It’s time for the second installment of our snapshot guide to Little Red Book (aka RED, aka xiaohongshu) for 2022! In Part 1 of this guide, we introduced what the platform is, what it looks like, its users, their behaviour, and ads. This time around we’re looking more carefully at RED as an e-commerce platform. What are the most popular products? How are influencers (or KOLs) best used? What’s the deal with livestreaming? And how can a brand set up a store? Read on for answers.
- US$1bn GMV through livestream sales in 2020
- $500m investment in November 2021
- 8% conversion rate, vs 2-3% on other platforms
RED: The Quiet E-Commerce Powerhouse
In terms of relative numbers of users, Little Red Book is one of the smaller platforms for e-commerce in China. But in terms of absolute numbers, it’s absolutely huge. While its 100 million monthly active users don’t compare to WeChat’s 1.2 billion, 100 million is still more than the entire population of Germany or the UK.
These highly active, fairly niche users (mostly young women in tier-one cities) are positioned within a somewhat genius shopping cycle. While we may talk of ‘posts’ on RED, akin to posts on other social media platforms, the majority of content is actually branded as ‘notes’ – that is, notes on products, purchases and experiences. While notes are discursive, with users adding comments to chat as a community, the discussions are angled at evaluating and making suggestions for other users regarding shopping, at their heart.
Where’s the shopping cycle here? Well, users read notes from others, then make a purchase. They’ll then post their own notes based on the purchase, and follow it up with a discussion with other users about it. Other users see this note, and the discussion, and make a purchase, thereby making a full journey through the cycle.
How purchases are made
Here comes a bone of contention. RED started as a social platform, but pivoted to include e-commerce. The question is, how successful has this pivot been? RED provides brands a store function, similar to other e-commerce platforms. It allows them to create direct links between posts and product pages, ads and storefronts, livestreams and deals. It gives them an aesthetically pleasing interface, which they may customize to make their own. What’s more, they charge lower fees and commissions than their rivals (5% commission, 600RMB annual fee, vs. Tmall’s 6% and US$9000 annual fee).
Seemingly, for RED itself, it’s had good, but not great, results. Why? The majority of users do not buy on the platform. Instead, they utilize the platform’s recommendations, and then make the actual purchase on another platform, such as Tmall or Pinduoduo.
In an attempt to counteract this, in 2021, RED banned text links to products on other platforms; although, they may still be included in livestreams.
What does this mean for brands, though? While it’s not great news for RED, it’s not necessarily bad news for brands. As long as purchases are being made as a result of activity on RED, then it is a useful tool. Brands will have to be aware, though, that because of this phenomenon, RED might not be enough alone. Diversifying sales options, where possible, allows users to hit multiple touchpoints; something that is very important to Chinese consumers especially.
RED-Hot product categories
Excuse the red-hot pun… ahem…
It’s no secret that consumers on RED skew heavily towards certain product categories, namely skincare, beauty products, clothing, and home products. This doesn’t mean other products can’t be sold, but really, the figures speak for themselves:
Like all e-commerce platforms, Little Red Book has a calendar of special shopping events. Brands are well-advised to plan campaigns around these dates. See the image below for an overview.
Utilizing RED influencers for e-Commerce activation
RED is the spiritual home of the Chinese influencer (aka Key Opinion Leader, KOL). Its interface and functionality is frequently compared to Instagram, and its users’ propensity to flaunt their well-curated daily lives is analogous to the point of parody. All marketers know the Bernaysian allure of influencers, but RED has some intricacies worth highlighting.
- Get on the official backend. Pugongying is where you can find KOLs of all stripes, with their rates. Officially, all KOL activations must go through this system, as RED takes a 10% commission. Unofficially, brands skirt this rule, but create risk in doing so.
- Product seeding is a good start. Think about the RED shopping cycle. The first step is to get notes made, and to get them noticed. Sending out generous amounts of product, to KOLs big and small, gets a brand’s foot in the door.
- Follow seeding with interaction and ads. RED is a social e-commerce platform; brands need to be social too. Reply to users, get conversations going, bring them into the exclusive bubble.
- Monitor KOL seeding results. With those who had high interaction, and decent outcomes, consider moving onto direct paid campaigns, and conduct them just as you would on any other platform.
Although Taobao Live, Douyin and Kuaishou still dominate live commerce in China, RED stands out in two key ways. First, their conversion rate is high. Second, their average spend, of 80RMB, is higher than other platforms. Brands may organise a KOL to conduct a live-stream on their behalf, they may place their products within a KOL’s live-stream, or they may conduct live-streams of their own. Unlike text and image-based parts of the app, it’s possible to link to TMall product pages within livestreams.
The gross merchandise value sold through RED livestreams in 2020 reached US$1bn, which is far from negligible, but doesn’t quite compare to its rivals; in the same year, Douyin’s total was US$78.5bn).
How to set up an e-store on RED
Important note: this whole process will be in Chinese. Using a browser with an in-built translator, like Chrome, might help. Otherwise, an agency or a trusted colleague with good Chinese skills should be enlisted.
Getting set up is a four-step process:
Download the RED App, and click to open a professional account.
Submit the following documents, on the RED application page:
- Business registration
- Certificate of incorporation
- Customs registration form
There are some supporting documents you will need to provide too. These include company information (for businesses outside of China this simply involves a commitment letter), logistics, brand information, and trademark authorization.
When you register, choose to create an Enterprise Account; this gives you an official brand presence.
Wait for review. The process will take 1 to 5 working days.
Upon approval, pay a 20,000RMB deposit to open a store, and get ready for some more documents submission. Among other things, you’ll need to submit a company email, company information and registration details, financial information, and legal information about eligibility to sell branded products. Once it is submitted, RED will take a few days to review everything, and then the store will be opened.
And there you have it, a complete two parts guide on Little Red Book that should get you acquainted with both the Social and e-Commerce sides of the platform, but if you’re willing to do things properly or to take your Little Red Book presence to the next level, don’t hesitate to reach out to us and benefit from Sekkei Studio’s +10 years of experience in China Digital Marketing.