Core Insights - Xiaohongshu has decided to suspend the trial operation of its membership product "Xiaohong Card" starting January 1, 2026, indicating a strategic retreat from its local lifestyle business [1][5][21] - The Xiaohong Card, launched in September during the third Xiaohongshu Street Life Festival, aimed to provide a "selected card for food, drink, and entertainment" but faced challenges in user engagement and merchant satisfaction [2][3][10] Product Performance - The Xiaohong Card was introduced in three cities: Shanghai, Hangzhou, and Guangzhou, partnering with thousands of selected stores but lacked significant subsidies, leading to limited user appeal [2][3] - Users reported that the card's benefits were minimal, with discounts not competitive enough compared to other platforms, resulting in low usage after initial interest [8][9][10] Merchant Feedback - Merchants involved in the Xiaohong Card program expressed disappointment, noting that the initiative did not drive significant customer traffic or sales, leading to a lack of enthusiasm for the program [10][12] - Many merchants were unaware of the card's operational issues and were not incentivized to promote it due to insufficient customer flow and high operational costs [19][20] Strategic Implications - The suspension of the Xiaohong Card reflects Xiaohongshu's recognition of the challenges in transitioning from a community-driven platform to a transactional model in the local lifestyle sector [5][13][21] - Despite the setback, Xiaohongshu plans to continue exploring opportunities in the local lifestyle market, emphasizing the importance of community engagement and user experience in future initiatives [21][25][26] Market Context - The local lifestyle service market in China is projected to grow significantly, with estimates suggesting a market size of 35.3 trillion yuan by 2025, highlighting the competitive landscape that Xiaohongshu is navigating [25] - Competitors like Meituan and Douyin have established strong footholds in the local lifestyle sector, making it imperative for Xiaohongshu to leverage its community strengths to differentiate itself [20][26]