Club Factory raises USD 100 million in Series D round led by Qiming Venture

Club Factory, AliExpress, and Shein are under the radar of India’s customs department for evading customs duty.

Photo by Artem Beliaikin on Unsplash

Chinese cross-border e-commerce platform Club Factory has raised USD 100 million in a Series D funding round led by Chinese venture capital firm Qiming Venture Partners, local media Mint reported. Other investors including Bertelsmann, IDG Capital, and a clutch of US and Asia-based Fortune 500 companies also participated in this round.

This investment, a source told KrASIA, was closed six months ago, and comes one and a half years after its last investment round of USD 100 million led by the German multinational corporation Bertelsmann.

In a statement, the company said the recent funding will be used to scale up the range of products, aggregate more local sellers on its platform, and beef up its technology prowess to capture the India retail market.

The Hangzhou-headquartered company, which claims to have over half of its entire seller base from India, had announced in August this year, that as part of its expansion plan for the Indian market, it plans to onboard 10,000 sellers on its platform before the end of this year. It also claims to have already onboarded over 5,000 local sellers since the announcement. The company has started a sellers’ recruitment programme in India offering products in categories such as lifestyle, fashion, accessories, electronics, and home.

The firm has also made it cheaper for sellers to sell on its platform by lowering the payment gateway and logistics charges. According to the company, India is its biggest market now with over 70% of its total users coming from India alone. The company claims to have achieved more than 10 times of growth in the past six months attributing its success to its zero-commission policy, wherein the sellers are directly in touch with customers.

According to Club Factory founder and CEO Vincent Lou, the company has changed the status of the Indian e-commerce industry that “monopolized information of buyers and sellers, allowing small and medium enterprises, to own their customers and run their business better.”

“All this, combined with our strategy to reduce the transaction costs of buyers and sellers and allow more local players to enter the ecosystem, has worked very well for us in India. It is to be noted that India has the world’s second-largest population with the purchasing power parity ranking third worldwide,” Luo told local media Economic Times.

India is cracking down on Chinese e-commerce players such as AliExpress, Club Factory, and Shein for evading customs duty by claiming commercial consignments coming to India as gifts. Since then, Club Factory has been trying to increase the share of locally sourced products and does not want to rely entirely on imported products from China and Southeast Asia.

However, against all odds, Club Factory has shown perseverance compared to Shein which was planning a partial close down of its business in India after the crack down from customs department. Three months later, it seems Shein has begun to accept orders from Indian buyers again.

Satish Meena, analyst at market research platform Forrester told KrASIA that compared to Shein, Club Factory may be more committed to the India market. “They [Club Factory] have been able to convince their investors to believe in its long-term viability. Even before the FDI regulations, Club Factory was much more active in India with some presence on the ground, whereas Shein limited itself to being only a cross border commerce platform,” Meena said.

Amidst all this brouhaha, Club Factory claimed in September that it has pipped Snapdeal in terms of monthly active users (MAU) to rank third behind Amazon and Flipkart in India, citing data analytics platform App Annie. Lou went on to say, “The company is now looking forward to an era of FAC (Flipkart, Amazon, and Club Factory) to be the future of India e-commerce market.” KrASIA couldn’t independently verify this claim.

Samir Kumar, managing director, Inventus India Advisors, begs to differ. According to him, “Amazon and Flipkart are very strong in India making Indian customers feel content with them, rather than warm up to a third player. Snapdeal’s misfortune is a case in point. Why will the Indian consumer, move to Club Factory if they charge normal prices after paying the requisite duties?” Kumar told KrASIA.

We have reached out to Club Factory for comments, and will update the story once we get a response.