Find here the China paradigm episode 20. Learn more about who uses XiaoHongShu and why they use it, how can one open a Xiaohongshu account in China, and how to initiate first customer contact with Chinese consumers with Miro Li. Find all the details and additional links below.
Full transcript below:
Matthieu David: Hello everyone I’m Matthieu David, founder of Daxue consulting and its China business podcast, China Paradigms. Today I am with Miro Li; you are the founder of Double V. Consulting. I’m correct, Double V. Consulting, right?
Miro Li: Yes, that’s right.
Matthieu David: You will have to explain to us why it is Double V later on and why is consulting. So Double V. Consulting, you are focusing on XiaoHongShu. I feel the action, or to action XiaoHongShu and how to manage. You manage for some brands their presence on XiaoHongShu as far as I understand, you have a couple on your website, Sofya talked to me on what you do, and you are mainly focusing on beauty brands, on premium brands on I feel cosmetics, skin care, and foreign brands in China. That’s something we are going to see together. So, to talk more about XiaoHongShu, which is known in the West as the company Red –
Miro Li: Red or Little Red Book, or XiaoHongShu.
Matthieu David: Okay, Little Red Book. So, for those who are listening to us from the West, who don’t know about China, who don’t know Chinese, XiaoHongShu means Little Red Book, and actually, it was first the book of Mao, right?
Miro Li: Well, it is different.
Matthieu David: But it does the same work, right?
Miro Li: Yeah, it does the same work actually.
Matthieu David: So, in terms of reference, the couture reference comes from the book from – written by Mao Zedong, of course, it has been used with another trademark and not as a book trademark, but as a website. Actually, not as a website, mainly as an app. Actually, the website is nothing because the best of the website is pulled in App.
Miro Li: Yes. Yes.
Matthieu David: Okay. So first question could you give us an idea of the size of the business, how many clients you have been working with and I know it’s pretty recent, you started the business like 2 years ago, but if you could give us about how many clients or size of the team, some metrics to have an idea of where you are now in your entrepreneurial path.
Miro Li: So, we have two offices in Hong Kong and Shenzhen. Our operation team mostly in Shenzhen and we are working with our clients, which all of our they are foreign brands in China and they are small to medium foreign brands and they don’t have a lot of brand presence in China, so basically, we’re helping them to do the first step in China. From zero to one. And we are helping – most of our brands are from Europe and the US, and we are now working with more than 20 brands. So, what we do is that we can do the first consulting part. We can help them do the brand audit, research, and the strategy, and then we can also do the operation and also the marketing part.
Matthieu David: I see, so when you say you have 20 clients, does it mean that you’re operating 20 Xiaohongshu accounts in China?
Miro Li: Yeah, 20 brands.
Matthieu David: You’re operating the 20 accounts. Roughly 20 accounts on XiaoHongShu, is what you say. The official accounts on XiaoHongShu and so on. Okay. Tell me, you wrote an article on XiaoHongShu a few weeks ago, not even a month ago I think, and what’s interesting on the history of XiaoHongShu is that it began in Hong Kong, you are based on Hong Kong that’s why it began in Hong Kong as a travel guide, I think and then step by step it became not only a travel guide to discover places to go, but how to buy. What to purchase in Hong Kong and as we know what we call the Chinese traveler, it’s a big thing in Hong Kong, you have a lot of Chinese from mainland going to Hong Kong to purchase products because of lower taxes, also because of the availability of the product and so on.
And step by step it became a guide, it was a guide, and it became a marketplace in China where actually you could buy products from Hong Kong through the app and then people began to sell from Thailand, from Japan, from Korea, that’s how it began, and that’s why the identity of XiaoHongShu is very cross border, it’s very international, and that’s something I discovered recently actually, I didn’t understand why XiaoHongShu was so into cross border, actually it’s based on the roots of XiaoHongShu which was a travel guide.
Could you tell us more about why XiaoHongShu could be a good platform for brands who want to enter China through the cross border and my question specifically are why in terms of audience? People on the platform, and why in terms of function? Do you need a bank account in China, a company in China to sell on XiaoHongShu or its purely cross the border? And finally, how do you do it technically with Alipay, WeChat Pay if you only have a foreign account, French account, American account. Sorry, it’s a lot of questions.
