Chinese App Ban: Sellers mull pulling inventory as Shopee confronts an uncertain future in India

India’s ban on SEA Group's gaming title Garena Free Fire has sparked concern on the fate of its e-commerce business Shopee in the country.

Several sellers are wondering if they should take inventory off Shopee amid mounting uncertainty. They fear an overnight ban on Shopee, similar to the one clamped on Chinese etailers Club Factory and Shein in 2020.

Last week, the Indian government banned 54 Chinese apps including the gaming platform of Singapore-based SEA Group, which also runs e-commerce firm Shopee in India.

SEA is not based in China, but has come under fire for a combination of reasons--its founder Forrest Li is of Chinese origin, the group counts China’s Tencent as a key investor and Shopee allegedly used Tencent Cloud to store data.

The Indian government has not expressed any specific concerns around the company's operations in India, but offline traders’ associations are demanding an immediate ban.

"Once a ban happens, our payment and inventory gets stuck. Everything will become zero," a Delhi-based seller of mobile accessories told Moneycontrol on condition of anonymity.

He said he lost Rs 5.5 lakh when Club Factory was banned.

"Suddenly companies stop replying to calls and mails. Jab operations hi band ho gaya (when the business is shut), who are they answerable to," he asked, adding that he was contemplating pulling his inventory off the site.

Copy of the e-mail Club Factory sent its sellers in 2020

Club Factory precedent 

The seller, who has been on Shopee for one-and-a-half months, said he had sold goods worth Rs 15 lakh so far and is currently selling 1,500-2,000 products on Shopee daily.

Another seller said he had Rs 24 lakh still stuck with Club Factory and has no clue if he will ever get the money back.

“The employees who spoke to us have now shifted to other companies. We can’t question them. We never had the contact number of their Chinese counterparts,” said Surat- based Pratik Bajaj who sells budget western and winter wear.

Once bitten twice shy, he has pulled out most of his inventory off Shopee following rumours around a potential ban on the company’s operations in India.

“I have just left Rs 20 lakh worth of inventory on the site. These are mostly old inventory which we have to liquidate. The rest we have pulled out,” he said, claiming that until last week he had over Rs 70 lakh worth of products on Shopee.

Soon after the ban in 2020, Club Factory sent an email to its sellers in India that all settlements with sellers were being “put on hold until the ban of the CF app and website is lifted.”

No case to file

“We can’t file a case against the company as they didn’t say they will not pay. But we have no idea when or even if our payment will ever come or not,” Bajaj said.

The Confederation of All India Traders Association (CAIT), an offline traders’ lobby, is demanding a ban on Shopee. Sellers who retail products on the site claim that Shopee had given them phenomenal business.

The company, which doesn’t charge shipping costs from merchants, has been growing at a rapid pace since it launched operations in India less than six months ago.

In December, Singapore’s transport minister said that Shopee had roped in 20,000 sellers in India. According to people with  knowledge of the matter, the company receives 350,000-400,000 orders daily.

Most of these are low-ticket-size items with a focus on Tier 2, 3 and 4 cities, vying with the likes of Amazon, Flipkart and Meesho.

“CAIT keeps saying they are concerned about domestic traders. But what are we? Online me jo sell kar raha hai wo bhi desh ka ek chota vyapari hai (someone selling online is also a small domestic trader),” said another seller. “These guys have given a seller like me really good business and there are hundreds like me. If my opinion matters, I would say they should not be banned.”

Moneycontrol has also seen social media conversations between group of sellers sharing their concerns and mapping out a plan of action in case the government clamps an overnight ban on the app.

TikTok, Free Fire 

India started banning China-related apps in 2020 following military tensions between the two countries on the Ladakh border. Apps that have been banned include the short-video platform TikTok.

Last week, Garena's battle royale mobile game Free Fire made it to the list under Section 69 A of the Information Technology Act. Garena is the gaming arm of SEA Ltd that also owns Shopee. Chinese tech giant Tencent is one of its key investors with an 18.7% stake.

Free Fire, which interestingly benefited from a ban on PUBG (Player Unknown's Battlegrounds) Mobile in September 2020, was the highest-grossing app across Google Play and Apple's App Store in 2021.

It clocked about $34.3 million in app spending last year, according to estimates by app intelligence firm Sensor Tower shared with Moneycontrol.

Moneycontrol has reached out to Shopee for comment. This story will be updated when it responds.