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China’s E-Commerce market is exploding and will lead the way for Asia Pacific to become the biggest until 2025.
We see a fierce competition between Tmall and JD, at the same time as smaller websites capture more ground, thanks to other lucrative sales models.
One of the hottest websites is Xiaohongshu, which can be directly translated to “Little Red Book” in English. A number of large companies have invested millions of dollars in the website and it will be interesting to see how it performs in the coming years.
Still, there’s little information out there that explains how it works when selling on Xiaohongshu. In this article, I explain what Xiaohongshu is, how you can start selling there, how much it costs, and much more.
What is Xiaohongshu?
Xiaohongshu (小红书) started out in 2013 and is one of the fastest growing E-commerce websites in China, currently having around 100 million users.
Still, it’s not a pure E-commerce platform, like Tmall and JD, but rather a lifestyle community with a separate section dedicated for brand stores.
The website mainly attracts young females, aged 18-35, that check product reviews from other members.
Simply put, users buy foreign products and write lengthy posts explaining about foreign brands.
It can be seen as a mix between Amazon and Instagram.
Product reviews are done in a blog-style format, including photos and videos. You’ll typically find reviews about apparel, cosmetics, nutrition products, supplements, and accessories.
The important role of influencers
Not to forget, a core part of the website is the role played by influencers.
Influencers are often referred to as KOLs (Key Opinion Leaders) that have big fan bases and a key knowledge within certain industries, for example, in cosmetics.
They have the power to impact sales of products, by posting positive or negative reviews.
Receiving a positive review from a famous movie star can lead to a sales boost where your stock is emptied with the blink of an eye.
Thus, good brand content promotion, word-of-mouth marketing, and preferably positive reviews by influencers will be highly important for sales success.
The business model of Xiaohongshu
Xiaohongshu is similar to Vipshop and Kaola as you have the following two options when selling on the website:
- Open your own store
- Let Xiaohongshu pre-purchase the products directly from you
The second option is preferred by Xiaohongshu as they tend to screen overseas markets for new products.
This can be beneficial as you won’t need to deal with marketing, customer support, and claims & refunds, for example.
The main goal of Xiaohongshu is to continue being the to-go website where bloggers and consumers learn about new foreign products..
Hence, sharing posts with a commercial or profit making incentive is forbidden.
You can’t share reviews that link to external websites or with an obvious purpose to hardly sell in brands.
This is not the case with Tmall and JD. Here, product reviews can be manipulated more easily with the one-click and 1-5 star review system used. Anonymous persons, and even bots, rate products as well.
Xiaohongshu market share
Xiaohongshu is fairly small and covers around 6% of the cross border market.
Kaola is the biggest company when it comes to cross border sales, claiming around 30% of the market shares.
Yangmatou, which targets the same customer segment as Xiaohongshu, is almost equally big having a bit more than 5%.
Vipshop, on the other hand, that focuses on flash sales, covers around 15% of the cross border market.
Alibaba’s investment in Xiaohongshu
Alibaba is a company that has seen the potentials in Xiaohongshu.
In 2018, Alibaba poured in around USD 300 million in this young lifestyle sharing platform.
Not to forget, the same year, JD and Tencent, the two main rivals of Alibaba, invested a whopping USD 863 million in Vipshop.
It’s clear that these giants have taken actions on long-term goals to further expand in China’s E-Commerce market, and by investing in upcoming niche websites.
Process when selling on Xiaohongshu
Before you can start selling on Xiaohongshu, you need to become a member and register your company.
There’s a detailed explanation of how it works on the website. Unfortunately, everything is written in Chinese, but I’ll give you a helping hand.
Below you can find the step-by-step process when opening a store on Xiaohongshu. It goes like follows:
- Register/become a member on Xiaohongshu
- Fill in your company information
- Qualification review
- Contract signing
- Complete training
Registering on Xiaohongshu
First, you need to create an account before you can apply to become a merchant.
Fill in your company information
After you’ve created an account, it’s time to fill in your company information.
In case you have a company registered outside of China, you should tick the box for cross border E-Commerce (跨境贸易).
You need to provide the following information:
- Company information
- Company qualification
- Financial information
- Brand information
- Brand qualification
1. Company information
- Store manager contact information
- Business address (the contract and invoice will be sent here)
- Trade model (choose cross-border trade)
- Delivery area
2. Company qualification
- Business registration
- Or Certificate of incorporation
- Or Other company registration file
3. Financial Information
- Bank name and account number of the bank
- Bank address
- Billing currency
- Overseas Bank Additional Information (SWIFT CODE/IBAN)
- If the bank address is South Korea, you need to fill in the financial contact number
4. Brand information
- Brand name
- Tmall official flagship store link (optional)
- Brand banner
- Brand promotion image
- Brand description (within 30 characters)
- Brand introduction (within 140 characters)
- Official store name
5. Brand qualification
Below, you can find the requirements that apply in case you’re a brand owner, have the rights to resell a brand on Xiaohongshu, or if you have the rights to resell another companies’ brands in general.
- Upload application for the establishment of a new store, including official seal
Companies authorized to resell brands on Xiaohongshu:
- Upload authorization letter issued by the brand owner, including the official seal of that brand
Companies authorized to resell brands in general:
- Upload authorization letter issued by the brand owner, including authorization from related companies within the supply chain, and with official seal
Trademark Registration Certificate should be provided by all companies.
- Upload application for the establishment of a new store, including official seal
Retailers authorized to sell on Xiaohongshu:
- Upload authorization letter issued by the brand owner, including authorization from related companies within the supply chain, and with official company seal
Restrictions to the descriptions of brands:
Xiaohongshu doesn’t allow any descriptions that include words like:
- “The most…”
- “The best…”
As mentioned, the community of Xiaohongshu builds on trust and lengthy product reviews. You’re not allowed trying to hard-sell your products.
How long time does it take to become a merchant?
The time it takes to become registered mostly depends on how quickly you can upload all the forms, finalizing your company introduction, to upload images, and more.
The application can be managed within one week if you do everything right from the start.
How can I contact Xiaohongshu if I need help?
If you come across any issues, or have any questions, you can email Xiaohongshu at: firstname.lastname@example.org.
A third party (Tmall Partner) can also help you sell in your brand, help you with registrations, and to set up your store.
How much does it cost to sell on Xiaohongshu?
I’ve personally been in contact with Xiaohongshu to confirm the deposits and running costs charged.
Deposits vary depending on the “characteristics” of your company, your qualifications, and the type of store you plan to set up.
The fees will be determined during the contract signing.
The deposit is normally RMB 20,000 and will be transferred back three months after you closed the store.
Commissions normally range between 15-20%.
Xiaohongshu is a quickly growing marketplace that focuses on products like apparel, cosmetics, nutrition foods, accessories, and brands that are appreciated among young female buyers.
It’s not a pure E-Commerce website, but rather a lifestyle community where users and influencers post pictures, videos, and information when using products.
Buyers put a big trust in the website and your sales success relies heavily on positive reviews from users or influencers (KOLs).
Xiaohongshu forbids companies from trying to hard sell products, with an obvious goal to profit from its users.
If you plan to sell on Xiaohongshu, you have two different options: they either pre-purchase products directly from you, or you open your own shop.
The first option is preferred as Xiaohongshu wants control of procurement processes, increasing quality and customer satisfaction.
If you decide to open a shop, you can manage the whole application and store setup online, by visiting Xiaohongshu’s website.