Xiaohongshu's business is not easy to seize

Planting grass with the purpose of trading violates users' shopping habits

Wen | Yuxi

The business of planting grass with pictures and text is like a besieged city. Xiaohongshu strives to develop beyond the besieged city and explore more commercial possibilities, while other large factories rise up and fiercely attack, wanting to enter the besieged city.

As a leading platform in the graphic and textual grass planting competition, Xiaohongshu has been enjoying the "unique" traffic dividend for many years, but has also been stuck in place by this traffic dividend, rarely achieving outstanding results in the commercial transformation of traffic. Whether it's e-commerce or live streaming sales, Xiaohongshu hasn't experienced significant flooding after several code additions. What can serve as milestone events are the recently popular Dong Jie live streaming room and the newly launched local lifestyle business.

Dong Jie broadcasted three times in three months within Xiaohongshu, with GMVs of 50 million, 30 million, and 60 million yuan, respectively. From the data performance alone, it is difficult for Dong Jie's live streaming frequency and GMV to compete with the data of other platform celebrities' live streaming and sales. Nevertheless, Dong Jie is still the "new hope" for Xiaohongshu's live streaming sales, and even Xiaohongshu CMO Zhiheng calls Dong Jie the benchmark of Xiaohongshu's live streaming on their own Xiaohongshu account. The local living business on the other side has just started and has not yet formed a scale.

Did Xiaohongshu not provide a fertile user base for commercialization by failing to catch up with the commercial fast lane of e-commerce, live streaming, and local life?

The answer is exactly the opposite. According to reports, the user base of Xiaohongshu will double and grow in 2022. At the moment when the demographic dividend of the Internet has faded, this user scale growth has become a goal that other large manufacturers can hardly reach.

Perhaps a better answer cannot be found in Xiaohongshu, but exists in the entire graphic and textual grass planting track. The unique nature of this track makes it difficult for entrants to achieve commercialization.

ByteDance, Tencent, Taobao, Weibo, and many Internet giants in different fields have gone deep into the hinterland of Little Red Book and started the business of planting grass with pictures and words. Among them, ByteDance is the most frequent action, upgrading the image and text information flow to the first level entrance of Tiktok, launching the independent image and text app, and launching the benchmarking small red book platform Lemon8 overseas, upgrading the headline search to have persimmons. The layout of ByteDance from short video content ecology to graphic content ecology is very clear.

However, after several twists and turns, large factories with their own traffic foundation and technical experience have not achieved greater breakthroughs in the graphic and textual grass planting track. Not only did it fail to point out a clear commercialization path for the graphic and textual grass planting track, but also no one could shake the market position of Xiaohongshu.

In other words, perhaps the commercialization of graphic and textual grass planting platforms is a challenge that can be considered a "Nobel Prize" level challenge.

Xiaohongshu Misses Development Opportunities

Undetermined, Xiaohongshu has always had problems in the commercialization process.

As early as 2014, when Tiktok and Kwai were new short video platforms, Xiaohongshu had launched the cross-border e-commerce brand "Welfare Club". At that time, Xiaohongshu's competitors were still NetEase Kaola, Tmall Global, and JD Global. In the face of competition with top e-commerce platforms, Xiaohongshu demonstrated its commercialization potential for the first time. Not only did it not be suppressed by giants, but it also handed over a six-month sales volume of 700 million in 2015.

You should know that in the same year, JD Global's annual sales revenue was only 1.8 billion yuan. After conversion, it is not difficult to find that at that time, Xiaohongshu cross-border e-commerce absolutely had the strength to compete with JD cross-border e-commerce.

