Exclusive: As initial momentum dies, Club Factory resorts to downscaling India biz

Chinese firms and entrepreneurs are known for taking immediate calls. And, this could be evident from their actions in India. While Helo and TikTok have been burning capital to scale fast, Kwai and Shunwei-funded Coconut didn’t think much before shutting down Indian offices and executing mass layoffs.

Struggling to raise follow-on round in China for its global operations, Club Factory has been downscaling Indian operations. “If you look at marketing spends of the firm, it has come down by about 70-75 per cent in the past six months. Budget across Google Adwords and social channels - Facebook, Instagram, and YouTube went down significantly,” said two sources aware of the firm’s operations and plans.

A couple of Entrackr’s sources in China pointed out that the Vincent Lou-led company has not been able to raise a follow-on round. “Lou and his leadership team have been meeting several VCs and strategic investors in China. However, nothing has materialised so far,” they said.

According to them, lack of funds and no commitment for the further round has been led to the downscaling in India. For the uninitiated, India is the biggest market for Club Factory. Last year, it claimed to be the third largest e-commerce company in the country with about 40 million user base.

Sources emphasised that Club Factory’s monthly volume is down by about 80 per cent in India. “The company used to ship 1.5 million orders 8-9 months back but it's down to below 3,00,000 a month, for past 4-5 months” added sources.  

Sources include individuals from logistics companies, payment gateway, and internal executives. They requested anonymity as they aren’t authorised to speak to media.

Chinese e-commerce companies including Club Factory and Shein have also been facing the government’s wrath and actions on goods being sent to India in the guise of gifts from China. In January this year, the Indian government had banned commercial parcels coming in disguise of gifts evading customs duties through Chinese e-commerce entities.

Following the tough stance of regulators, Chinese e-commerce companies operating in India are also grappling with structural changes.

Club Factory’s business was earlier managed by one Indian partner who moved out in September last year. “Post his movement and increasing glare of regulators, the firm has created a layer of companies to handle legal complications. However, it seems that managing several companies is proving to be a more complex business issue operationally,” mentioned two of the aforementioned sources.

Entrackr has sent a detailed questionnaire to Club Factory’s Indian team early last week. We are yet to receive any response.

Speaking to Entrackr, last July Lou claimed that apparels and lifestyle accessories generate 60 per cent of Club Factory business from India. The firm made a quick penetration in tier I and II cities through aggressive advertising campaigns on Facebook and YouTube. However, it has the worst consumer experience because of delivering wrong products, delay in shipping and returns and high mismatch in what is being shown and delivered.

Despite gaining early momentum amongst millennials and smaller cities (excluding top 10 cities), Club Factory seems to have started fluttering towards unknown future. While we don’t know what will happen to the firm, it would be interesting if it bounces back.