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Social commerce app Red raises $300 million

By He Wei in Shanghai | China Daily | Updated: 2018-06-02 10:24

Chinese social commerce app Xiaohongshu, or "Little Red Book", said on Friday it had secured $300 million from a cohort of investors led by Alibaba Group Holding Ltd, as word-of-mouth and cross-border shopping continue to influence China's retail landscape.

The Series D financing will value the Shanghai-based startup, which allows its 100 million users to share and review merchandise they bought (often overseas), at more than $3 billion, the company said in an internal letter emailed to China Daily.

Drawing in other venture capital luminaries including GSR Ventures, Tencent Investment and GGV Capital, among others, the company plans to use the funds raised in this round to support talent acquisition, machine learning infrastructure and user growth, the letter said.

Xiaohongshu, known as Red in English, was founded by Charlwin Mao and Miranda Qu in 2013 at a time when cross-border commerce was still a novelty and people relied heavily on Daigou, or a network of agents who shop overseas on behalf of clients and take a commission, for goods that were unattainable in China.

The app works by letting its users, the majority of whom were born in the 1990s and are mostly women, post product and lifestyle pictures online through short videos, pictures and texts.

According to the company, billions of original content posts are viewed every day related to fashion, beauty, food and home decoration.

It also runs a parallel e-commerce store that connects viewers with overseas sellers of everything from anti-aging masks to FolliFollie watches.

"Sharing is an inherent trait in women. Those who buy things here are vocal opinion leaders, and many choose to promote our platform on a voluntary basis," Qu told China Daily in an earlier interview.

She also said that by encouraging users to share their favorite products on the online forum, Red analyzes user data to determine what will be sold on its website.

In China, shopping is more than just transactions. It is about entertainment, discovery and social engagement with friends, celebrities and internet influencers, according to a joint report by Boston Consulting Group and Alibaba last year.

"Instead of searching for specific items online in the prepurchase phase, Chinese consumers embark on a journey of exploration and discovery-as if they are going to the mall with friends or family," the report said.

"The likes of Red are riding the surging wave of demand for imported goods as well as the prevalent social media usage in China, and the potential is huge," said Qi Xiaozhai, head of the Shanghai Society of Commercial Economy, a think tank under the Shanghai Municipal Commission of Commerce.

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