Since September 3, Xiaohongshu has expanded its group buying services for food and beverage businesses across 49 key cities in China, with a commission rate of 0.6% and no deposit required for now. This perk, however, is currently limited to the food and beverage category and hasn’t been extended to other local lifestyle segments.
According to a source familiar with Xiaohongshu’s operations, this new initiative is driven by the company’s product trading team. The team is small and lacks a business development arm, focusing instead on creating products that merchants can use to manage their operations independently. Third-party operators are providing additional services, and these third-party providers are tasked with expanding merchant relations for the time being.
Xiaohongshu has not commented on this development.
Before this change, Xiaohongshu’s group buying for F&B businesses was only available in five cities: Beijing, Shanghai, Guangzhou, Shenzhen, and Chengdu. Now, the expansion reaches beyond these urban hubs, touching a mix of provincial capitals, first-tier cities, and smaller markets like Linyi and Huizhou.
Several local lifestyle service providers told 36Kr that merchants in these 49 cities can now either self-enroll in group buying or enlist the help of third-party providers. However, businesses in other cities still lack the ability to verify orders. “For other local lifestyle categories, such as alcohol and travel, group buying has yet to be launched in these 49 cities, but such products can still be listed through third-party services, with orders completed within Xiaohongshu’s closed-loop system,” a service provider said.
For users, the group buying feature is now accessible via the “Explore” entry point beneath the regional tab. Previously, users had to dig through specific topics or posts to find purchase links, which made the process more cumbersome.
Xiaohongshu’s foray into the local lifestyle business began in April last year but has moved forward at a measured pace. In late April 2023, the platform introduced group buying for coffee, with its official account “Tuboshu” becoming active. This was widely regarded as the beginning of Xiaohongshu’s local lifestyle venture. By May, it began trialing group buying packages in Shanghai and Guangzhou, initially focusing on coffee and tea drinks. By July, Xiaohongshu expanded its store exploration initiative, with an official partnership center launched in Beijing, Shanghai, Guangzhou, and Shenzhen, extending from store exploration content to facilitating actual transactions.
Reflecting on Xiaohongshu’s local lifestyle progress over the past year, an insider remarked that “internally, the initiative hasn’t generated much buzz.” Initially, the team working on operations and business development numbered in the dozens, comparable in size to the team handling Xiaohongshu’s buyer business at the time.
The local lifestyle sector has been one of the few growth markets in recent years. According to iiMedia Research, China’s market for local lifestyle services is expected to exceed RMB 2.5 trillion (USD 351.2 billion) by 2025, with significant untapped potential in lower-tier markets. Douyin and Meituan have been fiercely competing in this space for some time, leaving Xiaohongshu relatively late to the game.
As a platform known for content seeding, Xiaohongshu has been working to complete the consumption loop from seeding to purchasing over the past two years. However, it faces a key challenge in balancing its identity as a traffic-driven e-commerce platform with its role as a community-driven space that aims for equal distribution of traffic. While other platforms use aggressive traffic generation and low prices to gain market share, Xiaohongshu has hesitated to follow that path, placing itself in a tough spot.
First, chasing low prices conflicts with Xiaohongshu’s brand ethos. Second, the platform has not offered any traffic incentives with this latest expansion—unlike the pilot group buying efforts in Shanghai and Guangzhou last year—though this may be attributed to the current beta phase. Moreover, unlike Meituan’s aggressive business development strategy, Xiaohongshu has not invested in building a hands-on development team.
“If Xiaohongshu only relies on service providers, it could easily turn into a mess,” an industry expert said. The concern is that service providers, driven by profit, may cut corners to meet performance targets. Xiaohongshu has implemented a data-driven system to eliminate underperforming providers, measuring success by their ability to cover at least 20 new point-of-interest locations per month, generate a minimum of 600 orders monthly, and keep merchant complaint rates below platform averages. This system encourages providers to onboard restaurants quickly, but any provider that exceeds the platform’s average complaint rate risks failure.
For large chain restaurants, which have wider geographical coverage and diverse customer bases, partnering with a platform like Xiaohongshu could help quickly scale operations. However, many of these chains remain on the fence.
A representative from a chain restaurant brand with over 1,000 locations told 36Kr that Xiaohongshu sent an invitation to join a group buying beta test earlier this year, but the company held off. “We already have plenty of channels, and opening a new one means more investment in time and resources. We’ll wait until the market response is clearer next year,” the representative said.
In the meantime, service providers are actively courting lower- and mid-tier merchants. While some are attracted by the low commission rates, others remain cautious. “First, it costs RMB 600 (USD 84.3) to open a professional Xiaohongshu account, and on top of that, there are service provider fees. For merchants who’ve never used Xiaohongshu, this can be a deterrent,” one merchant said. “Second, Xiaohongshu has historically been strict with merchants, and many are hoping for more leniency moving forward.”
Earlier this year, Xiaohongshu experimented with group buying for alcohol and travel, but these offerings were quickly pulled. Although alcohol and travel products don’t share the same purchase frequency as F&B goods, they offer higher margins. For example, in Q3 2024, Douyin raised its commission rate for accommodations from 3.0–4.5% to 8%, while Meituan’s commission rates for alcohol and travel range from 8–12%.
Local lifestyle is a multifaceted business, requiring platforms to cater to a variety of consumer needs. Over the years, Xiaohongshu has made efforts to expand its demographic, which was once heavily dominated by young women. The platform has introduced categories aimed at male users, such as gaming, tech, and sports. At one point, the number of male user registrations spiked by 1,550%.
But for group buying, price is still king. Xiaohongshu’s ability to offer competitive group buying packages, maintain a balance between community atmosphere and commercial transactions, and provide service providers with attractive commissions and incentives will ultimately determine how much of this trillion-RMB market it can claim.
Some industry experts speculate that if Xiaohongshu continues to resist the conventional model of traffic generation paired with low prices, its ambitions in the local lifestyle space may lean more toward advertising than transactions.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Zhong Yixuan and Ren Cairu for 36Kr.