It’s not ‘Tmall vs JD’ in China: Two other apps are taking over

It’s understandable if you’re outside of China trying to learn about ecommerce here, and you think the quest for success is between the go-to platforms Tmall and JD.

These two platforms are often mentioned by certain media outlets churning out quick articles. As is usually the case, the reality here in China is far from the online portrayal of it. Speaking to a variety of experts in China, it becomes clear to me that the two real up-and-comers are in fact Secoo and Xiaohongshu (also known as ‘Little Red Book’).

Despite receiving less attention in international media, the figures show Secoo’s strength. Its market share in China is 25.3% as measured by GMV, according to a Frost & Sullivan report. How has it achieved this?

O2O = Oh? to Oh!

It’s not just a gimmicky term. 'O2O' really does enjoy the best of both worlds: the convenience of mobile e-commerce with personalised, tangible brand experiences.

What's more, the fun factor of these omnichannel experiences, full of photo opportunities to post on WeChat Moments, is all-important in China. Secoo now has 10 offline ‘experience centres’—including one in Malaysia—where popular weekend activities like cooking classes or wine tasting sessions bring credibility for Secoo, transmogrifying it from bland e-commerce into a lifestyle platform. Every item used at the experience centre is for sale.

Plenty of foreign media still pump out the same old news about China being 'cashless’, sometimes making it seem as though brands have been really ‘clever’ in accepting mobile payments.

The reality in China is that you can pay for your wet-market vegetables or your car-parking coupons via Alipay or WeChat Pay, and everyone does that, from kids to grannies. There's nothing 'clever' or too new—until Eric Chan, CEO of Secoo Luxe, explained to me how Secoo took the concept of cashless payments further. First, customers can opt for interest-free monthly instalments to make higher-value purchases than they were previously able to (and didn’t want to use a credit card for). Also, Secoo partnered with retailers, such as Parksons, so that customers can pay for products using the same interest-free instalment plan that currently has partnerships with 26 banks in China.

Ecommerce is more than products

Secoo has taken a lead in diversifying its ecommerce options. It doesn't only sell luxury products. Travel-wise, it focuses on 48-hour trip packages, having found that many of Secoo's affluent consumers preferred shorter, work-friendly vacations, for example. These, plus the health and educational services it sells, reflect the (pursued) middle- to upper-class lifestyles in China that Secoo understands.

JD’s luxury section, Toplife, promises certain user-friendly features such as first-class delivery services when it launched in Oct 2017. But Secoo has been doing this for a while. If you buy a suit, it arrives with larger and smaller sizes for you to try on, even with a belt-hole puncher to adjust the belt to your exact size. 

Chinese women make up a prosperous 88% of Xiaohongshu's user demographics in 2017. The shopping-tip app—valued at US$3 billion in its series D round—is a platform for (mainly) women to read reviews of beauty and fashion products from 'desirable' overseas destinations. They purchase chosen products for themselves, and then review their own purchases. Rinse and repeat. It’s a beautifully simple cycle of a clearly beloved hobby of young Chinese ladies below the age of 35 (i.e. 89% of Xiaohongshu's users).

With 100 million users as of now, another strength of Xiaohongshu is that there is no sharing or forwarding function. Users can save their favourite reviews to their own shopping lists, as well as like and comment on other’s posts. This prevents spam and builds the notion of a ‘safe place’ which is just about user reviews.

Yet, authenticity is still an issue for Xiaohongshu. I spoke to several young Chinese ladies as part of my research and discovered many were wary of the authenticity of KOL reviews. This caution is an ever-present aspect of ecommerce in China, and worth mentioning amidst this gushing praise of Xiaohongshu.

Crucially, the aspect of user-generated content by leading KOLs, who post at will and for their own pleasure, is something that Tmall and JD don’t have. It is worth noting that Xiaohongshu has, just last week, released new rules against KOLs posting any commercial content. This is an aspect that brands need to finesse – creating relationships with the right KOLs who will ensure authentic posting of true content and not mere ‘pay to post’ advertisement-style reviews solely based on financial motivation.

All in all, Secoo and Xiaohongshu have engendered greater popularity among ecommerce players in China and are where brands should be looking to engage with their target consumers.

Nick Withycombe is director of content at Reuter Communications.