Recently, Xiaohongshu has been “talking a big game about its ability to transform into an e-commerce platform,” as they just released their “rise100” list, where it ranks 100 merchants, brand ambassadors, and key opinion leaders that have navigated and found success on their platform based on their growth and other metrics. This shift indicates a strategic focus on e-commerce/commerce for Xiaohongshu, as it places a heavy reliance on advertising revenue, leaving it susceptible to adverse macroeconomic conditions.

Ever since their launch in 2013, Xiaohongshu has faced pressure to make money, as 80% of their revenue comes from advertising and they “shed up to half their implied valuation over 2022.” The platform predominantly attracts urban women in their twenties to early thirties, who utilize it to discover various lifestyle offerings such as restaurants, bars, quality clothing, makeup, and vacation destinations. However, a problem for Xiaohongshu is the reluctance of users to make direct purchases within the app. Despite actively seeking products on Xiaohongshu, users often find themselves redirected to other platforms to complete their purchases, posing a substantial obstacle. To keep users within its “business loop,“  they decided to block links from Taobao, which prevents users from accessing Taobao links that redirect them to Taobao’s merchant page. By restricting access to Taobao links, Xiaohongshu aims to encourage users to remain within its platform, promoting engagement and potentially increasing the likelihood of users making purchases directly through Xiaohongshu’s own ecommerce channels.

Another solution and direction Xiaohongshu has shifted towards is leveraging influencers as brand ambassadors. These influencers promote products from third-party brands and receive a share of the sales revenue. They encourage their followers to use in-app links that lead directly to Xiaohongshu’s checkout, streamlining the purchasing process and keeping users engaged within the platform. This strategy has demonstrated success, as indicated by the increase in the number of merchants on the app and in-app sales, as reported by the company.

To further bolster Xiaohongshu’s efforts to increase traffic and enhance its commercialization efforts, the platform recently collaborated with the ‘Spring Gala Festival,’ gaining over 27 million views and 170 million user interactions. Additionally, Xiaohongshu introduced a new “nearby” feature, streamlining user access to an interactive map showcasing notes, group chats, and live streams related to local food, drink, and entertainment options. This strategic initiative aims to penetrate the local life service sector, currently dominated by Meituan.