The lifestyle-sharing app Xiaohongshu, also known as China’s Instagram, is reportedly testing a new group buying function.
Xiaohongshu has been recruiting retailers and service providers to participate in the beta, which is expected to drive offline footfall and online transactions. Participants are being offered the incentives of paying no deposit when signing up to the service and paying no commission to Xiaohongshu from earnings made via the service. Influencers on the app can also earn commission by posting about retailers that provide the group buying option.
This is the latest in a series of moves made by Xiaohongshu to plunge deeper into the “local life” market. Local life are app functions that connect users to offline services or retailers in their local area. While delivery apps, like Uber Eats, do fall into this category, China’s local services apps tend to cater to a much greater range of products in one app space – the “deliver everything” model.
Apps like Xiaohongshu that do not provide on-demand delivery services can capitalise on local life through their “seeding” ecosystem, in which users share their experiences and product recommendations to a wide audience. If a user’s feed is filtered by distance, this kind of information becomes a local life channel.
Starting with the introduction of the “Nearby” feed in 2019, Xiaohongshu has been trying to increase the connection between online peer-to-peer recommendation and offline services in users’ local areas. Group buying, where customers are offered a discount on the condition they buy together, is one way to incentivise consumers to spend money locally.
Group buying used to be favoured primarily in China’s tier 2 cities where there are tighter knit communities and spending power is often higher due to lower cost of living. During the pandemic, group buying took hold in bigger cities since it allowed a more efficient use of the stretched labour force. Low consumer confidence and a greater desire for bargains also spurred its popularity.
Online penetration of group buying in China was only 12.7% in 2021 according to iResearch Consulting. But with apps across the board scrambling into the local life space, this figure is only expected to grow, making it an untapped market.