Club Factory: Quality label for fake products

Screenshot / Login for sellers at Club Factory

Chinese e-commerce platform “Club Factory” (CF) is online in India since 2016. There is lot of criticism around the company and its market behaviour. The latest accusations: certificates of quality for counterfeit products.

“Genuine fake” – who doesn’t know it, this pun, when a fake looks so fantastically genuine and its quality is also very good, so that the fake almost comes close to the original. The online platform “Club Factory” now even awards those fake products as reported from India. The Chinese online retailer has 40 of its 70 million customers solely there. But the company does not only deliver domestically, but also to Australia, Canada, France, Italy, Great Britain, the USA and many more countries. In fact, “Club Factory” is not even an Indian shopping platform. Based in Hangzhou, Zhejiang (China), it is simply an integrated supply chain that gives manufacturers in China direct access to customers almost anywhere in the world. In the fall of 2013, the 25-year-old Vincent Lou left Facebook and started this business.

In India, the portal with its business practices is strongly criticized. Among other things, the company regularly declares its goods as gifts or trial deliveries in order to circumvent customs regulations. 

Today, Entrackr magazine is uncovering another scandal. Not only are counterfeits offered in series at large discounts of up to 90 percent compared to the original, but these products are also advertised with an in-house quality seal as being of particularly high quality. This scam is used for product groups such as watches, perfume, care products, jewellery and fashion accessories. Allegedly, five quality checks and 12 rules of conduct have to be fulfilled according to CF to guarantee the safety and quality of the products. This sounds unbelievable as CF is not the owner of the products and does not get in contact with them. The CF’s business model is that of a SaaS (Software-as-a-Service). It is intended to cut out the middleman. The algorithms are programmed not only to bring the customers a specific product at the lowest price but also to bring producers directly into business with that customer. 

But again, CF’s behaviour does not seem to deter investors. Those (including Bertelsmann, IDG Capital and Qimining Venture Partners) have recently again made an large investment into the company. Now there are estimated $220 million in capital available.