'Shein'Faces Partial Closure due to Custom Crackdown: Is 'Club Factory'Likely to see the Same Fate?

The business model of Shein is based on importing of goods from its home country in large amounts and then dispatch them as per the orders received.

Mumbai Customs has captured more than 500 parcels of Sino India Etail, the official Indian seller for Chinese fashion e-tailer Shein. Amid the custom duty chaos Chinese e-etailer Shein has temporally shut down its operations in India until the situation is resolved. At the moment, this e-tailer is in the process of refunding the money generated against the orders received. The move has come as the biggest jolt to Chinese retail in India, which was becoming extremely popular among the netizens.

Due to customs clearance issue for imports, there is no certain release date till for the captured goods. Therefore, the future of this Chinese e-retailer seems to be in hanging.

So far, Shein and many other Chinese platforms were shipping goods ordered by Indian buyers to various cities claiming them as ‘gifts’ to avoid taxes. As per the current law, Indians are eligible to receive gifts worth Rs5000 only without paying any taxes. These Chinese companies were flouting the law to fulfill their business interest.

Would ‘Club Factory’ be the next to face Closure?

The business model of Shein is based on importing of goods from its home country in large amounts and then dispatch them as per the orders received. Many others Chinese e-etailers including Club Factory, Aliexpress amongst others have adopted the same modus operandi to sustain India operations. Globemax Commerce India is the local unit of Club Factory.

A smaller number of parcels of Globemax Commerce India have also been seized on the grounds of Custom Duty Infringement. As per an exclusive interview with Indianretailer.com, Vincent Lou, founder and CEO, Club Factory last year, he said that the company is catering to around 26,000 + pin codes in India and continuously growing. This custom crackdown would certainly impede the ambitious plans of these e-etailers. The Chinese retailer has already managed to get a sizeable share of the country’s fashion market and has a strong customer base in India. The company plans to on board more Indian sellers to strengthen its Indian operations in the coming years. The company has recently roped in Ranveer Singh as their brand Ambassador. 

Some Chinese players including AliExpress have also on-boarded (or in process) third party Indian sellers on their platforms in order in work in Indian markets.

As experts have opinionated that it is high time when these Chinese vendors should reduce the reliance on the importing model and rather focus on marketplace model.

However, the core USP of ClubFactory is low price ticket items, which they were importing at dirt cheap rates. How they would sustain their core USP on the marketplace model is yet another challenge for them.

Small traders in India are already voicing their protest against these Chinese players to the Indian Government.

Amidst the strong protests, the custom crackdown has come to light. It would be interesting to see how these Chinese e-trailers will continue India operations? And, no company can afford to shun the market of more than 1.2 billion people.






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