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Club Factory suspends India operations, holds back sellers’ payments

Written by Moulishree Srivastava Published on 

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India has sent a list of 77 questions to all the 59 companies facing ban and has given them three weeks’ time to respond.

E-commerce marketplace Club Factory, co-founded by Chinese entrepreneurs Aaron Jialun Li and Vincent Lou, has suspended its operations in India after the government banned the platform along with other 58 apps two weeks ago due to privacy and security concerns.

A report by local media Economic Times (ET), citing the mail sent to the Club Factory’s sellers, said the e-tailer has put all payment settlements with sellers ‘on hold’ till the ban on its app and website are reversed by the Indian government.

“We further wish to inform you that the government notification banning the access to CF (Club Factory) app and website in India also constitutes a Force Majeure Event (mentioned in the agreement signed with sellers),” the company said in its mail, as per the ET report.

Club Factory currently has about 30,000 local sellers in India. In an interview in April, the company told KrASIA that it was witnessing rapid growth and success in India. “Club Factory’s zero commission strategy is helping the e-commerce industry grow by empowering local sellers and benefiting the consumers,” the company had said at the time.

Citing another source, the ET report said,  Club Factory owes sellers as much as USD 8 million and third-party logistics providers over USD 13 million. Allegedly, the e-tailer had been withholding payments from most sellers for several months before it was banned.

Read this: Club Factory sells masks and hand sanitizers at a premium price during COVID-19

Last September, the company had claimed to have become the third-largest e-tailer in India after Flipkart and Amazon in terms of monthly users. Club Factory’s founder and CEO, Vincent Lou told KrASIA that the firm was “looking forward to an era of FAC (Flipkart, Amazon, and Club Factory) to be the future of India’s e-commerce market.”

Reportedly, Club Factory, along with other two Chinese e-tailers affected by the ban, Shein and Romwe, had been shipping products to customers even after the ban. To circumvent the ban, the ET report said that these platforms had introduced different Uniform Resource Locators (URL) for their websites, while Club Factory also offered users to download its app directly from a link on its Instagram handle.

Shein, on its part, had sent its users a notification on the app informing them that it would not accept new orders from July 11, after it received a notice from the Indian government.

“After receiving the official order from the Indian government, Shein strictly complied with the order and regulations. We are in contact with the government to respond and provide relevant documents for clarification,” the notification said.

India’s information technology ministry on Tuesday sent a list of 77 questions to all the 59 companies facing ban, giving them three weeks’ time to respond.

“Club Factory team is dedicated to complying with the government’s directive and is closely working with the government in order to resolve any queries they may have and submit all necessary documentation required from time to time,” the firm said in the email to its sellers, the ET report added.

The ban had put in a breaker in the growth trajectories of Club Factory, Shein, and Romwe, which had been expanding operations steadily over the last couple of years, despite them being on the government radar for sometime now. Chinese e-commerce companies faced scrutiny from India’s customs department last year for https://kr-asia.com/india-to-say-no-to-free-gifts-from-chinese-e-tailers for importing.

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