Club Factory - Story of the Banned Chinese App that Indians Loved

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Fashion is not futile. Your clothes and accessories say a lot about your personality and of course your mood. Thankfully now fashion is affordable too!. All thanks to the e-commerce sites now men and women from even remote nooks and corners have easy access to Fashion. An e-commerce site that we cannot miss when it comes to affordable fashion is Club Factory. This China-based e-commerce site offers apparel, accessories, and more at factory prices. Though Club Factory is currently banned in India owing to security threats and rising tension between India and China, we cannot surely afford to miss the story of this amazing e-commerce startup, that gained immense popularity in India. Here is all about Club Factory. The startup story, Club Factory founders, funding, revenue model, and competitors.

Club Factory - Company Highlights

  • Startup Name-Club Factory
  • Headquarters-Hangzhou, China
  • Sector-Online Shopping and E-commerce
  • Founders-Vincent Lou and Aaron Jialun Li
  • Founded-2014
  • Parent Organization-Jiayun Data Technology Co. Ltd.

About Club Factory

Founded in 2014, the Chinese e-commerce platform Club Factory became quite popular internationally as a platform offering trending fashion goods at a very affordable price. Club Factory delivers in many countries across Europe, America, and Asia.

Club Factory's major USP is that its products are trendy yet much cheaper as compared to many of its competitors. The reason it can offer goods at a much cheaper price is its strong base of over 200,000 suppliers who want to sell directly to consumers and thereby liquidate their inventory.

For customers, Club Factory is very user-friendly as it offers recommendations to consumers based on their past choices of products and their preferred price range. The platform sorts out appropriate suppliers based on the quality of the products, their productivity, performance, and price. According to Club Factory founder Lou Yun, Club Factory uses AI and big data analysis to understand the users and suppliers better. Club Factory App uses AI technology to compare the prices charged by the manufacturers, find the lowest price of a particular product in real-time, and suggest to the customer the product having the lowest price.

Using Big Data Analysis, Club Factory shortlists the products that have the highest probability to be bought from a huge number of SKUs. Club factory offers insights to the manufacturers on the goods that are most preferred by customers so that the manufacturers can take appropriate manufacturing decisions.  

In India, Club Factory did face some controversies. The biggest of all controversy was the tax evasion charges raised against Club Factory. Club Factory and a few other Chinese e-commerce companies like Shein were found shipping products from China directly to customers in India by marking these orders as gifts to avoid custom duties. To do away with the problem the Government of India started imposing custom duties on gifts as well from November 2019. Besides these, from late deliveries, late payment to sellers, and delivering damaged products, Club Factory has faced many charges in India.  

Yet, Founder Vincent Lou perceived India as one of the biggest markets for Club Factory and had lofty plans to establish the company in India. The company had plans to invest in warehousing, technology, marketing, and delivery, and wanted to become India's "One-Stop fashion marketplace" for sellers as well as customers. While initially, Club Factory sold only goods imported from Chinese manufacturers, in early 2019, the company adopted the local marketplace strategy whereby it brought in Indian sellers to the platform. The company onboarded around 5000 Indian sellers on the platform and was planning to bring in more local sellers. Club also Factory invested heavily in marketing in India. In 2018 Club Factory appointed Bollywood actor Ranveer Singh and Miss World, 2017 winner Manushi Chhillar as the company's brand ambassadors.

Ranveer Singh and Manushi Chhillar in a Club Factory Ad

Club factory was looking forward to adding more product categories to the platform soon. But the ban on the app came as a shock to the founders.

Club Factory - Startup Story

Club Factory began as Baokuanyi, which was a SaaS data intelligence platform that helped manufacturers take manufacturing decisions based on stock and inventory-related data of over 200,000 factories. The aim behind starting  Baokuanyi was to empower the manufacturers with better inventory data so that they can make their decisions better.

While working with Baokuanyi, the founders realized that liquifying inventory was challenging for manufacturers. So, they thought of coming up with an e-commerce platform through which manufacturers can directly sell to customers. Thus Club Factory was founded.

Currently, too Club Factory has a SaaS product that offers insights to the manufacturers regarding the products that are sold the most and the most popular designs so that the manufacturers do not end up making products that are not in demand.

Club Factory - Founders

Vincent Lou and Aaron Jialun Li are the founders of Club Factory.

Vincent Lou

Club Factory founder Vincent Lou holds a Master's Degree in Computer science from  Stanford University. As a student, Vincent had a deep interest in applied AI. At Standford, Vincent along with Aaron Li developed an AI-powered solution to help WHO optimize the costs of medical devices.  Vincent worked as a Research Assistant at The University of British Columbia, and also at the Standford Biomedical Informatics Training Program. Vincent was working as a Software Engineering Intern at Facebook during the early years of his career. In 2014, Vincent founded Baokuanyi which later pivoted to become Club Factory.

Aaron Jialun Li

Club Factory co-founder Aaron Jialun Li holds a Masters's degree in Business Marketing. Aaron also did data analysis in Alibaba Group and looked after Product Management at Sharethis before founding the SaaS platform Baokuanyi with Vincent Lou.

Founders, Club Factory

Club Factory - Tagline and Logo

While the company keeps experimenting with its tagline from time to time, the company had to face legal wrath in India in 2020 due to one of its slogans that involved the name of Indian e-commerce unicorn Snapdeal. In 2020, Club Factory was running the "everything cheaper than Snapdeal” ad campaign. Snapdeal approached the Delhi High Court against this ad campaign, in response to which, Club Factory discontinued the ad campaign.

Club Factory - Business Model

In India, Club Factory's business model was quite different than its peers like Amazon and Flipkart. In India, Club Factory charged zero commission from the sellers. The Indian sellers could sell the products through the platform for free.

"Club Factory will continue to provide a level-playing field to all sellers by not charging any commission fee so that they get to increase their earnings while transferring the cost-benefit to buyers," said Club Factory founder Vincent Lou, in an interview, before the platform got banned in India.

Club Factory does not stock inventories. It uses algorithms to match orders and sellers. When a customer places an order, Club Factory finds a seller who can fulfill the order. The supplier then sends the product to Club Factory's warehouse, from where Club Factory ships the products to the customers. Club Factory also takes care of customer service.

Club Factory - Funding and Investors

Club Factory has raised a total amount of $220 million in funding over the 3 funding rounds.

To date Club Factory has raised funding from 8 investors including institutional investors like  Bertelsmann, Qiming Venture Partners, FREES FUND, ZhenFund, Kunlun Trust, and IDG Capital.

Club Factory - Growth

As per 2019 reports, Club Factory had over 70 million users worldwide, of which around 40 million were Indians. Club Factory also emerged as the most downloaded shopping app on the Android platform globally for the months of September and October 2019 (according to Sensor Tower’s Store Intelligence platform). Now that Club Factory got banned in India since June 2020, it has lost a huge user base. However, Club Factory is still delivering in many countries In Europe, USA, and Asia.

Club Factory - FAQs

Is Club Factory Working in India?

No Government of India banned Club Factory along with other 58 Chinese apps in June 2020.

Who is the founder of Club Factory?

Chinese entrepreneurs Vincent Lou and Aaron Jialun Li founded Club Factory in 2014.

Is Club Factory a Chinese app?

Yes, Club Factory is a Chinese app.