Xinyan Finance reported on Tuesday that Chinese lifestyle-related social media platform Xiaohongshu has recently undergone an organizational restructuring, merging the original community department and e-commerce department into a new community department. In addition, sources said that Ke Nan, COO of Xiaohongshu, will be in charge of the e-commerce business.
Xiaohongshu responded that its community vision is to become a multi-lifestyle gathering place for more users, and trading is an important part of community life. The trading mind of users should be cultivated in the community, and the trading ecology of merchants should grow in the community. The merger of community and e-commerce business is a natural iteration of the organization in the process of achieving this common vision.
This may mean that Xiaohongshu’s e-commerce business will be re-planned, the link between community and e-commerce will be strengthened, and the integrated layout of e-commerce and community business will be increased, so as to obtain more user traffic, achieve commercialization and monetization, and expand the firm’s profit model.
Xiaohongshu initially started as a cross-border shopping strategy, and cross-border e-commerce once brought significant revenue to the platform. However, with major corporations entering the scene, the competition has gradually become fierce. According to iiMedia Research, Xiaohongshu’s share in the cross-border e-commerce market in 2016 was only 6.5%. After that, it tried to self-operate e-commerce and introduce third-party merchants to join in, but its e-commerce sales were not satisfactory.
According to the 2021 Xiaohongshu Brand Research Report released by Leadleo, the company’s revenue in 2021 was mainly composed of advertising and e-commerce, accounting for 80% and 20%, respectively, while revenue of the e-commerce business is much less than advertising.
In fact, this is not the first time that Xiaohongshu has made structural adjustments to its community and e-commerce departments. In February 2019, the company said in an internal letter that the “platform” of third-party merchants was partially incorporated into the community system and renamed as “brand account” to conduct marketing and trading around the settled brands. The e-commerce business Xiaohongshu Mall continues to develop independently.