Xiaohongshu promotion strategy: the road to brand self-upgrade!

1. Explosive growth

Xiaohongshu has been extremely popular in the past year. The mere fact that it is the title sponsor of the phenomenally popular variety shows "Idol Producer" and "Produce 101" has brought it tremendous exposure. According to Analysys Qianfan data, the number of monthly active users of Xiaohongshu has been on an upward trend since 2018. As of April 2019, the number of monthly active users of Xiaohongshu reached 41.83 million.

Public information shows that Xiaohongshu was founded in 2013 and has gone through five rounds of financing. In June 2018, Xiaohongshu received over US$300 million in financial financing led by Alibaba, with a valuation of over US$3 billion. As of May 2019, Xiaohongshu had 250 million registered users, with more than 3 billion notes exposed every day.

Source: Compiled based on public information

Xiaohongshu positions itself as a community e-commerce platform with the dual attributes of both a community and an e-commerce platform. According to Analysys Qianfan data, among comprehensive community apps, Xiaohongshu has seen a steady increase in the number of monthly active users, and in March this year it surpassed Baidu Tieba by a slight margin, taking the lead in terms of the number of active users. Among comprehensive e-commerce platforms, Xiaohongshu ranks after Taobao, JD.com, and Tmall, and is on par with Suning.com, successfully squeezing into the second tier of comprehensive e-commerce platforms.

In terms of user attributes, Analysys Qianfan data shows that Xiaohongshu's users conform to the "28 distribution": women account for 79.19% of the users, users under the age of 35 account for 78.31%, and the majority of them are under the age of 24. The proportion of users with medium or higher spending power and users in second-tier cities and above is also close to 80%. It can be judged that the users of Xiaohongshu are a group of young people who love beauty and fashion. They are in the rising period of their careers, have many internal needs, and have purchasing power. They are a group of very high-quality users.

Xiaohongshu user structure in April 2019

With a large number of high-quality active users, and the platform's "grass-planting" gene directly influencing purchases, Xiaohongshu's marketing potential is obvious. Founder Qu Fang also said that Xiaohongshu has become a "gold mine" with huge commercial value and a "value depression."

2. Problems and Crisis

However, despite its growing fame, Xiaohongshu has encountered some problems in its growth process: first, there is an overabundance of advertisements. Many notes mention brands, product numbers and prices from time to time, and are always "recommending good things". The community for sharing experiences has become distorted. The overwhelming publicity by KOLs has also led to content homogeneity, and even illegal marketing involving tobacco has occurred. Furthermore, there is the problem of counterfeiting. Merchants, writers, KOLs and promotion companies work closely together to ghostwrite and post notes, inflate the volume and improve search rankings, which has become an industrial chain. Xiaohongshu has reported the case to the public security authorities.

The bigger concern is the slowdown in growth. According to Analysys Qianfan data, the growth rate of Xiaohongshu's monthly active users has slowed down significantly recently. This means that Xiaohongshu’s early model has encountered a bottleneck and new growth points are yet to emerge. At the same time, what is not optimistic is that the problems accumulated during the previous rapid growth will gradually emerge.

Analysts believe that the slowdown in Xiaohongshu’s growth is due to the following reasons:

(1) Marketing momentum has weakened. Compared with the first half of 2018, Xiaohongshu's subsequent promotional marketing activities have obviously weakened, and its exposure has decreased. Baidu Index shows that after August 2018, the search index of Xiaohongshu has almost been halved. Among its recent search peaks, point H was caused by the topic of Spring Festival red envelopes, while points I and J were caused by the scandals of "ghostwriting" and "forgery" of notes. Obviously, Xiaohongshu has not been "popular" all the time.

2018-2019 Xiaohongshu Baidu search index

(2) The user scale has reached its peak. Xiaohongshu's target group is young female users. According to the sixth national census data, my country's female population aged 20-40 is about 218 million. Based on Xiaohongshu's current gender structure, its total user group is estimated to be 280 million, and this does not take into account the city factor. However, Xiaohongshu currently has 250 million registered users, and its future growth space will be limited.

(3) Competition among platforms is fierce. Xiaohongshu’s ability to sell products has amazed other platforms, and has therefore been discussed, copied, and followed. In terms of e-commerce, Xiaohongshu is facing pressure from the first-tier e-commerce companies such as Taobao, Tmall, and JD.com, and its own supply capacity is relatively weak; in terms of community, Weibo, Tmall's Planting Cat, Meitu Community, and Mafengwo are trying their best to develop their own shopping sharing communities, hoping to recreate a Xiaohongshu-style miracle; in terms of model, Douyin has opened a purchasing channel in short videos, and WeChat is also brewing a content shopping guide mini program based on LBS, all of which will divert users' attention and purchases, squeezing Xiaohongshu's living space.

(4) Community reverse eviction. The influx of a large number of users brought about rapid growth of the platform, but also lowered the average quality of users. In the absence of clear platform rules in the early stages, there was a crazy influx of promotions, advertising was rampant, the community became watered down, and there were serious problems such as fake notes and products. This would affect user experience and brand awareness, accelerate user exodus, and ultimately lead to a slowdown in the platform's growth rate.

3. Future and suggestions

After rapid growth, Xiaohongshu is facing a year of great test. Judging from the current platform positioning, Xiaohongshu has gone through a period of rapid growth and will enter a mature period of steady development in the future. In this regard, Analysys International has the following suggestions:

(1) Change marketing direction. At present, Xiaohongshu already has a large number of users and no longer needs to spend time and effort relying on marketing and traffic diversion from other platforms to achieve growth. However, the fashionable and trendy characteristics of Xiaohongshu determine that it should maintain a certain level of exposure and convey a positive, active and lively impression to the society. In this regard, Xiaohongshu should change its marketing direction, use the platform's high-quality content to create hot topics, and spread them on other social media to maintain its popularity.

(2) Refined operations. At present, the proportion of Xiaohongshu's monthly active users to registered users is only 16.73%, and a large number of users are in a dormant state. In this regard, Xiaohongshu should tap into its existing user base and carry out refined operations. While serving female and young users well, it should also penetrate into male users and users of other age groups, discover their interests, and better improve user activity.

(3) Cultivate users’ purchasing habits within the platform. Analysis of the user preference index TGI found that compared with other UGC communities such as Zhihu or similar community e-commerce platforms such as Mogujie, Xiaohongshu users prefer to visit other e-commerce platforms such as Taobao, Tmall, and JD.com, and prefer Meituan and Douyin, which will take away Xiaohongshu's purchase orders. In this regard, Xiaohongshu should make up for the shortcomings of its own mall, establish brand credibility, and focus on cultivating user purchasing habits to promote purchase conversions among community users.

Data source: Analysys Qianfan

(4) Strengthen governance efforts and maintain the community environment. Xiaohongshu’s cleanup of kols is aimed at creating a good community ecology. It is reported that Xiaohongshu also released the "Little Red Heart" award list based on real voting and evaluation on May 27, helping users avoid false information and further discover good products, once again demonstrating its determination in community governance. It can be said that improving content quality and creating a good community ecosystem are obstacles that Xiaohongshu cannot avoid. However, the effect remains to be seen, and Xiaohongshu still has a long way to go in its self-upgrade...

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Author: Yi Analysys

Source: Analysys International (yiguanguoji)