When Indian e-commerce leader Flipkart bought apparel site Myntra for nearly $300 million in 2014, their combined market share was estimated at over 50% of the overall apparel e-commerce market. By the time Myntra bought rival Jabong in 2016, the combined market share was somewhere between 60-70%. Since then, even the much-feared Amazon has failed to make a significant dent in Flipkart’s massive leadership in the space.
Which is why few VCs in India will write large cheques for apparel e-commerce startups. It’s just foolhardy to fund a frontal attack against Flipkart in the apparel space.
But what if there was a backdoor? Chinese cross-border e-commerce company Club Factory entered India more than two years ago by offering value conscious Indians cheap apparel sourced largely from China. It grew rapidly, while staying under the radar. Meaning few people knew how it operates or who runs it. Not online sellers, not competitors, not even retail analysts.
Chances are you haven’t heard of the company or its app. It sells apparel and lifestyle products like cosmetics and accessories on the cheap. Its ethos is emblazoned on every product page—The good life does NOT need to be expensive. Founded in 2014, Club Factory, which competes with fellow China-based cross-border companies like AliExpress and Shein, found a gold mine in India.
More than 70% of its overall orders come from India, said an executive at the company. He did not want to be named as he is not authorised to speak to the media. Having raised $100 million in funding from the likes of IDG Capital and Bertelsmann Asia Investments last year, apparel is Club Factory’s primary business in India, with more than 90% of its overall sales coming from the segment.
Having tasted success in India, last year Club Factory went big and signed on Bollywood actor Ranveer Singh and former Miss World Manushi Chillar as its Indian brand ambassadors.
But right after, things started souring. In December 2018, the Indian government began cracking down on Chinese imports, causing Club Factory’s daily shipments to halve from about 85,000 in January 2019 to just 40,000 today, said the company executive quoted above. Club Factory did not answer specific queries about the crackdown and subsequent fall in shipments.
With India its most important market though, Club Factory refuses to go quietly into the night. Instead, it is tweaking its strategy and going hyperlocal, doubling down on India rather than giving up.
Club Factory is now signing up Indian sellers who can directly fulfill consumer orders from within the country. The company has even set up a business-to-business (B2B) website, KartIndian, for Indian sellers to import products.
According to an Ahmedabad-based seller working with the company, Club Factory is offering exceptional monetary benefits to sellers. The company is wooing sellers with margins up to 30-40% higher than other e-commerce platforms in order to quickly build an Indian seller ecosystem.