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Xiaohongshu is experiencing mixed fortunes. On September 11, the cyberspace administration interviewed and punished Xiaohongshu for poor management of its hot search list, which frequently featured hyped celebrity news and other harmful content. However, regulatory pressure has not slowed it down. Almost simultaneously, foreign media revealed Xiaohongshu’s latest performance update to investors: its profit is expected to triple this year to $3 billion. This figure not only exceeds Pinterest’s 2024 revenue by 50% (Pinterest also focuses on image-text socializing) but also pushes Xiaohongshu’s valuation to $31 billion in its latest transaction.
Main Managers in the Marketplace
On August 28, three days after the launch of the Marketplace feature, Xiaohongshu invited more than 100 merchants to participate in an offline marketplace in Shanghai, featuring “small and beautiful” categories such as fashion and handcrafts. The scene and decorations exuded a strong “Xiaohongshu vibe.”
These “small and beautiful” Xiaohongshu merchants often have their own brands, and Xiaohongshu calls them “brand owners.” Although the term “brand owner” has been overused in the online world, Xiaohongshu seems unaffected. According to a Xiaohongshu person in charge, half of the merchants who opened stores in the past year were first-time entrepreneurs born in the 1995s, and 70% of monthly active purchasing users are also post-95s. That means more than half of the merchants have just transitioned from users to consumers, and the newly transformed “brand owners” naturally understand what their fans like better and interact closely with consumers through notes and live streams.
Mi Ta is such a “first-time 95s entrepreneur.” She started live streaming jewelry sales on Xiaohongshu in June last year. Although she didn’t participate in the offline marketplace, she clearly felt that after the Marketplace feature went live, her store’s notes and live streams received more exposure and more precise traffic.
The Marketplace for brand owners had been in the works since May this year, when Xiaohongshu announced it would no longer organize the 618 shopping festival and launched the predecessor of “Marketplace” – the “Friendly Marketplace” feature, which officially went live on June 1. At that time, the Friendly Marketplace entrance was still on the user’s personal page.
| The “Friendly Marketplace” entrance on the personal homepage.
Within less than two months of its launch, the Friendly Marketplace underwent rapid iteration: after starting merchant recruitment in July, the “Marketplace” completed internal testing in early August and officially became a first-level function entrance at the end of August.
Changing a first-level entrance is no small matter for a social product, and such rapid iteration highlights Xiaohongshu’s emphasis on e-commerce.
As a first-level e-commerce function entrance, “Marketplace” is easily associated with Douyin’s “Mall,” but interestingly, “Marketplace” replaced Xiaohongshu’s most Douyin-like “Hot” feature, i.e., the short video stream entrance.
| “Marketplace” (right) replaces “Hot” (left).
However, the layout of “Marketplace” is completely different from Douyin’s Mall. In addition to the top navigation bar with entrances to Marketplace Live, Buyer Showcase, New Product Launch, etc., the lower part still uses Xiaohongshu’s iconic double-column layout, which more concentratedly displays product notes, live streaming rooms with goods, and shopping links.
| “Marketplace” vs. “Douyin Mall.”
Compared to Douyin Mall’s strong “shelf” attribute, Xiaohongshu’s “Marketplace” emphasizes community atmosphere more. When browsing “shelves,” users often have clear shopping goals; in “Marketplace,” even though you can also place orders, the presence of notes and live streaming rooms makes it more like a place where you can casually browse in your free time and get “grass-planting” (inspired to buy) incidentally.
Therefore, whether it’s online traffic guidance or offline exhibition activities, Xiaohongshu is conveying a perception to users: Marketplace is not only a shopping entrance but also an extension of the shopping experience. This “buyable and browsable” design essentially aligns with Xiaohongshu’s content community tone and constitutes the most distinctive feature of its “lifestyle e-commerce.”
