Taobao is eyeing the traffic of Xiaohongshu

Author | Liu Baodan

Editor | Huang Yu

After entering a new stage of competition and cooperation, the competitive landscape of internet platforms has begun to evolve again. Before the 618 shopping festival, Alibaba and Xiaohongshu teamed up for a big move.

On May 7, Wall Street News learned that Taobao Tmall and Xiaohongshu have signed a strategic cooperation agreement to create the "Red Cat Plan," which will further open up integration and connect the entire chain from planting grass to purchase. This is a marketing-level collaboration aimed at achieving growth in e-commerce transactions.

It is not easy to leverage such a level of cooperation, which also means that Xiaohongshu has opened its 300 million monthly active users to Taobao Tmall, marking a deep alliance between the e-commerce platform and the content platform.

In the past few years, the e-commerce industry has undergone a major reshuffle. Although Taobao Tmall has solidified its market position, internal and external pressures have gradually increased. Against the backdrop of Alibaba's strategic focus on e-commerce and AI, and its reinvestment in AI, Taobao Tmall needs to open up new performance growth space. The company has successively collaborated with former rivals such as WeChat and JD.com, and the deep binding with Xiaohongshu is a continuation of this development approach.

On May 8, Tmall announced that this year's Tmall 618 has been moved up, with pre-sales starting at 8 PM on May 13. The core gameplay is a single "official discount," with basic discounts starting at 15% off and maximum discounts reaching up to 50%.

What kind of results Taobao Tmall will deliver this time is still unknown, but it is certain that Taobao Tmall is no longer going it alone.

Partnership

This is not the first collaboration between Taobao Tmall and Xiaohongshu, but it is the most substantial one.

From the content announced at the press conference, the cooperation between the two parties mainly reflects three levels. First, data integration; this time, both parties have reached a strategic cooperation on brand merchants' planting grass, jointly building a three-party account. Merchants can observe the entire chain effect from planting grass to placing orders through the Taobao Planting Grass Galaxy platform, improving advertising efficiency.

Second, in terms of business, both parties have opened the effect advertising link for the first time, adding an "advertising link" function below the notes. For brands that joined the pilot program in the early stage, the advertising content on Xiaohongshu can directly link to Taobao Tmall. Wall Street News learned that only advertising notes can add Taobao links, and this function will first be piloted in certain industries and will gradually be opened up later.

Third, in terms of advertising investment, although both parties did not mention the advertising budget, Taobao Tmall clearly stated that it will increase investment and promote merchants' planting grass notes.

Unlike direct advertising investment, this cooperation has achieved the first full-link connection from Xiaohongshu planting grass to Taobao consumption, resulting in improved advertising efficiency. In recent years, the growth pressure on brand merchants has gradually increased, and the attractiveness of stable growth in operations has become greater for merchants, which is also an important driving force behind the deep cooperation between Taobao Tmall and Xiaohongshu.

Retail e-commerce industry expert and founder of Bailian Consulting, Zhuang Shuai, believes that the cooperation between Taobao Tmall and Xiaohongshu is a win-win situation. After Xiaohongshu users view planting grass notes, they can screenshot or directly search and purchase on Taobao Tmall. Tmall has a relatively mature platform tone, brand merchant supply, and transaction system. After the cooperation, Xiaohongshu users can enjoy a better shopping experience, while Taobao Tmall achieves an increase in transactions In fact, as early as 2022, Taobao Tmall and Xiaohongshu jointly launched the "Xiaohongxing" and other grass planting observation programs. After more than two years of exploration, Taobao Tmall has gained more data validation on the grass planting effects of Xiaohongshu.

According to data disclosed by Taobao, in the past year, the overall click-through rate of grass planting notes by brand merchants on Taobao Tmall increased by 20%, and the interaction rate increased by 109%. Among them, the average daily number of merchants participating in the joint investment of Taobao Tmall increased by 335% year-on-year, with the entry rate of sports industry brand merchants increasing by 85% year-on-year, and the entry rate of beauty industry brand merchants increasing by 41.5% year-on-year.

At the same time, Alibaba, as a shareholder of Xiaohongshu, has greatly promoted the cooperation between the two parties. According to IT Juzi data, Alibaba participated in both the D round and E round financing of Xiaohongshu, especially in the D round financing in 2018, where Xiaohongshu completed a financing of $300 million, with Alibaba leading the investment.

For Xiaohongshu, which has been established for 12 years and has not yet gone public, collaborating with Taobao can directly drive revenue growth. According to insiders, advertising and marketing contribute significantly to Xiaohongshu's main revenue, and one of the company's key focuses for 2025 is to optimize the commercial products and post-investment metrics of grass planting, and collaborating with Tmall Taobao can obviously increase advertising revenue.