Miro Li: Yeah so, as you said, XiaoHongShu is focusing a lot on cross border, but now it’s not 100% cross border, there are also Chinese brands selling on XiaoHongShu. That’s another thing. So, for a foreign brand in China, why is XiaoHongShu a good place for them to start? Because first, you don’t need to have a Chinese company to open the shop on XiaoHongShu, you just need – for example, you are a French company, you can use your French company and your French bank account to open the shop on XiaoHongShu, and you can receive Euro with your local bank account, and people in China they can pay with Alipay and WeChat pay and XiaoHongShu transfer Euro or US dollar to you.
So, they support cross border payment, and they’re allowing foreign brands in China to open the shop, and they also provide logistic support. They have seven warehouses in different countries, different districts, like they have a warehouse in Hong Kong, in Europe, in the US, in Australia so you can put stock in their warehouse and they can do all the packaging, customs clearance, last mile delivery, everything for you. So, it’s pretty easy for a small to medium brand, if you don’t have your own warehouse, you don’t have your own Chinese team, you can also start from XiaoHongShu.
And I think another thing that is getting more and more popular is because its audience, as you said, XiaoHongShu is very popular among Chinese millennial, young generation and they like to – they are looking for unique products, like foreign brands in China that they can’t buy from other places or other platforms. So that’s why they like to share their feedbacks or product reviews in the XiaoHongShu community, and they’re expecting that they can also buy from XiaoHongShu because they share a lot of photos or they see other people’s reviews. So, they want to see if they can also buy from XiaoHongShu, so that’s why XiaoHongShu is inviting a lot of foreign brands in China, like really unique niche brands that they may not sell on other platforms or other marketplaces in China so they can start on XiaoHongShu.
Matthieu David: I see, could you be more specific, for instance, I’m a French company, I want to sell on XiaoHongShu, how do I open an Alipay cross border and a WeChat cross border? Do I need to do that first right before selling on XiaoHongShu?
Miro Li: You don’t need to do that. Yeah, because XiaoHongShu they receive money from Chinese customers with Alipay and WeChat pay and then XiaoHongShu transfers euros to your local bank account.
Matthieu David: I see, so they pay through the WeChat or Alipay on XiaoHongShu and then send you money. Okay. But that should be expensive. How much is the commission here and how much is the set up fees because I believe when you go through the WeChat or Alipay or XiaoHongShu sale, so I believe they charge even more than if you have your direct WeChat or Alipay, the commission on Alipay is less than 1%, so how much is the commission on XiaoHongShu? How much does it take?
Miro Li: Yeah XiaoHongShu takes on average because it is different from categories or brands. Usually it’s a 15% commission.
Matthieu David: I see. So, like Amazon. Like Amazon but much more than TMall and Taobao. TMall is about 6 to 10% and 15% it’s much more like in the West Amazon.
Miro Li: Yes, but they don’t charge a fixed fee, because TMall and JD they have a fixed fee, so XiaoHongShu they only have a deposit plus commission.
Matthieu David: How much is the deposit?
Miro Li: Averagely, for a foreign brand in China, it’s around 3500 USD.
Matthieu David: Okay, so it’s about 20,000 RMB. I see. And you can pay in USD or Euro?
Miro Li: No, USD.
Matthieu David: Only USD, okay. I see. So, I give a deposit; the deposit is mainly because if you have some product to return, I believe, they will take –
Miro Li: Yes, or some quality problem they have to refund.
Matthieu David: I see. I’m a bit technical and going in detail here but when a client from China wants to return the product, how does it work because the warehouses are overseas and this company which is selling on XiaoHongShu has no presence in China. So how does it work?
Miro Li: So, for a seller, they have two options. One option is they can say they don’t accept returns. If it’s the customer’s problem – I mean if the product quality problem they have to accept returns but if it’s that I buy this product and I don’t like it, they can choose, they don’t accept returns if they are from foreign countries, they are shipping products from foreign countries. So, another option is they can also have return address inside China. So, they can have a Chinese company or a Chinese partner who receives returns for them.
Matthieu David: It not XiaoHongShu which is doing it, because XiaoHongShu has seven warehouses outside of China, but they don’t offer the service of managing returns, do they?
