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Find here the China paradigm episode 20. Miro Li is a consultant from Double V Consulting who focuses on the cosmetics and fashion brands in China. In this episode, she shares insights into XiaoHongShu or RED. XiaoHongShu is a social commerce app that is extremely common among young female consumers of cosmetics and fashion brands in Tier 1 and Tier 2 cities in China. Brands can open stores, target consumers, and publish branded content on XiaoHongShu. Users, KOLs, and KOCs can review and purchase products through the app. Initially, most of the brands on the app were international brands and now there are more domestic brands. Opening a XiaoHongShu account can provide an excellent platform for foreign brands who do not have enough brand awareness to open a Tmall or JD store. The app is also available to consumers outside of China.

How can I open a XiaoHongShu store to sell my products in China?

Miro Li:

• To open a XiaoHongShu store and sell products you first must lodge 3,500 USD into your account. This will be used in the event of refunds.
• You don’t need to register a bank account in China. Payments are cross-border commerce, XiaoHongShu will take a commission (roughly 15%) and transfer the money directly back to your foreign bank account.
• You ship your inventory to the XiaoHongShu warehouse in Hong Kong and XiaoHongShu will take care of the logistics within China. It takes around 10 days for your inventory Consumers in mainland China will receive the products within 3 days.

How much does it cost to store products in a XiaoHongShu warehouse?

Miro Li:

• For the first 60 days, brands do not have to pay storage costs to have their goods stored in a XiaoHongShu warehouse. There is no minimum required amount of stock.
• XiaoHongShu recommend to start with smaller quantities of stock, especially for lesser known brands.

How much does logistics cost within China for transporting goods from XiaoHongShu warehouse to the final consumer?

Miro Li:

• It’s very cheap, roughly 30 RMB per kilogram.

How does it work with product returns through XiaoHongShu?

Miro Li:

• Foreign brands do not have to redress the consumer if the problem is simply that the consumer is unsatisfied with the product. If the product was damaged during transportation, the brand must redress the consumer.
• Foreign brands can have a return address within China if they want. They can have a partner within China who can manage returns for them.
• The return rate is about the same on XiaoHongShu as it is on other major platforms. Of course, it also depends on the category and the standard of your after-sales service.

Will my products have to undergo animal testing to sell in China through XiaoHongShu?

Miro Li:

• No. Animal testing is not necessary for brands that want to sell in China if they sell through XiaoHongShu.

Quick Recap

You don’t have to open a XiaoHongShu store to promote your brand. You can see if people are already talking about your brand on XiaoHongShu. If people aren’t, you can simply give regular users free samples of your product on the condition they talk about it on the social platform (presumably you will want them to say positive things).

If this doesn’t create big enough buzz you can pay KOLs to talk about your brand on the platform.

If the buzz turns into a chatter you can pay 3,500 USD to open a XiaoHongShu store and begin selling on the platform.

How do you drive sales on XiaoHongShu?

Miro Li:

• It’s different from other eCommerce stores like Tmall, Taobao, or JD. It is not actually the best platform for doing a large volume of sales. It’s more for brands that are new to China and don’t have a big presence, it’s a good place for generating hype or awareness for your brand. The bigger aforementioned e-commerce platforms will only work with very established brands. XiaoHongShu should be a platform for a smaller brand’s first steps in China. When entering China through cross border commerce, having a XiaoHongShu account provides cheaper and slower organic growth, other bigger platforms provide faster and more expensive growth.
• It is a social commerce app, it functions as both social media and an eCommerce platform. It is user-generated content-driven rather than being driven by SEO optimization, effective banner ads, etc. However, you can do marketing and drive sales on XiaoHongShu by managing your own official account on the app, similar to WeChat mini-accounts.
• Also working with KOCs, KOLs, and /or normal consumers can help you to drive sales on XiaoHongShu. Regular users will probably be satisfied with free samples or free merchandise but working with KOLs will cost you marketing dollars. Because of the social nature of the app, these users will then post content about your brand and/ or its products. And because of the review driven nature of Chinese consumers, a positive review of your brand can go a long way towards convincing other shoppers about your brand.

