Chinese e-commerce company Club Factory claims heady growth in India, but it may be driving in the wrong lane of the Indian e-commerce highway.
After constant run-ins with the Indian Customs and GST authorities, Club Factory is going all out to certify a wide range of counterfeit products as “high quality” ones in a desperate attempt to establish a toehold in the fiercely competitive Indian e-commerce market.
Over the past 5-6 months the firm has been labelling fake products across categories such as cosmetics, watches, perfumes and footwear as “CF Verified” to garner the trust of the buyer, an Entrackr investigation reveals.
A quick search on the app reveals about 20 listings for fake “Titan” watches, with discounts as high as 86%. A watch for Rs 3499 is being offered for as low as Rs 699. Surprisingly, all these listings are verified by Club Factory, which promotes these products as “high quality” and something that is subject to “5 quality checks and 12 strict guidelines”. Looking further, Chanel’s popular fragrances — “No. 5” and “Gabrielle” — after an 87% discount are offered at Rs 420 – likely a cheeky acknowledgement of the fake nature of the product.
Other counterfeit products include perfumes from Christian Dior and many other leading international brands. Lipsticks and foundation from MAC are priced down from Rs 1,999 to Rs 419 and follow the same certified stamp of a high-quality product.
Two agents tasked with sourcing products from China for Club Factory said to Entrackr on condition of anonymity, “The company got off to a rough start as the Indian customs cracked down on undervalued cheap Chinese imports that were meant to be Club Factory’s cost advantage. To cover for that, it had to quickly induct products of dubious quality, including fakes.” The agents wanted to stay anonymous fearing backlash from the firm.
Club Factory’s seemingly casual approach to certifying fake personal care products such as Hindustan Unilever’s Indulekha Hair Oil & Shampoo as high quality, offered at half the price could prove detrimental to consumers. Still more worrisome is a knock-off of Bio Oil — a specialist skincare oil aimed at pregnant women which claims to help with stretch marks. Priced at a steep discount of 57% it’s marketed as recommended use for pregnant women from the second trimester.
“It (Club Factory) knows that it is treading dangerous ground legally and that is why it has not nominated any Chinese executive for the position of a director in India — in order to protect them from having to face legal action,” added the above agents.
Club Factory’s order volumes have been dropping since the beginning of this year due to poor customer service, according to multiple sources. In fact, Club Factory’s Facebook page is filled with buyer complaints about up to 50 days delay in fulfilment, damaged products and a complex return process. A Passage report in May estimated Club Factory’s monthly volume in the range of 1.5 million.
While leading marketplaces are rolling out anti-counterfeiting programs like Amazon’s Project Zero and Snapdeal’s Brand Shield, Club Factory has been getting ahead of itself by not only listing fakes, but also endorsing them through their “CF verified” certification process.
Fashion accessories like sunglasses are a large selection of fakes on Club Factory. Brands like Ray-Ban, Police, Salvatore Ferragamo, Louis Vuitton, Gucci etc are priced at a fraction of the prices of genuine products. For instance, a couple of Ray-Ban glasses originally priced at Rs 6,999 is offered at a markdown of 90% for a mere Rs 699. Again, certified by Club Factory.
The Chinese firm, however, is unfazed and says it operates within the legal contours. “We have stringent guidelines to ensure the quality of a product is not compromised. While we have strict measures in place, we also welcome the users and partners to highlight in case they find any product not in order. If found to be true, we will not only remove those products but also take necessary action against the particular seller,” said a Club Factory spokesperson in a response to our detailed questionnaire.
The platform’s endorsement of counterfeit products through its “CF Verified” program finds extensive presence in its footwear category, too. Shoes by Nike are “marked down” by 89% from Rs 14,999 to Rs 1,599. Slippers by Adidas and Nike are discounted at 75%.
It appears that the platform is trying to cover up these observations by planting or promoting fake reviews — a pair of Nike slippers marked as fake by many buyers has hundreds of positive comments by a user who goes only by the cryptic name of C***s. He dutifully visits the comments section to submit positive comments every day. Club Factory seems to be in no hurry to stem such bogus reviews of knock-off products.
The firm’s peddling of fakes is bound to raise the hackles of both brands and regulators trying to safeguard their brand and protect consumer’s rights, respectively. As Entrackr reported on Nov 19, the Consumer Affairs Ministry is planning to promulgate new guidelines to crack down on the sale of counterfeit products via online platforms. The ministry is focussed on giving greater control to brands and introducing financial disincentives for sellers and marketplaces selling fakes online.