Miro Li: Yes, you can because you can also set the return address as XiaoHongShu’s warehouse. If you are using XiaoHongShu –
Matthieu David: Okay, and then you have to pay more like Amazon, right?
Miro Li: Yes.
Matthieu David: Do you have some metrics about the cost of using the warehousing from XiaoHongShu?
Miro Li: Actually, honestly, it’s not very expensive, I think. So, for example, let’s say if you have stock in Hong Kong warehouse, it takes around 25 to 30 RMB for each kg. So, it’s like for each shipping – shipping cost is around 30 RMB.
Matthieu David: Okay, but for how long because warehousing depends on weight, volume, and time.
Miro Li: No, it’s just the shipping cost. XiaoHongShu has 60 days free warehousing, so you can put your stock in the warehouse for 60 days, free for 60 days.
Matthieu David: For free and after you have to pay -?
Miro Li: Yeah so that’s why you can put for example one box or two boxes for 60 days, and they all sell out, and then you can ship more. It’s very simple; it doesn’t require you a minimum stock or something.
Matthieu David: Okay and then the 25 – 30 RMB per kilograms – kg is kilograms right. So, the kilograms is after the 60 days, right?
Miro Li: No, that’s the shipping cost, shipping from the warehouse to the end customer.
Matthieu David: Okay, and if it stays more than 60 days, I believe you have to pay, right?
Miro Li: Yeah.
Matthieu David: Okay, and it is every month? Do you need to pay every month?
Miro Li: Yes, so actually we always suggest the brand to not put a lot of stock, not a lot in the warehouse first to test the marketplace in China.
Matthieu David: Okay, that’s interesting because Hong Kong is a free trade zone is some way, so you don’t have DHE, you don’t have to pay, you don’t have duties to pay, so what you may suggest your clients is to send first to Hong Kong and to be fast and deliver quickly to Chinese clients, it is more convenient than storing in Australia or France or in the US which will require the client to wait – I will say 5 days right?
Miro Li: At least.
Matthieu David: At least 5 to 10 days. Okay, so the good process could be to send to Hong Kong, you don’t have to do a lot of paperwork in Hong Kong, and then the client can get the product quite quickly in China.
Miro Li: Yeah, in 3 to 5 days you can receive the product.
Matthieu David: I see. Then the question is about regulations. If you’re selling cream, if you’re selling skin care and so on, you have some regulations in China, China, and the West, especially is a test on animals. How did it work in XiaoHongShu on the cross border? Is it a zone where you don’t have to do those tests on the product?
Miro Li: Yeah. You don’t have to do animal testing if you’re doing the cross border, in any marketplace in China.
Matthieu David: Okay, including others like TMall Global?
Miro Li: Yes.
Matthieu David: I see, so I understand the commission, I understand the warehousing – then the question would be, how do you create quality content and sales at the same time. For instance, what we’re learning from using TMall and JD or Taobao – that if you want to get sales, you need to pay advertisement money. You need to have banners; you need to pay keywords, and so on. What’s the case on XiaoHongShu?
Miro Li: So first because we all know that XiaoHongShu is a social commerce app, it has the social media function and also the e-commerce part, but I think the difference between XiaoHongShu with other e-commerce marketplaces in China is that XiaoHongShu is not that sales are driven. The unique part of XiaoHongShu is social media; it’s the community part because people like to write content. People are willing to generate their content instead of a whiteboard, maybe you are just reading out of people posts, and you don’t like to post your own content.
So that’s the unique part of XiaoHongShu, but honestly, if you want to have a shop on XiaoHongShu, it’s not as – the sales may not be as big as TMall or JD or other big e-commerce marketplaces in China. That’s the expectation that we should know before we go to XiaoHongShu. The unique part is, XiaoHongShu is a good place for a new brand in China because it has both the social and e-commerce function so you can do marketing, branding and also you can sell on it. So, if you are totally new in China, you don’t have a lot of brand presence, it’s really hard to get in TMall Global or those big marketplaces in China because they only want those famous brands. But XiaoHongShu they are actually accepting a lot of new brands, so it’s a good place for a new brand to take the first step.
Matthieu David: Okay, so you basically don’t spend much on marketing money would you say, and you more create content?
