Xiaohongshu, also known as Little Red Book or RED, is a platform about millennials’ lifestyle that influences their buying decision. It allows users to share product reviews. It has now become the largest library of consumer word of mouth and social e-commerce platform in China.
The platform has 85 million monthly active users; however, the conversion rate is low as users do not purchase on Xiaohonshu directly; instead, they like to research on Xiaohongshu and complete their purchase on other e-commerce platforms.
To improve the conversion rate, on 3 July, Xiaohongshu announced that they are reducing the platform commission for merchants from 20% to 5%.
If the merchant is advertising on Xiaohongshu and the ads lead to a successful purchase, the sales commission will be lowered to 3%.
By lowering the commission rate, Xiaohongshu is encouraging the merchants to invest more and advertise more on the platform to drive direct conversions. As a long-term result, this will help more users to purchase directly on the platform and improve the conversion rate.