The Secret of Niche Non-standard Products
However, no matter how Xiaohongshu packages it with new concepts, the core transaction model of “lifestyle e-commerce” is still the buyer-led e-commerce it launched in 2023. That year, three top streamers emerged on Xiaohongshu: Dong Jie, Zhang Xiaohui, and Yi Nengjing. All three set a record of 50 million GMV. At the same time, words like “buyer” and “brand owner” frequently appeared in the titles of their live streams, and their success directly pushed Xiaohongshu to fully invest in the buyer-led e-commerce model.
From common sense, the current e-commerce competition is fierce, and all major platforms are moving closer to the supply chain source, with low price as the core selling point. At this time, Xiaohongshu chose a “counterintuitive” path: focusing on differentiation through buyer-led e-commerce.
In fact, buyer-led e-commerce is not invented by Xiaohongshu. This model has long been mature in Europe. Platforms like Zalando in Germany, ASOS and La Redoute in France are vertical e-commerce platforms with buyer system as the core, aggregating a large number of independent brands and focusing on niche, high-premium non-standard products. European consumers’ habits are also clear: they go to these independent sites for non-standard products, while for standard products such as daily necessities and life essentials, they rely more on shelf e-commerce like Amazon.
Xiaohongshu’s choice is similar. It does have standard product businesses, but starting from May this year, Xiaohongshu simply handed over this part of the traffic to shelf e-commerce. Xiaohongshu has successively launched “grass-planting direct” cooperation with shelf e-commerce platforms such as Taotian, JD.com, and Pinduoduo. Brands can post notes on Xiaohongshu, and users can jump directly to Taobao from the notes. This “semi-closed-loop e-commerce” not only conforms to users’ habit of “planting grass on Xiaohongshu and placing orders on other platforms” but also allows Xiaohongshu to earn advertising fees.
The closed-loop part is left to the Marketplace and non-standard products. After all, compared with other platforms, Xiaohongshu e-commerce still has many obvious shortcomings: first, its standard products lack price advantages, and most users plant grass on Xiaohongshu and close deals on other platforms; second, its fulfillment capacity is insufficient, and e-commerce infrastructure still relies on third parties. Instead of competing head-on in standard products, it is better to give way and focus on non-standard products that are more in line with the community tone.
Because of this, Xiaohongshu has recently increased support for non-standard product merchants. The aforementioned merchant Mi Ta felt obvious changes:
“Even without paid traffic, the exposure of the store’s live stream and notes has increased significantly, and the platform’s service to merchants has also improved.”
She guessed that this might be related to Xiaohongshu’s experience of a round of standard product merchant loss.
But from the platform’s perspective, the “departure” of standard product merchants is not necessarily a bad thing. Not every merchant can produce high-quality content, and standard product sellers often rely more on price competition, resulting in serious homogenization of the content they output. In contrast, non-standard products naturally have niche and aesthetic values, making it easier to breed differentiated content expression.
This also determines that Xiaohongshu’s live streams cannot sell goods like a marathon like other e-commerce live streams. Although the volume of non-standard products is small, it allows merchants to spend more time on the content quality of notes and live streams. Mi Ta’s daily routine is an example: she not only shows details in the live stream but also spends a lot of time shooting exquisite graphic notes to impress users with her personal aesthetics and understanding.
“The anchor doesn’t need to shout at the top of their lungs; more importantly, they plant grass by fully displaying product details, sharing their understanding, and personal aesthetics.”
It can be seen that whether it is buyer-led e-commerce or the so-called “lifestyle e-commerce,” the core is not price-driven, but transactions based on trust, recognition, and emotional value. In a sense, Xiaohongshu’s ambition is to become the “B side” of Chinese e-commerce.
How Long Until It Lands?
Xiaohongshu seems to have found its own path, but whether the “brand owners” can really support the scale of the Marketplace is still the biggest suspense. The platform took the initiative to give up the largest standard product business and instead bet on niche and vertical categories. Although these areas have higher profit margins and larger commission spaces for the platform, in terms of volume, they are difficult to compare with standard products.