Miro Li: No, you also need to spend marketing money, the content is – for example, you can manage your own XiaoHongShu account in China, it’s similar to WeChat official account. You can keep posting, but you also need to work with – like your users or KOL users to ask them to post content about your product. So that’s the marketing part.
Matthieu David: Okay, but when I played a little bit with XiaoHongShu – I’ve never bought anything from XiaoHongShu but I’ve played a little bit with it, and you don’t see banners, you don’t see advertisements, you don’t see some brand buying keywords, so this is not the case yet on XiaoHongShu is it?
Miro Li: Yes, so you see XiaoHongShu has two sections, one is the social media, and another one is e-commerce in China. They don’t have a lot of banners because the e-commerce function is – so on XiaoHongShu the user behavior is different. On TMall people know exactly what you want to buy like I want to buy Shiseido cream and I go to TMall I search Shiseido Cream, then I compare prices between different sellers and then I choose one. But on XiaoHongShu it is different.
People go to the community, and people see other people’s posts. They are not searching exactly or specifically one product. They are searching for example cream, and they see peoples reviews on different brands, different products and then they choose one, and then they click the product link, and they go to the product. So, they don’t exactly go to the shop. First, they go to the community first, and they see other people’s reviews, and then they go to the product. So that’s the importance of the user behavior. So that’s why the e-commerce function is not so strong on XiaoHongShu, that’s why you don’t see a lot of banners or advertisements on XiaoHongShu, but actually, in the past few days, XiaoHongShu just launched a new program, CPC ad program, so that’s completely new.
So, it is similar – there are two functions, one is you can see only the explore page, so that’s the default front page, if you open the app, you can see a lot of people post, and on the explore page, you can buy CPC ad. For example, you want to target a group of audience, and you can buy the ad on the explore page. Another thing is, you can also buy keywords, it’s similar to TMall, but it’s not as sales are driven as Taobao – because if you buy keywords, the link can be linked to a post a product page or a brand page. So that’s not only linked to a product page. So, they are very content driven. They are very focused on the social media part.
Matthieu David: Okay. I am just browsing the app now, and indeed in the store, you have a slider – I believe you can set and – you can buy this display, and you have a search in which you can buy now. I mean very recently as you said keywords, so it’s I guess CPC and CPM, cross per click and cross per million per view. So, CPC for those who have written to us and we don’t know it’s the cost per click, so you click and pay for the click and CPM is the cost per view the number of ones that you view. You pay it for a view – I believe both of them exist because you have a display strategy and you have a keyword strategy.
Okay, I see. So, I played a little bit with Xiaohongshu, and I am very surprised is that actually the hype of XiaoHongShu saying that it’s a fast-growing app, there are more and more people. Does it really convert into number of likes, I don’t know what XiaoHongShu pushed to be in terms of advertisement because I said they were interested in sports and they were interested in fashion, travel, and kind of – reading Doushu – Doushu means the learning or reading I am not totally sure what they mean by Doushu, but Doushu meaning to read books and I am rolling now, and I see some posts like 63 likes, 600 likes, 2500 likes, but I don’t see many posts which are like 10,000 likes or 20,000 likes.
Miro Li: Yes, 10,000 and 20,000 likes it a lot.
Matthieu David: It’s a lot, right?
Miro Li: Yes!!
Miro Li: Yes, I think maybe because there are so many fake likes or fake comments on the blog. And there are also fake likes on XiaoHongShu, but XiaoHongShu is very strict about fake followers or fake likes, they delete a lot of fake followers or fake likes. Or if they find out if you buy these fake likes they may block your XiaoHongShu account in China, or they may delete it. So, they have very strict regulations about this.
Matthieu David: I see whenever you’re still on Xiaohongshu I can follow some interest, so the way the app works you give some ideas of the interest. So, in terms of interest what do you have? You have travel, fashion for men, fashion for women, food as well – seems to be quite big on food. Sports- cars as well. Then shoes, movies as well. I don’t know how they monetize on movies, but they ask if I’m interested in movies, and movies – and cosmetics and after it’s pretty similar in a lot of subcategories. Then once you have decided which category you are interested in; you have a feed of pictures and videos. It’s not only pictured it’s also videos which reminds a lot about Douyin, TikTok in the West Douyin, where you can see a lot of videos, and it’s pushing you videos you may be interested in.
