Last night, the app of Xiaohongshu, a famous social media e-commerce platform in China, started disappearing from various Android Stores in China.
Google Play Store is not available in China, for reasons everyone is aware of.
Rumours are saying that the company received notice from the government to ‘rectify’ certain things before its apps can be allowed onto the stores again.
Xiaohongshu is one of the most popular social ecommerce platforms in China, where KOLs and ordinary users share products they ‘like’, and other users can place orders. The large number of good quality reviews have made Xiaohongshu’s community strong – as of Q1 2019, the app boasts more than 10 million DAU (daily active users).
In 2018 Xiaohongshu received a US$300 million funding round, valuing the company at US$3 billion. Both Alibaba and Tencent invested in that round.
However, in 2019 the company has faced a number of controversies, mainly because of people selling or promoting illegal stuff, such as cigarettes (which are a government monopoly and governed by strict advertising rules), unapproved cosmetics and even borderline pornography.
It is hard to argue whose fault that is: platforms often used edgy content to push for growth – Xiaohongshu has >70% UGC; on the other hand, with 10 million daily active users, it is quite hard to police all the content.
Longer term challenges
However, as far as the regulators are concerned, often what needs to be done has to be done. No doubt Xiaohongshu will sail through this hiccup with some additional costs.
The bigger issue, however, is whether they can defend their market position and actually make a profit, as the likes of Tmall are also quite aggressive in the same space of e-commerce.
People in China often check boutique hotel review sites to select hotels, but then use large OTAs such as Ctrip to book, as the latter gives good price advantage. Same might happen in the social media e-commerce space.
Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].