Can the "increasingly crowded" local life still tolerate Xiaohongshu?

Text: Hong Kong Stock Research Society

Compared with "there is no one before and no one will come after", what is staged in the business war is more "you live or die" and "it is long overdue".

Recently, Xiaohongshu released new news on the local life track. Tianyancha shows that Xiaohongshu has an open commission rate of 0.6% for group buying of catering categories in 49 core cities across the country, and the merchant deposit is temporarily exempted.

At this time, entering the local life, the market can be described as anxious. In content e-commerce, Douyin was the first to hold high, and then Kuaishou and Video Accounts rushed to catch up; Among the takeaway platforms, there are both Meituan and Ele.me, and even the cross-border player Gaode is also playing extraordinarily.

For Xiaohongshu, this timing and the current situation are not friendly.

The integration of Internet platforms into local life is an inevitable trend

Xiaohongshu, from the earliest tool-based product origin, to the transformation to content + e-commerce, has gradually grown into a grass planting platform comparable to an "encyclopedia", and has been trying to complete the consumption closed loop from "planting grass" to "pulling weeds" in the past two years.

Now, gradually extending to the direction of local life, Xiaohongshu's action is not fast, and the time is not too early.

Beginning in April last year, after Xiaohongshu launched a group buying activity for coffee categories, the official account "Tupapot" became active, and Xiaohongshu officially entered the initial stage of local life. Subsequently, in May, Xiaohongshu rolled out a pilot group purchase of coffee and tea drinks to Shanghai and Guangzhou. Then, until recently, the group buying category began to open up to all categories of catering.

Behind this, Xiaohongshu's growth anxiety and signs of strategic vacillation are very obvious.

According to QuestMobile, as of April this year, Xiaohongshu's daily active users had grown by less than 10 million, and the growth rate is no longer what it used to be. Under the anxiety of growth, the founder Mao Wenchao personally led the community department, and Xiaohongshu began to change people and strategies from the CEO downward, and the structure and business were frequently adjusted.

The strategic positioning has also changed from "buyer e-commerce" to "lifestyle e-commerce" in 2023. Xiaohongshu has been changing, but it has never been able to "stabilize". Behind this change, Xiaohongshu is looking for a new model to solve the current problem.

In the past two years, a high-frequency word that has been hotly discussed in major tracks - "stock market". On the other hand, the local life track is one of the few sectors with increments. According to iiMedia Consulting, the domestic local life service market will exceed 250 million yuan in 2025, especially in the sinking market, and its potential is still worth tapping.

Moreover, the commercialization path of local life is similar to the "people looking for goods" of shelf e-commerce, starting from the user's demand, and then completing the search, discovering the recommended store, and then going to the store to consume. This full-link, from the moment the user walks out of the house, the generation of consumption has become a high probability event. In addition, it can be mined in many scenarios, with high consumption frequency, and has the ability to make sustainable profits.

More importantly, when the Internet giants enter the stage of competition for existing users, that is, the knockout stage, the Internet giants that won in the previous stage begin to penetrate each other's fields.

In the context of the saturation of the online market, the local life front focusing on the offline has become the target of a concerted attack among the major Internet companies. As a result, local life services have gradually become an area where every platform has to test the waters.

Sometimes, rather than spontaneous, it is seen as "forced", forced to survive, forced to compete, forced to develop. Xiaohongshu was "pushed" by the market to embark on this road under the "mentality" of vague positioning and strategic vacillation.

Focusing on traffic, content, and distribution systems is the "unified formula" of the industry

In fact, there are many "players" who are "forced" to join the battle of local life. Short video platforms include Kuaishou and Channels, SF Express in the express delivery industry, Ele.me on takeaway platforms, and AutoNavi on travel platforms.

Despite this, these platforms also have their own tricks and attitudes.

On the whole, today's local life track is undergoing unprecedented changes, and presents a complex pattern of "two superpowers and many powers". Meituan and Douyin, as the "advance troops" of the track, have obviously "eroded" each other, Meituan began to make its own short dramas, and Douyin made efforts in the food delivery business.

In the past, the logic of the store volume guiding the store to complete the transaction helped Meituan win the previous competitive stage, and as the market entered the content-based traffic thinking, Meituan began to accelerate its internal reconstruction.