And my question when I was playing with Xiaohongshu is, what is the algorithm how did you know your video is going to be displayed to a lot of people? What’s your learning on it? Do you need to be very good when you publish the first two hours, so then there is momentum, and you’re pushed? Do you need to put the right hashtag? Did you need to be nearby because you have a function being nearby, so it’s going to be pushed to people who are nearby? How do you optimize your chances of being visible on the social platform?
Miro Li: The algorithm on Xiaohongshu is actually similar to Douyin. XiaoHongShu also pushes the content that you may be interested in. And it’s not just based on the interest tags you chose at the beginning it’s based on – for example, today you are looking at the explore page, and you click on five posts about skin care or you comment on a few posts about cosmetics and tomorrow there’ll be a lot of posts about skin care or cosmetics that are pushed to you. So, it’s according to the keywords you search, the post you click on, the post you like; you collect, you comment it’s according to that interest.
Matthieu David: I see, I was playing a little bit with the app, looking at some apps and some companies which are famous, like McDonald – when you look at McDonald’s just like 500 followers 44 likes. So small. I feel that it’s not an app for a brand which is like mass market like McDonald’s where you know all the products because people know already the product of McDonald, they don’t need to go on XiaoHongShu to discover the products of McDonald. As you said, I feel it’s a very good app for discovery, for serendipity, for a unique product. You don’t know enough, and you need more information. My feeling is that it’s compensating as well the mistrust people have in Baidu because here your search based on the feedback of people of users of people who are using the product, who have experience. Could you give us more insight into how Xiaohongshu is used as a search?
Miro Li: Yeah, as a search engine. So, for example, because on Baidu you can buy the ranking, you can buy a higher ranking. So, if you use Baidu, you will see a lot of keywords you search, and the result is really not you are looking for. So when people are looking for some product review or some product brands, for example, they are looking for makeup tips or some specific – I want to buy a cream, but I don’t know which brand I should choose – they are looking for this kind of advice or people’s recommendation they will go to Xiaohongshu to search. So Xiaohongshu serves like a search engine, and people will know that if I go to Baidu I won’t find anything that I am looking for, but if I go to XiaoHongShu I can see other people’s real comments, read reviews, then I can decide which brand or who I product I want to buy. So, it’s like product review function or search engine function or people also use it to search for -for example, I want to go to France for vacation, and I need to search which restaurant people recommend or which hotel I should go to. So, this kind of traveling recommendations or FMB restaurant recommendations, people also use Xiaohongshu to do that.
Matthieu David: I see. Tell me about your case studies. So, you have worked for – you are working currently for about 20 different clients. Could you share some case study, especially one illustrating the fact that it’s a new brand, not known – how do you initiate the first contact with a Chinese consumer on XiaoHongShu?
Miro Li: Okay. So, most of our brands are beauty brands like skin care, cosmetics. We have one brand from the US, and I have to say they are like the medium sized brand in the US, but they are totally new in China like they have never sold in any market place or many places in China. And they are going cross border because they don’t do animal testing. So, they chose Xiaohongshu as their first step, and we do post the social and the e-commerce part for them. We opened a brand flagship shop; we also do the content management and also, we work with KOLs. So, for example before the shop opening, because we need time to prepare for the shop application and also shop setup, product listing – so we took around 2-3 months to do pre-launch marketing on Xiaohongshu. We create a brand official Xiaohongshu account in China, we start posting, and we work with regular users and KOLs on Xiaohongshu to create some noise before the shop opening because it’s a very new brand, although there are a few people talking about them because maybe these people live in the US and they know this brand.
So, after we do the pre-launch marketing, there are already some people asking like- where can I buy this product, I can’t find any from Taobao or TMall or other market places. So that’s the preparation work before the launch, and then we launch the shop. When we launch the shop we also work with the KOLs on Xiaohongshu to do the shop opening and then the feedback is pretty good because people are already asking where can I buy this and then at the same time they see a lot of KOLs on Xiaohongshu are posting about this product, or the brand so we can see from the back end, The traffic come directly from the KOLs post.
Matthieu David: I see
Miro Li: Like the most 80% of the traffic comes from KOL posts.
