China’s Xiaohongshu To Cut Its E-commerce Wing

Louise Dang

China’s social and cross-border e-commerce unicorn Xiaohongshu (likewise called Red) is planning to lay off half of its e-commerce team in the next three months, business experts claim.Though the business

has denied this, Zhang Min, a Xiaohongshu’s employee informed press reporters that the layoff is already underway, tech portal All Weather condition TMT reported.Xiaohongshu was founded in 2013 and currently boasts more than 100 million users and 30 million regular monthly active users, the majority of whom are urban millennial females having high consuming power and premium taste.This lifestyle online neighborhood operates like a mix of Instagram and Amazon where users share pictures and videos, write posts and tag products in their images that link to e-commerce listings of appeal, fashion, food, travel and entertainment.In June, the USD 3 billion Xiaohongshu closed a USD 300 million Series D financing that was led by Alibaba. Other financiers consisted of Tencent Investment, Zhen Fund and GGV.For Alibaba, the financial investment marks an indirect push into the international market and its latest strategy to more broaden its e-commerce company through material sharing, which is the strength of Xiaohongshu.Having built up a substantial quantity for social usage data from its users, Xiaohongshu has actually given that developed a closed shopping circle on cross-border sale of luxury items.Instead of selecting

a marketplace model like most Chinese e-commerce sites, Xiaohongshu maintains collaborations with foreign brands and has its own inventory for added quality assurance, straight delivering orders to

users from their warehouse.However, confronted with intense competition from Tmall worldwide, and, the business’s cross-border e-commerce technique might not assist the unicorn to monetize.According to a market report by Analysys, Xiaohongshu just makes a 4.3% market share in cross-border

e-commerce in Chinese market. On the other hand, its inventory model and weak supply chain management also cause heavy financial burden for the company.Xiaohongshu’s unsatisfying e-commerce

organisation not just affect its online traffic but also causes some trouble for the company to raise capital. The business had actually protected the Series D after more than two years because it closed the C round in 2016. Having Alibaba as its leading financier, the marketplace anticipates Xiaohongshu will directly

transport its e-commerce organisation and huge online traffic to Tmall.The company will then designate more resources to more broaden its community and material-sharing. In the next couple of years, Xiaohonghu strives to end up being another TikTok in beauty and style vertical.With the financing support, Xiaohongshu seems determined to begin over again as a content-sharing platform targeting Chinese shoppers’unmet desire of finding and sharing shopping experiences and let Alibaba handle major part the e-commerce side.(Lousie Dang is a Beijing-based investment analyst. She concentrates on development and investment in emerging markets.

She can be reached at [email protected])

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