Chinese social media platforms are betting on livestreaming e-commerce to generate more revenue and profit

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The last 12 months have been a difficult period for both e-commerce and social commerce players in China. Many firms, operating across product categories, have shut operations owing to a slowdown in consumer spending and venture capital funding in the region. Those operational, are now seeking to revive their growth and generate more revenue and profit, in 2023.

• Xiaohongshu, for instance, has announced that the firm is planning to upgrade its livestreaming business to an independent department. Furthermore, to generate more revenue and profit from the livestreaming business vertical, the social media platform is planning to increase the proportion of effective advertisements, thereby targeting more brands to conduct livestreaming sessions on the platform.
• Compared to other social media and livestreaming platforms such as Douyin, Kuaishou, and Taobao, Xiaohongshu has entered the livestreaming industry vertical relatively late in the Chinese market. Consequently, to keep up pace with these industry giants, the firm has been consistently seeking to improve its product offering. In February 2023, Xiaohongshu announced that the firm is planning to launch a new chat feature that is aimed at expanding the social interaction element of the platform.

The chat feature, which creates an opportunity for users to create communities for connecting over niche interests, is aimed at encouraging users to spend more time on the social media platform. With users spending more time on the platform, Xiaohongshu will be subsequently able to attract more advertisers on the platform, thereby driving more revenue for the firm. For influencers and retailers, on the other hand, the new feature can assist in driving more traffic to their profiles and subsequently, the purchases.

In March 2023, Xiaohongshu also announced that the platform now allows direct links to Taobao on open-screen ads. These new feature additions, along with an enhanced focus on livestreaming, is part of the firm’s strategy to diversify the functionality and compete with players such as Douyin and Kuaishou, which are recording strong growth in the short-video space.

In China, Xiaohongshu has gained widespread traction among consumers and has recorded strong growth ever since its launch in the country. The addition of these new features and services will further aid social media's popularity in the Chinese market. Over the next three to four years, PayNXT360 expects Xiaohongshu to also expand its presence in the global market, a strategy that has been adopted by its competitors such as Douyin (TikTok).

• In February 2023, Douyin's parent firm, ByteDance, announced that the firm is launching Xiaohongshu competitor Lemon8 in the United States and the United Kingdom market. Lemon8, which resembles Xiaohongshu, was first launched in the Japanese market in 2020 and since has been launched in several global markets over the last two years.
• PDD Holdings, the parent firm of the social media platform Pinduoduo, is also expanding its global footprint. The firm, which initially launched Temu in the United States in September 2022, has now launched the e-commerce shopping platform in Australia and New Zealand in March 2023. The shopping app was also launched in Canada in February 2023.

Unlike Temu, which has gained widespread popularity in the United States market owing to its low-pricing strategy, Lemon8 will find it difficult to penetrate the North American market. Instagram has built a reputation for itself in the United States. Lemon8, which offers services similar to Instagram will, therefore, find it difficult to gain popularity among the users in the region.

ByteDance also launched Lemon8 in the Chinese market under the name of Kesong in July 2022. However, owing to the widespread popularity of Xiaohongshu in the Chinese market, ByteDance removed Kesong from the app store only a few weeks later. However, in the global markets, Lemon8 has found widespread success, especially in markets like Japan and Thailand.

With many of the Chinese social commerce firms expanding their global presence, Xiaohongshu is also expected to adopt the same strategy from the short to medium-term perspective. With competition growing in the domestic industry, all of these firms are seeking to drive the next growth phase by expanding into international markets.

To know more and gain a deeper understanding of the Chinese social commerce industry, click here.