China social e-commerce player Beidian gets $126m
Beidian, a Chinese membership-only social e-commerce website, has raised RMB860 million ($126 million) from a group including Hillhouse Capital and Sequoia China Capital.
Sinovation Ventures, Gaorong Capital, IDG Capital, Capital Today, and Xiang He Capital also participated. The fresh capital will go toward upgrading the company’s supply chain, according to a statement.
Beidian was established in 2017 as an e-commerce platform by Hangzhou-based Beibei Group, a company that focuses on selling maternal and childcare products. It went through four rounds of funding between inception in 2011 to 2016, raising $234 million from Capital Today, Gaorong, IDG, Northern Light Venture Capital and New Horizon Capital.
The company adopts a model that is highly similar to that of recently US-listed Chinese social e-commerce company Yunji. It uses an invitation-only scheme that only allows people who get an invitation code from existing users to register. Members have to purchase certain goods priced between RMB398-498 before having the right to open a shop or share links of products on the app.
Beidian claims to have over 50 million registered users and over RMB100 million in sales on average per quarter. The number of monthly active users is increasing at 30% month-on-month and now totals 10 million. Services also include a microloan platform called Beidai and a community e-commerce platform called Youtuan.
Like Yunji, Beidian also offers incentives to existing users to motivate them to recruit more members. Users who recruit 17-20 new members whose combined purchase amount has reached RMB10,000 will be able to convert the credits into cash and become a “gold shop owner” - the highest level of membership on Beidian app. These users can receive credits when any of the members they recruited in turn recruits additional users.
Similar to Beidian, Yunji requires new users to accept an invitation from an existing member and buy a flat-rate RMB398 membership package. The major difference is that Yunji has replaced its previous model of asking new users to buy discounted products with a flat fee. This change was made after the company was fined for violating restrictions on pyramid selling in 2017.
Social e-commerce schemes have raised concerns among Chinese media outlets such as financial magazine Caijing, which quoted a lawyer from Maisheng, a law firm, saying that this kind of model falls into the description of pyramid selling according to Chinese laws.
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