Are there lots of bots/fake likes on XiaoHongShu?

Miro Li:

• XiaoHongShu is very strict on this. They are much stricter than Weibo in terms of allowing these fake likes or bots on their platform. If you buy fake likes for your post, your XiaoHongShu account might get removed.

How will users see my brand’s content on XiaoHongShu?

Miro Li:

• According to the users searches, if your brand makes running shoes, your content will appear in the explore/ home page of the users who have recently been searching for running shoes and liking or commenting on posts about running shoes. The XiaoHongShu algorithm pushes the content that it thinks might be of interest to users onto the homepages of those users.

Apart from buying products, what else do users use their XiaoHongShu accounts for?

Miro Li:

• People also use XiaoHongShu as a search engine, as well as using their XiaoHongShu account for product reviews, to review products themselves, and consuming branded content on XiaoHongShu by KOLs or KOCs they follow.
• People increasingly use XiaoHongShu as a travel review, if they are travelling abroad they will rely on XiaoHongShu for restaurant reviews. F&B content on XiaoHongShu is only behind cosmetics and fashion in terms of popularity on XiaoHongShu.
• Users also trust XiaoHongShu more than Baidu because they know Baidu search feed is dominated by paid advertisements, rather than genuine reviews.

Can you give us some case studies of brands you work with on XiaoHongShu?

Miro Li:

One brand in particular is US cosmetics brand. They are fairly well known in the US but almost not at all known in China, and they are using XiaoHongShu because this brand doesn’t do animal testing. We manage their social and ecommerce presence on the platform. We opened a flagship store XiaoHongShu account for them on the app and we also collaborated with KOLs for the brand. We also manage their content on XiaoHongShu.

But before we opened their XiaoHongShu store, we did around 2 and a half months of pre-launch marketing for them. We worked with regular users of the app as well as KOLs to spread awareness of the brand before we opened the XiaoHongShu store. That got people talking about the brand.

When it came to launching their XiaoHongShu store we also worked with KOLs and we could see that 80% of the traffic was being directly driven from the KOL’s posts.

For a cosmetics brand with low awareness launching in China through XiaoHongShu, a good year could amount to about 10,000 orders. Remember, XiaoHongShu is not Tmall or JD, you can’t expect to be selling hundreds of thousands or millions of products a year. XiaoHongShu is for developing a buzz about your brand.

Of course, sales will also depend on price. Price is still an important factor for consumers on XiaoHongShu. Particularly if you price in China is much higher that it is in other countries.

What are the categories of products that do very well on XiaoHongShu?

Miro Li:

• Categories that do very well on XiaoHongShu are mass market cosmetics. This is because the application and results of putting on make-up are very visible. Also, the returns rate is lower than for clothing because once you use the product it cannot be returned. In 2017 cosmetics accounted for almost 50% of cross-border purchases.

What taxes need to be paid for products sold through XiaoHongShu in China?

Miro Li:

• Just cross-border tax. This tax is around 11.2%. This tax is lower than VAT because government policies are supportive of cross-border commerce.

To recap

XiaoHongShu is not the place to generate huge sales. It is a good platform for smaller, niche, lesser-known brands to generate awareness for their brand in China through regular consumer or KOL reviews. It is possible to generate sales if you open a XiaoHongShu store but the sales volumes pale in comparison to eCommerce platforms like Tmall and JD.

Brand’s Strategy in China using a XiaoHongShu account

Miro Li:

1. Do social listening on the platform.
2. Pay KOLs or KOCs to talk about you brand on XiaoHongShu
3. When enough people are talking about your brand, open a XiaoHongShu store and start selling your products.
4. When sales go over 10,000 transactions a year, consider generating sales on other ecommerce platforms in China