Matthieu David: Okay. What is a successful launch for you in terms of the number of sales? What can you expect when you are not known in China, or maybe you are known in the US, and some Chinese travelers know or some Chinese who have studied in the US know you? But what can you expect as a good result for the first six months after the launch? What would be your success for you? $100,000 of sales? $1,000,000$ sales either 10,000 US dollars of sales? Could you give us some metrics? I know it depends on which brands, which sectors – but could you give us several clients it’s like it should get 1000 clients, 10,000 clients, 100 clients it’s a good start. What do you have in mind?
Miro Li: So first, it depends on the price of the product because now people can receive information from a lot of channels. So, if the price is much, much higher than what you sell in the US or your own country, then people may find other channels, or they may find Daigou to buy your product. They may not go to your Chinese shop. So, the price is actually still a very important factor in China, and it should not be too much difference between different platforms like you sell too high on Xiaohongshu, and then the price is much lower on TMall, or your own shop.
So that’s one factor, and it also depends on the category because from what we see, the makeup brands sells pretty well in Xiaohongshu because Xiaohongshu is a content driven platform and its easier for people to see – if you put on this makeups like if you put on lipsticks or eyeshadows the pictures are pretty nice. But if it’s a skincare brand, people cannot really see if your skin is getting better or something. So, for us, we recommend makeup brands and especially if you are not a premium brand like you are for the mass market. It sells pretty well in Xiaohongshu. For makeup brands, maybe you can expect like 10,000 orders or something it’s pretty quick.
Matthieu David: How much time-one one month or six months?
Miro Li: No after six to twelve months because you need some time to prepare launch marketing, everything.
Matthieu David: Okay, but after the launch, you have everything you have the shop everything set up after your official launch after the pre-launch, let’s say you are ready to get the sales. Like in the coming six months you could expect 10,000 sales. What do you say?
Miro Li: Yes, but it depends on the brand, the price.
Matthieu David: Of course, but 10000 would be a success for you. 10,000 would be one of the good cases.
Miro Li: Yes, that’s pretty successful because like I said, Xiaohongshu is not as big as TMall. So, it doesn’t sell that well like TMall.
Matthieu David: In terms of pricing you said you keep roughly the same price. In terms of taxes, what taxes do you have to pay when you sell at Xiaohongshu? Do you need to pay VAT? VAT clearance? It is a cross border. All this is not very clear
Miro Li: Just the cross-border tax because it includes everything, so the cross-border tax is around 11.2%, but there is a new update yesterday.
Matthieu David: Yes? 11.2% actually it’s lower than the VAT. VAT is 17% in China.
Miro Li: Yes, because it’s cross border you are not selling in China you are selling cross border. So, it’s different.
Matthieu David: I understand, but that’s a bit like unfair competition for people who are made in China
Miro Li: Yes. So cross border actually because of government policies, they actually support cross border, so there are a lot of brands – smaller brands that don’t do the FDA, or they are not in China yet so that they may choose a cross border.
Matthieu David: Okay. You talked about KOLs on Xiaohongshu, yesterday actually I interviewed on podcast Park Lu, and we talked about KOL, how does it work on Xiaohongshu? So, you talk to the KOL telling him; we can pay you, I’ll give you some product, talk about a product and then on the board of the brand, you will see the different people mentioning the brand, right? So, you can see some feedback and experiences of different KOLs on Xiaohongshu and different people on the board, I don’t know if you call it the board but on the page of the brand. If I go to the front page, I would see all the people who mentioned the brand, and I can see the experience, the feedback of different users. Right?
Miro Li: Yes. If you have a brand official Xiaohongshu account in China, you can see – you can collect people’s post into your board, and other users can see KOL’s posts or users post. Also, under the product page- under the product information, that’s the different part from TMall because TMall has a comment function – although now Xiaohongshu also has a comment function. But under the product information there will be other people are also using this product, and then you can see other people’s post related to your product.
Matthieu David: We mentioned previously the percentage of return and How to manage returns from clients. I forgot to ask you; do you have an idea of the percentage of return? Is it higher on Xiaohongshu or lower on Xiaohongshu compared to TMall, do you have some metrics to share?