However, many people are concerned that Xiaohongshu linking to Taobao Tmall in its notes may affect its own e-commerce business. In this regard, Ma Kaiyue, founder of the Old Ma E-commerce Circle, who has been deeply involved in the industrial belt for many years, believes that Xiaohongshu is lifestyle e-commerce, mainly focused on live streaming transactions, and opening notes to Taobao Tmall will not significantly impact Xiaohongshu's closed-loop e-commerce. According to insiders, Xiaohongshu's focus this year is to expand its merchant base in the industrial belt.

However, from a psychological perspective, the path of grass planting on Xiaohongshu and placing orders on Taobao Tmall may inherently conflict with Xiaohongshu's e-commerce business. For consumers, choosing to place an order on Taobao or purchase on Xiaohongshu is a single-choice question. Wall Street Journal learned that Xiaohongshu has some concerns about this cooperation, especially at the merchant level, fearing it may create a negative impression of Xiaohongshu abandoning closed-loop e-commerce.

With Taobao Tmall deeply binding to Xiaohongshu as a traffic platform, competition between e-commerce platforms is also expected to usher in a new change.

Gaining Momentum

This cooperation is not only a handshake between platforms but also the beginning of the reconstruction of the e-commerce ecosystem.

In recent years, the e-commerce market has undergone a major reshuffle, with new forces represented by Pinduoduo and Douyin rising rapidly, which has not only lowered Taobao's market position but also completely changed the development posture of this former e-commerce giant.

Compared to the past of dividing territories and building high walls, Taobao Tmall has begun to move towards interconnectivity. In September last year, Taobao Tmall announced the addition of WeChat Pay to its shopping platform, opening the e-commerce transaction entry to Tencent for over 1 billion users. In the same month, the plan for the Taobao APP to integrate JD Logistics was put on the agenda.

Taking WeChat as an example, JP Morgan estimates that there are 200-300 million WeChat Pay users who are not yet Taobao users, and the interconnectivity between the two is expected to bring 20-30% incremental users to Taobao. "We believe this is a more meaningful potential than most investors expect."

Joining forces with Xiaohongshu is also part of the aforementioned open strategy. According to industry insiders, Xiaohongshu's users are mainly young users from first- and second-tier cities, and the overlap with Taobao Tmall's demographic is not significant, which can bring a considerable number of incremental users to the latter At the meeting, Tmall President Jia Luo stated, "The cooperation with Xiaohongshu is a very important step for Taobao Tmall's all-domain operation in 2025." Currently, Taobao Tmall has established partnerships with over 200 internet platforms, including Xiaohongshu, Weibo, WeChat, Alipay, Bilibili, and Zhihu, to support brand all-domain operations and drive growth.

Behind this series of actions is a common goal: to drive traffic for merchants across the entire network.

According to QuestMobile data, as of March 2025, the number of monthly active users in China's mobile internet has reached 1.259 billion, a year-on-year increase of 2.2%. As the growth of internet users peaks, coupled with the fact that traffic growth on e-commerce platforms is far lower than that of short video and other content platforms, the traffic anxiety of Taobao Tmall is understandable.

In particular, with the divestiture of non-core assets, the traffic-driving effect within the Alibaba ecosystem has also weakened. Ma Kaiyue believes that Tmall is facing a problem of insufficient traffic internally, especially after cutting off Gaoxin Retail and Intime, as these businesses had a certain degree of online and offline complementarity with Taobao Tmall, making the traffic issue even more prominent.

Behind the traffic anxiety, the strategic importance of Taobao Tmall within the Alibaba Group is increasingly highlighted, and it can be said that the e-commerce business is a stepping stone for Alibaba to enter the AI era.

In September 2023, Alibaba Group CEO Eddie Wu took office, and under his leadership, Alibaba's strategy has shifted to focus on e-commerce and AI, the latter of which is currently in the investment phase. On February 24, Eddie Wu announced that in the next three years, Alibaba will invest over 380 billion yuan to build cloud and AI hardware infrastructure, a total exceeding the past decade's sum.

The confidence behind such large-scale investment comes from the e-commerce business, which continues to contribute cash flow. For Taobao Tmall, maintaining the fundamentals of e-commerce and continuously improving profitability to provide funding for AI development is the main task now and for the foreseeable future.

After the last round of e-commerce competition, Taobao Tmall is still in an adjustment period. On February 20, Alibaba released its quarterly results for the period ending December 31, 2024, stating that in the domestic market, the company's medium- to long-term goal is to stabilize market share while continuously improving user experience and business efficiency.

After more than twenty years of development, the e-commerce industry has shown signs of fatigue in both market growth and competitive dynamics. In this context, it is not easy for Taobao Tmall to maintain its position and not let competitors like Douyin and Pinduoduo narrow the gap.

The deep cooperation between Taobao Tmall and Xiaohongshu has just begun. Behind the link from traffic to transactions, there may also be potential issues such as cross-platform data regulation and conflicts of interest between Xiaohongshu's live streaming sales and Taobao Tmall.

The 618 shopping festival is about to begin next week, and the market will provide answers on the effectiveness of this cooperation