In 2016, the market share of Xiaohongshu cross-border e-commerce has reached 6.5%. However, at this time, cross-border policies have been gradually tightened, and Xiaohongshu has gradually developed domestically. The open platform has invited third-party merchants to settle in. At this point, it seems that Xiaohongshu has two incisions to become an e-commerce platform, but the team is not firm in the development of e-commerce business. Qufang, the founder of Xiaohongshu, stated multiple times in 2017 interviews: "Xiaohongshu is not e-commerce, it is an amusement park

In 2018, Xiaohongshu's market share in cross-border e-commerce fell to 4.3%. Although her grades were declining, Qu Fang did not pay attention. She stated that "cross-border e-commerce is just a phased concept." Later stories also proved that it is indeed just a phased product. Subsequently, Xiaohongshu began to launch its own brand "Youguang", but this project did not cause any greater ripples.

In the past four years, Little Red Book has developed from cross-border e-commerce, open platform, and private brand to the field of commercialization, but most of them have just started.According to public reports, Xiaohongshu's e-commerce GMV goals for the two years 2018 to 2019 have not met expectations.

But these two years have also been a critical period of industry change, and under the changing circumstances, the direction of the industry has changed.

In 2019, the live broadcast with goods entered a period of barbaric growth. Taobao has Li Jiaqi, Kwai has Simba, etc., and Tiktok's live broadcast e-commerce GMV has exceeded 40 billion. At this point, Xiaohongshu suddenly slowed down and continuously strengthened its strategic positioning as a content community. Commercialization led by e-commerce retreated to the second tier, with most of its revenue coming from advertising.

One year after the development of live streaming e-commerce, Xiaohongshu officially entered the live streaming industry. At this time, Xiaohongshu still defined itself as a content community platform. Qu Fang has spoken on multiple occasions, and Xiaohongshu is a "lifestyle community". In order to strengthen the atmosphere of the content community, from lifestyle to fireworks, Xiaohongshu continuously supports the diversified content formats within the platform.

Perhaps because the e-commerce business is too vague, Xiaohongshu has not been able to usher in a period of rapid development at the e-commerce level.

At this point, within the team, e-commerce is already a secondary department. At the end of 2021, Mao Wenchao, co-founder of Xiaohongshu, emphasized internally that Xiaohongshu's growth comes from the community, and trading is an important component of community life. Therefore, e-commerce should be placed in the community, and users' consumption mentality should be cultivated in the community, and the trading ecosystem of merchants should also be produced in the community. Conan, the head of Xiaohongshu Community Department, is not only the head of e-commerce business, but also the head of commercialization technology.

Last year, Xiaohongshu launched a themed e-commerce platform. Unlike traditional e-commerce shelves, themed e-commerce is more like a lifestyle guide, focusing on different categories, selecting products, and recommending them to community users through topic planning.

But the positioning of the secondary department naturally hinders the development of e-commerce. This situation did not improve until March this year, when it was previously under the live streaming business group of the community department and upgraded to an independent first level department. At the same time, Xiaohongshu has officially promised to subsidize various aspects such as billions of yuan in traffic pool, pallet selection, marketing tools, and platform services.

It can be said that it was not until after March this year that the commercialization process of Xiaohongshu began to accelerate.

In March, Xiaohongshu welcomed Dong Jie, and like all popular live streaming rooms, Dong Jie also provided differentiated presentation methods. In Dong Jie's soft and penetrating live broadcast room, Xiaohongshu finally waited for the new story of live streaming e-commerce.

In addition, recently Xiaohongshu launched a local lifestyle business, and according to the notes released by the official account Tupaishu on the platform, Xiaohongshu can be said to be a strong supporter of local lifestyle business. Attract merchants to settle in through platform activity creation, traffic support, exclusive blogger docking, commission free and deposit free support policies.

In order to enhance the atmosphere of local life on the platform, Xiaohongshu has also launched a searchlight program for platform influencers, who can experience and post store exploration notes for free. According to the disclosure, in addition to traffic incentives, influencers include group buying links in their notes. If transactions occur, influencers can also receive commission rewards.

In terms of specific business, Xiaohongshu's local life business is similar to other platforms, and is also based on transaction scenarios such as group buying packages and wine travel.

