Social selling startup Beidian raises RMB 860 million, challenges Pinduoduo

By Jill Shen
2 min read
(Image credit: Beidian)

Chinese social retail startup Beidian announced Wednesday it closed its first round of funding totaling RMB 860 million ($126 million), as another Pinduoduo challenger joins in on the e-commerce fray.

According to the company, it has attracted prominent venture capital funds as major investors, including Hillhouse Capital, Sequoia Capital, Sinovation Ventures, and Gaorong Capital, among others. The funding will be used to upgrade its supply chain management system to improve the shopping experience, led by influencers or key opinion leaders (KOLs) on the platform, said Beidian in an announcement.

A subsidiary of mom and baby-focused e-commerce website Beibei, Beidian was founded in August 2017 by Allen Zhang, a former Alibaba product manager in Hangzhou, the capital of Zhejiang province in eastern China. Beibei most recently closed a Series C in January 2015 from investors including Chinese equity firm New Horizon, as well as Capital Today, an early investor of online retail heavyweight JD.com.

In an open letter sent earlier this year, Beidian’s president Gu Rong touted the company’s “proprietary” e-commerce model, in which the platform forms partnerships with brands, manufacturers, and agri-food suppliers, and verifies the authenticity and quality of the products. The platform stocks and ships goods to customers, unlike Alibaba’s massive C2C platform, Taobao, which does not hold inventory.

“Merchants” act like product ambassadors and promote goods in their social networks, including friends and acquaintances, a company spokesman told TechNode. To encourage the social aspect, he added, buyers are offered discounts for promoting products to their social network.

The model addresses a key weakness in rival Pinduoduo at present: the issue of product authenticity. Beidian develops relationships with manufacturers and brands, then authenticates the goods itself, a strategy that Shanghai-based Pinduoduo is also adopting as its reputation as a platform for counterfeits has proven hard to shake.

Zhou Jiajun, Investment Director for Sinovation Ventures said in an announcement Thursday that despite the density of players in the e-commerce market, Beidian’s growth figures “was beyond our expectation,” (our translation). The China-focused tech VC had avoided investments in retail businesses, but now says that it expects a profit-making period for e-commerce players in the WeChat ecosystem. Beidian’s cost structure adds a margin of safety, it added.

China’s social e-commerce market has become increasingly crowded. Hangzhou-based Yunji plans to raise $200 million in an US initial public offering (IPO) filed last month. According to market research firm Questmobile, the number of monthly active users (MAU) from Beidian surged 550% year-on-year to 13.29 million in March, more than double that of Yunji (5.87 million), but one-twentieth the size of Pinduoduo (272 million).