinion leaders, which will be discussed later in this article. Payments vary greatly. On average, the most authoritative opinion leaders cost from 50,000 to 100,000 yuan (7300-15000 dollars, respectively). Mid-level opinion leaders charge an average of about 10,000 yuan (or $1,400). Finally, less reputable opinion leaders ask for 3,000 to 5,000 yuan ($440-730).

Who is a key opinion leader? Why is Xiaohongshu an excellent platform for promotion with the help of opinion leaders?

Key opinion leaders (KOL) are influential personalities in social networks and various fields, such as cinema, music, fashion, and so on. In most cases, KOLs have hundreds of thousands (and sometimes millions) of subscribers.

Why are we talking about KOL? Because they are one of the most important aspects of the functioning of Xiaohongshu. Today, in order to do business and be successful in China, it is important to interact with KOL. They are the ones the Chinese user trusts. Sometimes, KOL's opinion becomes more important than, for example, the opinion of other users or their acquaintances.

SEM and advertising are not as effective. In this respect KOL is a new type of advertising that has the effect of word of mouth, spreading useful information about the product.

To achieve maximum results from KOL marketing, it is important to understand which personality is most suitable for the spirit and values of this advertising company. The image and style of KOL should correspond to the message that the company intends to convey.

The influence of KOL is very important in any platform. On Xiaohongshu, however, this influence becomes even greater due to the excellent reputation in matters of quality and authenticity of content. This content is usually detailed, accurate, and since the platform team works on it every day, it knows exactly what the user needs. Xiaohongshu gives opinion leaders an excellent platform to share content about their favorite brand, while informing users about new products and trends.

A new platform for companies to interact with opinion leaders

Opinion leaders working with Xiaohongshu are very important for the digital strategy of any foreign company. Their influence is built entirely on the transfer of information from user to user. Such buzz marketing has a powerful impact on users, especially when it comes from their peers or opinion leaders. The reason for this lies in the fact that before making a purchase, the Chinese consumer seeks to learn as much information about the product as possible.

Moreover, KOLs are a real asset for the company, as they know how to work with the platform and what content users need.

Finally, opinion leaders can tell about a particular brand to a person who has never heard of them, or make the purchase of products of this company more and more desirable for a user who is already familiar with it.

Where do KOL on Xiaohongshu come from?

Celebrities who want to develop relationships with their audience by posting posts about their daily lives, favorite products, and so on. Owing to the growing community, more and more Western celebrities join Xiaohongshu, like Kim Kardashian, who recently created an account on the platform.

KOL from other social networks such as Weibo, WeChat, Douyin and so on. These are opinion leaders who have noticed the potential of Xiaohongshu and want to take advantage of the benefits provided by the growing community of the platform.

Ordinary users who have gradually attracted a huge number of subscribers thanks to their style and image that they have developed on the platform. The KOL data have the highest impact as KOL’s are not celebrities, but they are like everyone else. Thus, users are more likely to trust this type of KOL than, for example, actors or singers.

Which KOL will suit your strategy?

It is important to choose the right KOL for the marketing campaign of your company. An opinion leader should have the right number of subscribers and the right content. Indeed, the effect of the company depends largely on the audience of a particular KOL. Here are some examples:

In order to achieve the short-term effect of broad brand coverage, it is best to attract very well-known opinion leaders with 500 thousand to 1 million subscribers.

What to expect from KOL?

Good opinion leaders provide high-quality posts and beautiful photos with a detailed product overview that emphasize the advantages of the products.

For a more balanced choice of KOL, it is important to study how active the audience of this KOL is. Parameters such as the number of comments and their length are important. Short comments reflect low audience engagement, while detailed and long ones show that this KOL is quite influential and his opinion will be listened to.

About advertising on Xiaohongshu

In order for the content to reflect reality, the platform imposes a ban on the activities of companies using phrases like "the best..”, "luxury”, "elite, upscale” and so on. Xiaohongshu tries not to admit companies that attempt to mislead users in order to sell their goods.

This is exactly what makes Xiaohongshu one of the fastest growing platforms in China. It qualifies only authentic content and tries to satisfy its customers in any way by controlling companies and supply chains.

However, since 2018, Xiaohongshu is also becoming not just a shopping platform but also an advertising platform. However, being committed to preserving the authenticity of the content, Xiaohongshu does not host it on a large scale.

However, this process may not be the best strategy for Xiaohongshu. Firstly, due to the fact that this option is new, information about users and their interests cannot yet be effectively used for targeting on the platform. Secondly, as already noted, the Chinese user does not trust advertising.

Pop-up advertising

Pop-ups are displayed when you open Xiaohongshu. A Lancome lipstick ad is displayed. This ad also provides an access to the Lancome store directly by clicking a small button at the bottom of the page.

Integrated advertising

Integrated advertising is displayed in the news both on the Discover page and on Guangzhu, displaying the posts of the accounts to which the user is subscribed.

Here you see a Louis Vuitton ad. Users receive a notification about advertising posts thanks to a small button at the bottom of the page to the left of the photo, which is called "guanggao”, which means "advertising".

Is SEO used on Xiaohongshu?

First of all, Xiaohongshu is an application used to search for reviews, pictures and tips regarding the products of foreign companies. The application is used as a search engine for foreign goods that can be bought online.

Thus, when developing a company's activity plan on Xiaohongshu, the SEO strategy should be taken into account.

These strategies are quite similar to the traditional ones that are used in other search engines. In this case, you need to consider the following:

The power of keywords

The company must use right keywords if it wants even those users who do not know about it to find its products.

