"Xiao Hong Shu", translated into "Little Red book", is the world's biggest word-of-mouth database and community ecommerce platform. Simply put, this giant startup from China is a combination of "Instagram + Amazon" kind of mobile application, operated by deep growing user-created content shopping and recommending communities.
On June 1st, Xiaohongshu is already worth over US$3 billion. With this round of series D funding led by Alibaba, the trendy mobile app raised a total of US$300 million, with new and old investors including GSR Venture Capital, Tencent Investment, Jiyuan Capital, Genesis Capital, Tiantu Capital, Zhen Fund, and K11 Zheng Zhigang. Previously in 2016, Xiaohongshu raised US$100M series C funding led by Tencent Investment.
With an important investor like Alibaba, this mobile app is set for a clearer path, with new strategy to improve engagement among the community and the satisfaction of the users, reported by Caixin reporter. "If the supply chain of the app is to be integrated with Alibaba's, the marketability will be a whole new different story".
First established in 2013, this Shanghai-based unicorn now has near 100 million users, with 80% being under 30 and 90% being female, according to China Money Network. On the mobile app, users can interactively share reviews of a beauty product, fashion item, the latest cosmetic or even a vacation hotel through photos and videos. Many active users including celebrities love posting photos of them trying out the latest product and linking their post to the product page.
“The potential of social commerce is huge because people like to buy what their friends recommend.” said Shaun Rein, the managing director of China Market Research Group and author of The War for China’s Wallet: Profiting from the New World Order. China's social ecommerce market is also set to reach US$150 billion with 24 million merchants selling on such platforms by 2020, according to Advangent.
The problem the app is trying to solve is the shopping decision making and trust of the locals who don't get the chance to travel overseas much but loves shopping for overseas products and brand. "This app allows local college students and employees to buy products from overseas through the product reviews by others in order to ensure the level of satisfactory from each purchase", according to Charlwin Mao, the CEO of Xiaohongshu. Due to the limited amount products sold locally and mixed reviews on China’s biggest online shopping website Taobao and other platforms, online shoppers have gradually shifted towards using Xiaohongshu.
Fan Bing Bing, one of China’s leading actress, has been a very active user with over millions of followers. Since her posts mostly feature skin care products, fashion, social events, keen beauty shoppers tend to enjoy her posts and product reviews. Unlike Instagram, the app is not solely dominated by celebrities with massive number of followers, but rather, through the “praises collected”, which can be earned from how active the user is in doing reviews for products/services.
Not only is this app a hit in China through vigorous marketing campaigns online and offline, it has also increasingly been more popular among users in other parts of Asia such as South Korea, Thailand, Indonesia, Taiwan and regions where Chinese pop culture is a hit. With the recently popular reality TV talent competition “Produce 101” that was aired in South Korea, Japan, China and Thailand (late 2018), majority of the voting from the audience also takes places through the app, compelling Thai fans to download the app in order to vote for two of their favourite Thai contestants, Sunnee and Mimi Lee. There is also a high tendency for this app to boom in Thailand once the show first air in late 2018.