Take Dong Jie, Zhang Xiaohui, and Yi Nengjing as examples: all three took turns topping the “Xiaohongshu Top Goods Anchor” in 2023, but their highest single live stream GMV was only about 50 million yuan. The gap is more intuitive in comparison. Li Dan became the “Xiaohongshu Top Goods Anchor” last year with his emotional channel, with an estimated monthly GMV of only 6.8 million yuan, while as early as October 2020, his second live stream on Douyin achieved 23.08 million yuan. Whether in terms of the volume of top anchors or the overall goods sales scale, Xiaohongshu and Douyin are still not in the same league.
Perhaps Xiaohongshu intends to control the volume of top anchors to disperse platform risks. After all, incidents like “Viya tax evasion” and “Li Jiaqi’s ‘Where is it expensive?'” have had a significant impact on the platform. Some analysts pointed out that Xiaohongshu’s recent regulatory interview may be related to a certain female star occupying the hot search list multiple times with trivial life matters.
However, the problem is that if fully relying on the middle-tier anchor group composed of buyers and brand owners, there are still considerable challenges in expanding the e-commerce scale. Xiaohongshu’s “slow live stream” does leave more space for content expression, but consumption behavior is often driven by low prices. Mi Ta admitted that in her live stream, users need a long time to choose before placing an order, and some even leave after browsing for more than an hour.
In online shopping, quality control and quality are always the users’ biggest concerns. Large-scale produced standard products have stable quality assurance, while the quality of non-standard products depends largely on the conscience of the brand owners. In May this year, Xiaohongshu was interviewed due to failed grass-planting and false recommendations, and previously, it has been frequently exposed to problems such as hidden price increases, inconsistent goods, and false promotion, all pointing to quality control.
Against this background, Xiaohongshu has begun to further expand the interest circles of the community. According to official data, there are currently more than 2,500 segmented interest tags on the platform. Among them, the second dimension and games, which originally belonged to Bilibili’s strong fields, have jumped to the third and fourth largest vertical categories on Xiaohongshu in the past year (calculated by content publication volume). Xiaohongshu clearly has its sights on the “Guzhi economy” of the second-dimensional population. According to iResearch data, the market size of China’s “Guzhi economy” reached 168.9 billion yuan in 2024. With traffic support, Xiaohongshu is cultivating users’ habits of posting, socializing, and trading “Guzhi” on the platform.
This may also explain why Xiaohongshu upgraded “buyer-led e-commerce” to “lifestyle e-commerce” last year: it attempts to extend “trust-based transactions” from the fashion consumption of young women to a wider range of niche and vertical interest circles.
However, from the perspective of product strategy, Xiaohongshu is still very cautious. Up to now, the “Marketplace” function for many users has not yet become a first-level entrance. According to reports, the platform only started testing for deep e-commerce users at the end of August, initially covering 10% of daily active users, and will gradually expand in the future. This rhythm fully reflects its prudent attitude towards e-commerce.
The same is true for offline business. Xiaohongshu’s local life membership service “Xiaohong Card” has just been launched, and the first phase is only available in three cities: Shanghai, Hangzhou, and Guangzhou. The official customer service responded that cardholders can enjoy discounts when consuming at designated stores (up to 10% off, specifically configured by the merchant), and emphasized that the “Xiaohong Card” is gradually expanding, but only supports these three cities for the time being.
Whether online or offline, Xiaohongshu is testing step by step. This platform, which started with e-commerce, has been feeling its way across the river for many years. The difference is that more and more brand owners have successfully “landed” with the help of Xiaohongshu, while the platform itself is still exploring how to make “lifestyle e-commerce” truly work.
In the global e-commerce landscape, the United States, represented by Amazon, has long taken “shelf e-commerce” to the extreme; China, driven by Pinduoduo and Douyin, has rolled low prices and efficiency to the limit. Xiaohongshu’s “lifestyle e-commerce” attempts to open up a third path – not competing with giants for scale, but using content, trust, and interest to build a new consumption logic.
Can it grow into the “third pole” of Chinese e-commerce, or can it only exist as a supplement to the mainstream model? The answer may not be revealed immediately. But what is certain is that in a market dominated by low prices and efficiency, Xiaohongshu is trying to write a completely different possibility.
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