Xiaohongshu, the Instagram-style Chinese social media platform also known as Red, is emerging as a formidable player in China’s bustling e-commerce market. With 300 million monthly active users, the platform allows young consumers to share lifestyle tips and has recently intensified its efforts to capture a share of the online shopping industry, competing with giants like Alibaba Group and ByteDance’s Douyin.

The platform hosted a two-day summit in Hangzhou, China’s e-commerce hub and home to Alibaba, to attract online vendors, brands, and influencers. The event featured a range of products from durable goods like custom-designed sofas and home appliances to consumables like snacks and beverages. Influencers also attended, seeking collaboration opportunities.

Yin Shi, head of Xiaohongshu’s e-commerce unit, revealed significant growth figures at the summit, noting a 3.5-fold increase in merchants with monthly sales exceeding 5 million yuan and a 4.3-fold increase in purchasing users. To further solidify its e-commerce presence, Xiaohongshu plans to move its e-commerce unit from Shanghai to Hangzhou, a city renowned for its influencer base.

Founded in 2013 by Stanford graduate Mao Wenchao and former Bertelsmann employee Qu Fang, Xiaohongshu started as a cross-border shopping guide. It has since evolved into a vibrant online community offering life hacks, travel tips, fashion inspiration, and job opportunities. Its homepage features a double-column layout of content, allowing users to easily scroll through live streams and short videos, similar to Douyin, the Chinese version of TikTok.

Xiaohongshu’s “lifestyle e-commerce” model has gained traction, with influencers like Chinese actress Dong Jie and Hong Kong celebrity Teresa Cheung Xiaohui leading live-streaming sessions. Dean Yang, co-founder of Hangzhou-based fragrance brand Emonster, highlighted the platform’s appeal to women seeking a high-quality lifestyle, who are loyal users and ideal customers for brands like his.

Despite a relatively small following of under 40,000 on Xiaohongshu, Emonster has seen significant sales, with some products selling nearly 10,000 units. Top live-streamers can drive significant gross merchandise value, though they often charge around 30% commission. The number of users purchasing via live streams grew 6.3 times in the past year, with an average transaction value above 500 yuan (US$69).

Eno, who sells artifacts targeting younger audiences, found that Xiaohongshu’s users are more sophisticated and less price-sensitive compared to Douyin’s. On Xiaohongshu, her average product price is 4,000 yuan, five times higher than on other platforms.

Xiaohongshu’s e-commerce segment is still developing. The platform reported a net profit of US$500 million on revenue of US$3.7 billion last year, primarily from advertising, as per a Financial Times report. In contrast, Alibaba’s revenue in 2023 was 927.5 billion yuan.

Despite its relatively small size in the market, Xiaohongshu has attracted significant investment from Alibaba and Tencent Holdings, peaking at a valuation of US$20 billion in 2021. The valuation has since dipped to around US$17 billion amid a broader decline in Chinese tech stock valuations. The platform’s initial public offering plans remain uncertain.

Zhou Qi, a fashion editor turned brand owner and live-streamer, emphasized the importance of finding the right platform for the right audience. “Only the right platform, combined with the right products, hosts, and users, can achieve harmony,” she said after the summit.