Miro Li: I think it’s pretty much the same because – although TMall’s audience may be more mass market and XiaoHongShu’s audience, they are the younger generation, Chinese millennials. The returns actually depend on your after self-service, your logistics your product everything. So for us actually when we operate the shop for our client, if it’s not some really big quality problem or some logistics problems, like if the parcel is stuck at the customs and you have to wait one month to get parcel or if it’s that kind of problem, I think the return rate is very, very low.
Matthieu David: Okay. I feel that being in the cream business, beauty business – it’s actually safer in terms of return because once someone has opened the cream, you cannot return it. But when you are in the clothes and apparel business, people try it, and the return is very high. Is that why you have specialized in more beauty businesses or beauty products? Is it one of the reasons because in some ways it is a little bit easier in management, there is a bit more as well I guess audience and interest into it? Why did you choose beauty products?
Miro Li: Actually, because beauty is like the most category on Xiaohongshu and it’s – at the beginning, Xiaohongshu is very, very focused on beauty and now it’s becoming more and more a lifestyle. Like they have a lot of travelling content, FMB content or even for male fashion, male skin care – so at the beginning beauty is the largest category on Xiaohongshu, so it’s also the most popular category, people like to share content about beauty brands because it’s a – yeah if you’re using XiaoHongShu for many years, you would like to share beauty content.
Matthieu David: I was checking actually the hot topics on Xiaohongshu right now. The third one is chocolate, but the second one is TFC – I don’t know what it is but TF I think is cosmetics. And the first one seems to be related to food as well. I feel as well that there is also some interest in technology like Huawei, I guess it’s for the pictures of the new phone, or the glass is just launched. Actually, it’s pretty balanced in terms of hot topics. I see some tech; I see some food, I see some cosmetics. What’s your – Bingqilin – 11 million people like topics about Bingqilin, I mean the ice cream I understand you are in beauty products, but if you go outside of it. How do you feel the food business can monetize? How can it monetize through Xiaohongshu? Is it as a restaurant or is it purely products like chocolate -?
Miro Li: Yes, like snacks. Snacks are also very popular on Xiaohongshu because like you can – because there is something that you want to share with people like if you have one good brand of snacks you want to share it with your colleagues or your friends. And restaurants also you because you can take a lot of beautiful pictures. And Xiaohongshu it’s like Pinterest or Instagram, its very photo driven.
So, if you have really nice photos like you do makeup, or you go to a restaurant, a nice hotel you can take a lot of pretty pictures and then it’s very suitable for your brand.
Matthieu David: That’s the thing yes, you have a lot of functionality where it’s very similar to Pinterest where you can pin and put it on the board. When you manage a client business on Xiaohongshu, do you yourself play as a KOL on Xiaohongshu, means that you are going to use the product to show the product in order to start talking about the product? How do you do that? Or do you talk on behalf of the brand, and test the product, describe the product describe the company as the brand itself? Or yourself and your team – you have, I don’t know a few people who are posting on a personal Xiaohongshu account in China.
Miro Li: We do both. Yes, because it needs posts, KOL posts, and also regular user post. A regular user post it means you are a regular user and you are sharing this product or this brand, so it looks like a real user is using your product, and they have some reviews or comments, and like we said before because Xiaohongshu is also serving as a search engine.
So, when people, for example, they go to TMall they see this new brand they have never heard of it, they may go to Xiaohongshu to search the brand name and see other people’s comments. So, at that moment you will need a lot of posts. So, for example, if they go to Xiaohongshu and they search the number is 0 or just 2 posts. It’s not enough.
Matthieu David: Exactly so before you launch you have to make sure that at least you can scroll a little bit on the front page. That’s why I was thinking that inside your team, among your friends you are already beginning to get some comments, even if they’re not KOLs on Xiaohongshu but at least to fill in the board, to get some feedback. Is it the strategy that you are following?
Miro Li: Yes, like not only ourselves because we only have a few accounts. We are managing a lot of regular user accounts to increase the number of results.
Matthieu David: I see talking about KOLs on Xiaohongshu, I told you some people from big companies like Publicis, and so on, they have mixed feelings about KOL. They say we talk about a lot but KOLs, but it doesn’t convert that way that much actually. It doesn’t convert as hugely as we say and for the price – for the money we spend, of course, it’s long term, it’s about branding, it’s about being on top of your mind. What’s your opinion on it? Do you feel that KOL are commenting very well or it’s a compulsory path to convert on the medium in the long term? More likely investment?
