17 Jul Red: Exclusivity or scalability?
The social commerce platform lowers merchant commission cut to keep up with its competitor
The cross-border social commerce platform decides to welcome merchants at a larger scale.
It was confirmed on July 3rd, 2020 that China’s social commerce pioneer RED (also know as Xiaohongshu) has lowered the merchant commission to 5% from the previous 18%-20%.
RED’s was one of the first social platforms that directly integrated with cross-border e-commerce functions. Its niche audience has generated high conversion rates on high-end product categories. Compared to other e-commerce platforms like Taobao and Pinduoduo (PDD), RED has been well enjoying its icy beauty.
First, compared to PDD’s 1,000 CNY and Taobao’s 30 CNY entry fee, RED requires a one-time deposit of 20,000 CNY from merchants. At the same time, RED’s previous commission was also significantly higher than Taobao’s 5% (on average). These charges could be heavy burdens for RED KOL-merchants who usually start off as ordinary fashion and beauty bloggers.
However, advantages fade when the business model has a relatively low technical and market barrier. Alibaba and JD.com have successfully integrated cross-border e-commerce businesses with either existing or new social platforms, which helped to level these players to similar positions of RED.