Through the above review, it is not difficult to find that Xiaohongshu has the first mover advantage in commercialization, but due to ten years of indecision, it has not been able to make breakthrough progress in commercialization. But Xiaohongshu's hesitation is definitely not "unclear". On the contrary, Xiaohongshu has been exploring community content and commercial platforms. After all, only by finding a balance can sustainable development be achieved.

In fact, Xiaohongshu is not the only one constantly seeking a balance point in this matter.

Big factories cannot fathom the heart of planting grass in pictures and texts

Turning the perspective to the industry, it is not difficult to find that not only Xiaohongshu but also other big companies that are attacking the graphic and textual grass planting business have not been able to point out the development path of commercialization in the industry. Even the monthly living super small red book several times, and Tiktok, which has more traffic foundation, can not find out the core of planting grass with pictures and texts.

As early as 2018, ByteDance began to test the image and text grass planting track and launched new independent app grass. It is reported that KOL has been invited to settle on the platform two months before the launch, which is enough to show that ByteDance has injected a lot of effort into this new project in the preparatory stage. But the situation backfired, and the new business ceased operations less than a year ago. Later, ByteDance found a way to lower the trial and error cost, and cultivated the user's mind by increasing the weight of image and text content in Tiktok.

In 2021, the grass planting business will move to Tiktok, and then it will be upgraded to the first level entrance of Tiktok. This position is the most important position in the app, with minimal operating costs and maximum exposure, making the business in this position the C position in the app. So, in a sense, it represents the strategic development direction of the app. It can also be seen from this that Tiktok is determined to enter the Tuwen track. At the same time, Tiktok started to build momentum, released the Tiktok graphic and text plan online, and launched the 100 million level traffic support plan.

According to Zijin Finance, as of the end of April 2023, Tiktok plans to broadcast more than 163 billion times.

In addition to creating momentum in the station, in July 2022, the grass planting APP, as the content ecology of Tiktok, will be launched, and the slogan will show "define your new vitality". Both in terms of content presentation and promotional positioning, they are almost identical to Xiaohongshu. However, Kesong also failed to catch up with Tiktok's ambition on the Tuwen track, and went off the shelves after several months.

Both failures failed to dispel Tiktok's enthusiasm for the graphics and text track. Recently, the original "headline search" app was upgraded and renamed "Youshi" app. According to the official application introduction, Youshi app can provide users with more real and useful experience and better product experience. At this time, the first level entrance of Tiktok is changed again, and experience becomes a new level entrance. It can be seen that Tiktok is still in the business of planting grass with pictures and texts.

In fact, the main reason for the first two failures was that Tiktok's traffic could not be imported to the new app, which made it difficult to form a user scale in the early stage. Nowadays, some persimmons have avoided this point, and the app content mostly comes from the creation of headline numbers in today's headlines. However, as it is still in its early stages, the future development direction is not yet clear.

With traffic, Tiktok has become a content ecology player. For a while, it was considered as Xiaohongshu's most powerful opponent. However, from the perspective of the development of Tiktok in the graphic and text track, after several attempts, Tiktok has not been able to find a clear development direction of graphic and text grass planting.

In addition to Tiktok, e-commerce platforms are also eager to do business with Xiaohongshu.

The action of e-commerce platform is similar to that of Tiktok, that is, launching independent apps and building momentum on the site. From the perspective of Taobao, in 2020, Taobao will upgrade the buyer show to Taobao shopping, becoming the main front for the platform content to grow grass. In the Double Eleven Day of 2021, 250 million consumers will "plant grass" on Taobao shopping.

Subsequently, Taobao launched an interest community app called "Youshi" that can be cultivated, and invested 1 billion yuan to reward and support creators, establishing the "Youguang Plan". But at present, there is not much water for friends, and the main position of Taobao's graphics and text is still based on the platform's Taobao browsing.

In addition, JD has also begun to create a grass planting show. During the 618 period of 2021, JD produced over 900000 professional grass planting videos, and the proportion of goods brought increased by 334 times. Tencent has also increased its size again, taking over the Tencent Grass Planting e-commerce platform by launching Penguin Huimai after taking off the Little Goose Pinpin.

