Little Red Book, burning red

Occasionally two megalomaniac men would both terribly fall in love with a red hair girl, vying for her attention by showering her with tons of cash. Of course in our context of the love story, we mean the big news last week: a staggering USD 300 million Series D led by Alibaba and Tencent at the same time doted on Little Red Book. After all, it is not that frequent for A and T finding common ground. In fact, Tencent acted much faster than Alibaba in this scenario as it already joined Red’s series C fundraising back in March 2016. Alibaba sounds like a threatening 3rd wheel this time.

Anyhow you can find many lengthy articles describe Red’s reasons for success. It usually boiled down to these key winning formula:

-Cross-border e-commerce

-social sharing oriented

-User-generated yet authentic product reviews

-KOL and even celebrity volunteer endorsement

-AI-powered personalization

-The reinvention of the outdated online forum

-Community building

above everything else

-extremely content driven

It is said that Red’s founders knew at the very beginning that they cannot stand out by being the pure cross-border e-commerce player; rather they chose the strategy of packaging itself as a lifestyle experience sharing for millennials focusing on skincare and cosmetics. Or put it in a simple way, do not present your business want to make money at first, but make yourself attractive, then the rest will follow, which is much easier said than done.

Red’s content also echoed with the psychology of bulk of the millennials who would aspire to buy premium&luxury products but are not rich enough to afford to purchase the wrong ones. Hence Red is one of the most popular destinations for product search, discovery, and reference. 

Alibaba has been a headstrong man in practical e-commerce conversion while Tencent is a daring playboy in social&gaming, however, neither of them can adeptly straddle on two sides. In the end Red has become the muse for Alibaba and Tencent, combining the perfect balance between social and e-commerce.

Few local critics raised eyebrows for Alibaba’s investment incentive, suspecting it should be far beyond financial returns. These days Alibaba has been touching everything it favors in a controlling and dominant manner. But on the plus side, Red still suffers from the nettlesome issue of cross-border logistics so Alibaba might be able to lend a helping hand.

For better or for worse, the Little Red Book cannot enjoy more glamorous days of burning red with its more than USD 3billion unicorn valuation.  

Author: Cecilia Wu