In order to maximize the visibility of products on the web, the company should not only use keywords corresponding to the product/service, but also popular words that will help it appear on the search results page as often as possible.

Look at the browser screenshot below to see what Chinese users are looking for.

Long-tail keys can help a company to occupy its niche in the market like SEO of traditional search engines.

Below are two examples of popular queries on Xiaohongshu and ways to select the most appropriate keywords for a company or product.

The word "fangshai" means "protection from the sun". As you know, women in China want to keep their white, perfect skin. For this reason they are very interested in sunscreen products.

For this keyword, the number on the right indicates the number of posts on this topic (940 thousand).

Along with fair skin, Chinese women prefer to have full red lips. The search engine in the image above displays the results of a query for the word "kouhong”, which in Chinese means "lipstick". It is not surprising that this query has 1530 thousand results! Now, how to use this in SEO strategy on Xiaohongshu?

SEO Strategy

The company will need to develop a well-elaborated SEO strategy to be successful on the platform.

First, find popular keywords related to the industry related to the business of your company. It is ideal to use words of average popularity, since it will be easier to find this company through them than with very popular formulations, due to the fact that they may be too competitive.

Then, in order to attract special potential customers, you can set a number of long tail words.

Why is Xiaohongshu becoming an increasingly popular platform among the Chinese?

In order to understand why Xiaohongshu is so popular among the Chinese, it is necessary to analyze some features of consumer behavior.

Development of Chinese society

Over the past ten years, the way of life of the Chinese has undergone profound changes. Economic growth has led to a steady increase in living standards, and at the same time to an increase in the purchasing power of the Chinese. The Chinese are spending less and less on housing and food. On the contrary, spending on leisure and lifestyle (restaurants, fashion, care, etc.) is increasing.

In this vein, luxury goods are becoming more and more important for Chinese consumers. In particular, we are talking about young people, who represent the new driver of China's growth.

Face culture and reputation

Also, due to the importance of the "face culture" in China, the Chinese always strive to look perfect. Reputation is very important, so the consumer pays great attention to the brand and its image.

Some companies may believe that Xiaohongshu users are too young for their products. However, this belief is incorrect. Young people have a high purchasing capacity, and they can purchase high-end goods much more often than older generations.

Based on the results of the KPMG study and Mei.com , more and more young Chinese are planning to purchase luxury goods in the coming years.

Xiaohongshu maintains the authenticity of the content

In order for the content to reflect reality, the platform imposes a ban on the activities of companies using phrases like "the best..”, "luxury”, "elite, upscale” and so on.Why is Xiaohongshu becoming an increasingly popular platform among the Chinese? Xiaohongshu tries not to admit companies that attempt to mislead users in order to sell their goods.

If the platform does place ads, then it is neutral and focused on user content. Thus, the Xiaohongshu algorithm usually takes user-generated content as a basis, instead of relying on the company's content.

The platform regularly invites users to interact with publications on their interests in order for the algorithm to then better recognize the content that suits them.

Xiaohongshu is the only platform that combines a social network and an online store. Thus, the platform provides users with an access to both entertainment and useful services. This is what attracts users to Xiaohongshu.

How to successfully start business in Xiaohongshu?

Xiaohongshu is an excellent platform for promoting the company in China. In order to use all its advantages, it is necessary to take into account the following:

1.Use both components of the platform

As already noted, Xiaohongshu is both an e-commerce platform and a social network. In this regard, it is impossible to separate one from the other: It is important to use a single marketing strategy that takes into account both components of the platform – both social and commercial.

Work with Xiaohongshu is divided into 4 stages. First - viewing the platform. Then, the user is reads a certain post / article about any product, which leads to the third step – the purchase. Finally, as soon as the product has reached the addressee, the final stage of the cycle is the writing of a customer’s review /feedback regarding the purchase made.

2. Know your target audience

The company should know its target audience well. Xiaohongshu community is mainly young women. And although this trend is starting to change, as the number of users from cities of the third tier and below is increasing, firms still need to customize their products to the needs and interests of their target audience.

3. Attract opinion leaders to your marketing campaigns

As explained earlier, Xiaohongshu is the best platform for conducting KOL campaigns and obtaining high-quality content specially tailored to your target audience.

Thus, firms should work with influential media personalities in order for their target audience to receive high-quality and appropriate content.

4. Focus on creation of your content

Content plays a crucial role in Xiaohongshu. Companies should take it seriously: write detailed articles about your values, products and how to use them, as well as choose the most appropriate images that will emphasize the company's advantages.

Do not hesitate to write long posts – the key to success lies primarily in a deep analysis of user preferences, in the proximity and relevance of content for them.

5. Take advantage of holiday sales

The Chinese e-commerce industry boasts a large number of events and holidays that companies can use to boost their brand awareness and increase sales. The most important dates for Xiaohongshu:

The most famous is Bachelor's Day (or 11/11 - November eleventh). Usually on this day companies arrange incredible discounts and special promotions. A month later, there are also big sales (12/12), but not as large as on November 11.
March 8 is Women's Day (Nushengjie), which is one of the most important for Xiaohongshu, since women are the main audience of the platform.
“Black Friday” in Xiaohongshu is transformed into "Red Friday”
The anniversary of the creation of Xiaohongshu (June 6) and other events are celebrated on the platform by holding various promotions

6. Learn how to use SEO in the platform

As noted earlier, SEO strategy is very important in order to increase brand visibility on the Internet. Xiaohongshu is a very competitive platform, therefore, close attention to every detail is needed there. Keywords should be appropriate and not too popular.

Source ecommercechinaagency

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