Fifteen days after the government ban on Chinese apps, Chinese e-commerce platform Club Factory suspended operations in the country as of Tuesday. It has also informed all its sellers that it will be putting all settlements on hold until the ban is lifted, leaving thousands of sellers with pending payments in a lurch.
Prior to the ban, Club Factory was one of the most popular e-commerce platforms in India. According to a report by analytics research firm TechArc in February 2020, Club Factory was the third most used e-commerce app in the country after Amazon and Flipkart.
During the massive sale period of October-December in 2019 across e-commerce websites, Club Factory was the most downloaded app in the shopping category in India. It had over 100 million monthly active users (MAUs) in India.
When TNM checked on Wednesday morning, the app had stopped working. This also comes days after Shein, which was still operating in India post the ban, stopped taking new orders as of July 11.
Club Factory said the e-tailer is closely working with the government in order to resolve any queries that the government may have and submit all necessary documentation that the government may require from time to time.
In a letter to sellers on Tuesday, it said that given that that the government has mandated complete suspension of business activities of Club Factory, all settlements with sellers on the CF app and website are hereby being put on hold until the ban of the CF app and website is lifted.
Club Factory said that as per the clause 33 of the Platforms User Agreement that it entered into with each seller on Club Factory, banning of the app by the government of India would qualify for it to invoke force majeure. A force majeure clause in agreements between two entities, protects them from unforeseeable circumstances that prevent one of the parties from fulfilling a contract, which in this case is Club Factory.
â€śWe further wish to inform you that the government notification banning the access to CF app and website in India also constitutes a 'Force Majeure Event (as defined in the Platforms User Agreement entered into with each of the sellers on the CF platform) since the same is beyond our reasonable control and was an act of the government,â€ť it added in the letter.
Club Factory said that it had over 30,000 registered sellers on its platform at the time of the ban.
An All India Online Vendors association spokesperson told TNM that with the suspension of operations, payments of all the 30,000 sellers stand impacted. Some sellers have dues running up to a few lakh of rupees.
Several sellers took to Twitter to complain about pending payments.
â€śWe are an online seller and were selling on Club Factory which was recently banned by Indian Govt without any previous notifications to Indian sellers. Now our payment is struck with Club Factory. Request PMO to kindly help to release payment,â€ť one seller said, tweeting to PM Modi.
â€śPlease help us to get the payments from club factory. There are more than 5 lakh Indian sellers like us who were selling at club factory. Please help,â€ť another seller tweeted..
Approax 30000-50000 sellers are suffering from the ban by govt on club factory and club factory is hold more than 1 billion rs of seller. pic.twitter.com/z0YecBfPWNâ€” Amit singh sengar (@Amitsingh2030) July 14, 2020
Yet another marketplace has defaulted with sellers money while RBI keeps sleeping, we request the government to check why RBI is not ensuring marketplaces keep money in escrow.@DasShaktikanta @ashwani_mahajan @sgurumurthy @nsitharamanâ€” All India Online Vendors Association (@AIOVA3) July 14, 2020
â€” Arti Garg (@ArtiGar52897577) July 14, 2020
@ #PMOfIndia. We are an online seller anD were selling on Club Factory which was recently banned by Indian Govt without any previous notifications to Indian sellers. Now our payment is struck with #clubfactory. Req #PMO #onlinesellers #clubfactory to kindly help to release pmt.â€” Anshul Mahajan (@anshmah) July 14, 2020
#clubfactorypaisadoâ€” sachin kumar (@sachink80213608) July 14, 2020
Club factory has put on hold the payment of all the sellers.Its many crores of rupees they have hold. In pendamic situation its very bad for the sellers. Please @rsprasad @PMOIndia @FinMinIndia help all the sellers. Media please cover this issue @AajTk @ndtv
Club Factory, however, has told sellers and assured them that it is taking all possible steps to get the ban revoked and that the money of all sellers is safe with Club Factory. â€śHowever, given that this is a government action, the period for which such ban may be extended is presently unknown,â€ť it added.