A Chinese e-commerce app that lures grocery shoppers with cash just raised $100M in Series B

There is no shortage of up-and-comers jostling for a spot in China’s massive e-commerce industry, and oftentimes they pick a niche market and present a novel business model different from the establishment of Alibaba or JD.com .

Chinese social e-commerce app Fresh Buddy announced on Tuesday that it has raised $100 million in a Series B funding round led by Genesis Capital, a growth-stage fund founded by two former Tencent executives. SIG China, DCM Ventures and Vision Plus Capital also participated in the round, with China Renaissance serving as the exclusive financial advisor.

The new financial injection came just months after Fresh Buddy, or Meiri Yitao in Chinese, made its debut in April and raised $30 million from a Series A round led by DCM Ventures in July. Fresh Buddy plans to spend the proceeds to strengthen its supply chain and logistics center.

The company is a project incubated by Miss Fresh (branded as Meiri Youxian in China), a Tencent-backed service used by 50 percent of China’s online fresh produce shoppers as of June, according to research firm Trustdata. Zeng Bin, founder and president of Miss Fresh, owns 40.79 percent shares in Fresh Buddy while Miss Fresh has an 11.8 percent stake in the new app, according to enterprise registration information that’s publicly available.

Like its parent, Fresh Buddy sells and delivers vegetables and fruits, but it comes with a twist. While Miss Fresh goes after consumers in China’s megacities, the new project lures small-town consumers with a multilevel revenue-sharing scheme: Users get cash rewards when they get other people to use the app.

A social media account on Weibo marketed at Fresh Buddy’s money-grubbing users claim it’s normal for an average “recruiter” to earn 10,000 yuan, or $145, a month. Someone that’s reached the “advisor-level” can pocket no less than 1,000 yuan a day and a senior “advisor” can make more than 10,000 a day.

Fresh Buddy has utilized the social reach of Tencent’s billion-user messenger WeChat where shoppers can discuss potential purchases and recruit others. Other e-commerce apps that have taken off on WeChat include group-buying site Pinduoduo, which scored one of the biggest U.S. IPOs by a Chinese firm this year. Alibaba has also toyed with a few social e-commerce ideas, but the giant lacks a networking app that matches the size of WeChat, which has long blocked Alibaba’s range of products.

On the supply end, Fresh Buddy says it sources directly from farms, bypassing layers of distribution to cut costs.

The app grew 70 percent month-over-month to reach 30 million unique mobile installs in October, according to market research firm iResearch.

Cash rewards have been proven effective in acquiring users in China. Yunji Weidian, which also has a revenue-splitting program to incentivize users but covers a wider range of products, is reportedly targeting an initial public offering in the U.S. that could value the company between $7 billion to $10 billion. Qutoutiao, the NASDAQ-listed rival to TikTok’s sibling news distributor Jinri Toutiao, also has a similar scheme that lets users earn money by reading content and bringing in new users.