The last 12 months have been a difficult period for both e-commerce and social commerce players in China. Many firms, operating across product categories, have shut operations owing to a slowdown in consumer spending and venture capital funding in the region. Those operational, are now seeking to revive their growth and generate more revenue and profit, in 2023.
The chat feature, which creates an opportunity for users to create communities for connecting over niche interests, is aimed at encouraging users to spend more time on the social media platform. With users spending more time on the platform, Xiaohongshu will be subsequently able to attract more advertisers on the platform, thereby driving more revenue for the firm. For influencers and retailers, on the other hand, the new feature can assist in driving more traffic to their profiles and subsequently, the purchases.
In March 2023, Xiaohongshu also announced that the platform now allows direct links to Taobao on open-screen ads. These new feature additions, along with an enhanced focus on livestreaming, is part of the firm’s strategy to diversify the functionality and compete with players such as Douyin and Kuaishou, which are recording strong growth in the short-video space.
In China, Xiaohongshu has gained widespread traction among consumers and has recorded strong growth ever since its launch in the country. The addition of these new features and services will further aid social media's popularity in the Chinese market. Over the next three to four years, PayNXT360 expects Xiaohongshu to also expand its presence in the global market, a strategy that has been adopted by its competitors such as Douyin (TikTok).
Unlike Temu, which has gained widespread popularity in the United States market owing to its low-pricing strategy, Lemon8 will find it difficult to penetrate the North American market. Instagram has built a reputation for itself in the United States. Lemon8, which offers services similar to Instagram will, therefore, find it difficult to gain popularity among the users in the region.
ByteDance also launched Lemon8 in the Chinese market under the name of Kesong in July 2022. However, owing to the widespread popularity of Xiaohongshu in the Chinese market, ByteDance removed Kesong from the app store only a few weeks later. However, in the global markets, Lemon8 has found widespread success, especially in markets like Japan and Thailand.
With many of the Chinese social commerce firms expanding their global presence, Xiaohongshu is also expected to adopt the same strategy from the short to medium-term perspective. With competition growing in the domestic industry, all of these firms are seeking to drive the next growth phase by expanding into international markets.
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