Both Tiktok and e-commerce platforms have repeatedly added graphics and text to grass track, but with little effect. Before incubating for commercialization, I was already hindered by the step of content ecology. Every attempt seems to illustrate that cultivating content communities with images and text is a difficult bone to crack, and it is even more difficult to achieve commercial transactions while building a content community atmosphere.

Why is Xiaohongshu's business difficult to seize?

Returning to the graphic and textual grass planting platform itself, the difficulty of commercialization lies in the natural contradiction between the two actions of grass planting and trading. Planting grass is a long-term process that requires sedimentation and subtly affects users' minds. Trading, on the other hand, pursues efficiency in a short period of time and requires faster decision-making.

From a different perspective, we can understand the reason behind it. We can consider planting grass as the shopping process before paying the bill. In most scenarios, consumers need to spend a lot of time shopping before they can choose the desired product. The creator of the platform's notes is the partner who goes shopping with consumers. During the shopping process, they explain in detail the characteristics of each product, allowing consumers to find products that are more suitable for them before making decisions. This is the most important atmosphere of the graphic content community, and also the core value that the community provides to users.

However, if the transaction process is pre positioned at this time, the platform or creator will plant grass with the purpose of promoting the transaction, which will cause dissatisfaction among consumers. It makes it difficult for consumers to distinguish whether the grass planting process is seriously discussing the product or advertising it.Planting grass with the purpose of trading violates users' shopping habits

This is the commercialization dilemma of graphic and textual grass planting platforms, which is also the reason why e-commerce platforms find it difficult to do a good job in graphic and textual grass planting business.

Therefore, e-commerce platforms that undertake decision-making actions are difficult to do a good job in the business of planting grass and images, as users are more accustomed to purchasing on e-commerce platforms than planting grass on them.

Although Tiktok has had similar successful precedents, after the vigorous development of live broadcast e-commerce, the chain from planting grass to trading can now be completed in Tiktok. However, it is precisely because Tiktok is too large, and the sales model of short video+live broadcast with goods is very mature, so it is too bulky to add a graphic content ecology to the content ecology of short video.

On the contrary, Xiaohongshu still has the potential for commercialization. From the perspective of users, Xiaohongshu has the highest user group stickiness, and the consumer unit price is also high. According to a research report from Dongxing Securities, the Xiaohongshu live streaming room exhibits characteristics such as high customer unit price, high conversion rate, high repurchase rate, and low return rate: over 30% of the rooms have an average customer unit price of over 200 yuan, and the top KOL sales conversion rate reaches 21.4%.

With a sticky user base and the current acceleration of commercial development, perhaps Xiaohongshu will find a commercial logic that belongs to the field of graphic and textual cultivation.

summary

It is not difficult to find that the successful reason for the early cross-border e-commerce of Xiaohongshu lies in the high adaptability of content and transactions, as reflected in the commercial development process of Xiaohongshu.

At that time, the user sharing content of Xiaohongshu was mainly focused on beauty and clothing, and the content attributes matched those of the products sold, naturally leading to a rapid development path. However, nowadays, the content of Xiaohongshu is constantly breaking the circle, and the notes on the platform are no longer limited to beauty. Various lifestyle notes such as 3C, cooking, and sports have emerged. The birth of these contents can only enrich the platform atmosphere, without the support of backend transaction chains, it is naturally difficult to leverage commercial development.

Xiaohongshu seems to be aware of this and has recently started to focus on local lifestyle business, carrying the content of exploring stores on the platform through catering group buying transactions.

However, at present, Xiaohongshu's local life is still in its early stages, and its future development situation still needs to be verified by the market.

After analyzing the characteristics of the graphic and textual grass planting track, it can still be said that Xiaohongshu does not have a real opponent. For other large companies, only by clarifying the underlying logic of the platform can a commercial banner be planted on the graphic and textual grass planting platform.

As for Xiaohongshu itself, with the popularity of Dong Jie's live streaming, perhaps more possibilities for commercialization can be found.