Recently, Meituan's self-made original short drama "I Changed My Life Against the Sky in My Diary" was launched on Douyin, Channels and other platforms. Moreover, it is mostly broadcast in the form of free air. Clearly, this is a competition for traffic to its core business, the local lifestyle sector. This also means that Meituan is overturning its previous perception and beginning to pay attention to the importance of traffic.

The advantage of Douyin is that it has a huge traffic pool and has accumulated a large amount of data. This allows the platform to divide users into different regions and interest groups, recommend relevant content and services that they are interested in, improve service efficiency and quality, and improve the accuracy of content push.

Now, Douyin has begun to focus on takeaway because it realizes that the platform wants to efficiently complete the whole process of ordering, store arrival, and instant delivery, which tests the platform's fulfillment system and fulfillment capabilities, especially during peak periods. This not only depends on a considerable user base and the number of merchants, but also on the distribution system. It can be seen that both sides are carefully examining their shortcomings and trying their best to make up for them.

The advantage is that the sense of immersion and realism is stronger, which is helpful for business marketing communication, but at the same time, the threshold is not low, and the business itself needs to have a certain operational ability. In the past, Douyin, which ran through the business model, was used as a template, and although the latecomers had no worries, the resistance to progress was not small.

Since the number of users surpassed that of Baidu Maps, AutoNavi has gradually begun to extend to local life services, and has tried to open up the whole link of "navigation-travel-store" with a breakthrough in shared behavior, so as to create a local life business that is highly related to map navigation.

On the whole, the major platforms have given relatively unified "samples" - launching an offensive from the dimensions of traffic, content form, and distribution system.

For Xiaohongshu, which is still shaping the image of "content e-commerce" in the previous stage, content and traffic conversion may not be a problem, but the distribution system on which local life depends needs to start from scratch, which is not easy.

After bowing into the game, there are still many "obstacles" on the road ahead

Local life services permeate everyone's daily clothing, food, housing and transportation, and the Internet platform is like a bridge, closely connecting every merchant and consumer in China's economic context down to the capillaries.

However, from the perspective of merchants, due to geographical constraints and store service characteristics, even if users are quickly attracted and place group purchases when watching short videos and live broadcasts, they still need to visit the store to complete the consumption experience before they can be written off.

From this point of view, the unique verification method of Channels exposes the drawbacks of not opening up the cash register system on the market, and the verification process requires manual input by the clerk and then checking the order, which is cumbersome and can easily affect the consumer experience. This is something that must be taken seriously.

At the same time, the geographical distance and time cost of arriving at the store cannot be ignored. In addition, businesses need to carefully assess whether the limited store space and service capacity are sufficient to cope with the sudden surge in customer traffic, especially during peak dining hours, so as not to compromise the dining experience of customers.

Behind this, it is not only necessary to accumulate a large number of merchants to support, but also to assist the platform in recommending stores. I have to say that this is the advantage of Douyin. Because the huge traffic pool means that with enough user history and behavior data, Douyin Local Life is better able to make personalized recommendations, thereby improving marketing effectiveness and conversion rates.

In view of Xiaohongshu's current accumulation in the content e-commerce sector, merchant resources must be sufficient, but how to revitalize and plan is not a matter of time and a half.

Despite the development of a large number of merchants, you can refer to Meituan's huge BD iron army, and the "crowd tactics" quickly spread out to the market. But at present, Xiaohongshu has not yet ended. Moreover, the large-scale chain restaurant brands that can quickly help the platform form a large-scale have been waiting and seeing the invitation to Xiaohongshu.

The concern is that there are already many existing channels, and opening up a new channel means new investment in manpower and material resources. Although merchants are worried about the potential "monopoly" risk of existing large platforms, the effect of input and output is uncertain, and market testing is a long-term process, so merchants have to be cautious.

In addition, profit margin is also one of the core indicators that merchants pay attention to. Behind the profit margin is the offline customer flow, online exposure, operation investment, and so on. Therefore, merchants will only flock to it if they provide cheap and effective traffic.

Finally, the current platforms such as Douyin, Kuaishou, and Meituan are all moving towards low prices, which is obviously contrary to the tonality of Xiaohongshu's platform.

For Xiaohongshu, the key to its subsequent development lies in how to cater to the current trend of low-cost group buying, while skillfully balancing the community atmosphere and trading behavior, and building a sufficiently attractive commission and incentive system. These factors will determine how much of the pie Xiaohongshu can get in this trillion-dollar market.

Therefore, whether it is "reborn" or "awkward forward", there seem to be many "principles" that Xiaohongshu wants to break.