In an ambitious bid to stake its claim in the “local life” or local services industry, Xiaohongshu has unveiled a group-buying function on its popular social e-commerce platform. With this strategic move, the company intends to expand its presence in the in-store food category and vie for market dominance against competitors such as Meituan, Dianping, and Douyin. Xiaohongshu’s foray into local services represents a significant opportunity to create a comprehensive ecosystem that seamlessly integrates content generation and transactions.
To entice more merchants to join its platform, Xiaohongshu has launched the “Shilifa Store Plan,” an initiative that requires zero deposits and zero commissions, and offers traffic support. Moreover, the company has introduced the “Searchlight Project” for influential content creators, akin to Dianping’s successful “Bawang Meal” initiative. Under this program, content creators can publish posts about their experiences at various establishments. Additionally, those who achieve a certain level of popularity will receive commission rewards for transactions generated through the group-buying links associated with their content.
Over the years, Xiaohongshu has steadily ventured into the local services industry, leveraging its status as a lifestyle search engine favored by young people. In fact, Xiaohongshu’s online celebrity stores have become a valuable source of traffic for numerous catering establishments.
While the online penetration rate of the local services industry currently stands at a modest 12.7%, the market’s overall scale has reached a staggering RMB 2.83 trillion (USD 409 billion). This highlights the vast potential of the sector while underscoring the challenges associated with penetrating it. Zhu Shiyu, the individual responsible for Douyin’s local services business, asserts that the online component of the industry remains relatively small and has yet to reach a point of saturation.
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Xiaohongshu first dipped its toes into the local services industry back in 2019. It subsequently expanded its presence within the wine and travel categories, enabling homestays, hotels, and campsites to complete the entire consumption cycle within the platform. In recent years, Xiaohongshu has enriched its Points of Interest (POI) pages, offering users comprehensive information about restaurants, tourist spots, and popular check-in locations. Beyond basic details such as addresses, contact information, and average expenses, users can explore popular dishes, read check-in notes, watch store visit videos, and discover nearby eateries, all thanks to the platform’s content-driven approach.
Xiaohongshu has the opportunity to leverage its existing advantages. However, convincing merchants of the efficacy of its traffic remains a significant hurdle. The platform’s novel content presentation methods require merchants to relearn marketing strategies and invest additional funds in content promotion.