Miro Li: I think it’s different from what I see KOL campaign, like what do you see KOLs? What do you expect to work for you? I think KOLs on Xiaohongshu – their job is to bring traffic to your shop, but not the conversion because there are a lot of factors affecting conversion like your product page, your product photos, your brand, your price, a lot of things.
But for KOLs on Xiaohongshu what they need to do is they need to write good content; they need to take good pictures. They can bring traffic real traffic to your shop that’s their job, and they have already done it. You can’t expect a KOL to bring your conversion because they are not your sales people they are not responsible for your sales.
Matthieu David: Do they delete the post after? Do they keep the post on their profile or do they delete it after when it is purchased -?
Miro Li: Of course, they keep the post because it’s searchable, you can still search for it.
Matthieu David: Okay they cannot delete it after, they could, but they don’t.
Miro Li: Of course, they can’t delete it.
Matthieu David: Okay, okay. When I browsed Xiaohongshu I feel there is a lot of people taking pictures of themselves, in their room, with a different view and so one and the question is for me, should it exist all those blogs? Don’t you feel that is a lot of actually a waste of time on Xiaohongshu, I feel that Douyin is the case. How do you think is the quality of the content created on XiaoHongShu?
Miro Li: You mean you need to take good pictures or you can just take okay pictures?
Matthieu David: I mean. I don’t know if it’s my generation or not, but I think people are taking pictures of themselves in every kind of circumstances, in their home, when they are in their hotels. I don’t know if I would be very happy in 20 years to see all those pictures first thing. Second thing, they put videos, and in the videos I don’t like some videos, they don’t really smile during the video, they just talk and so on, it not very engaging, and you see some short videos about sports, football – I don’t know if it’s because of something I followed, But I am not sure if I spend a lot of time on Xiaohongshu I’d really learn something.
If I spend time on like on the New York Times, I learn things I know. But here I feel we are in a space where people are wasting a lot of time, and there is a podcast “should it exist.” We have a lot of techs; we have a lot of apps but should it exist this way? My question for you is- How much percentage of the content or how qualitative the content is on Xiaohongshu? I think it’s a big question because at the end of the day people are going to use Xiaohongshu for entertainment, why not – to play but maybe they will find it’s a little bit empty in terms of content. What’s your feedback? Do you have some concerns about that?
Miro Li: Yes, while Xiaohongshu is popular among young female users, female Chinese millennials. And like they are in college they are still students; they have a lot of time to go to Xiaohongshu may be to read the celebrity’s post or to see other people’s reviews about specific products. They may not like you a businessman who is very busy with your work or me because if I was not in this business, I might not go to Xiaohongshu, because I don’t have that much time. So, the audience is different, and they are targeting Chinese millennials, and they have time, and they like to read these kinds of stuff. They are not interested in the New York Times.
Matthieu David: I understand that. I was actually challenging it on purpose. The thing is that it was interesting what you said that targeting the Chinese millennials and young people, that means lower purchasing power – but when you want to target busy people. Who are busy at work, busy with family and so on do you think Xiaohongshu will be a good platform?
Do you think it’s better to be in the VIP shop? The flash sales, because it’s very targeting to some brands because you know you have a discount, it’s very organized. I think that’s a very big question- is Xiaohongshu basically a platform for Chinese millennials and young people, so you have a bit of constraint on pricing.
Miro Li: Chinese millennials or Young people don’t mean they don’t have purchasing power, because there are a lot of rich young people in China. That’s the generation, that’s this generation like post 95 they are pretty rich, and they have a lot of time, they like to read this stuff. That’s the current situation of China.
Matthieu David: Spending the money of parents. Thank you very much. How did you like it? How did you find the questions? Is there anything you would like to add?
Miro Li: I think it pretty much covers everything, it’s a pretty good episode of our China marketing podcast. Thank you.
Matthieu David: Thank you very much. I hope everyone liked this episode of China Paradigm, as well. I hope you liked it.
Miro Li: Yeah, thank you, Matthieu David.
China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.
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