/A Gray Market in Furniture Spawns a Feud in Europe

A Gray Market in Furniture Spawns a Feud in Europe

By BOB TEDESCHI
KICK up your feet and get ready for a war story between Old World and New World merchants. Just take off the shoes first, please.
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Jonathan Player for The New York Times
Julie Edwards, in a chair made by B&B Italia, runs Europe by Net, a Web site that takes furniture orders, finds the items and ships them to customers. This is considered operating in a gray market because customers do not buy from sellers with official deals with manufacturers.

Luxury furniture makers and their affiliated sellers are taking aim at Europe by Net, a Internet company based in London. It is run by Julie Edwards, a former banker from Gillette, N.J., who has the gall to offer $11,000 Italian sofas to the unwashed masses for $8,000.

Europe by Net says it is planning to ask the European Union to investigate whether five Italian furniture manufacturers are engaged in a campaign of slander and price-fixing, making it more difficult for the company’s Web site to advertise its service and sell its items.

Most of the manufacturers, including Minotti, Cassina, Poltrona Frau, and B&B Italia, either declined to comment or did not return calls and e-mail messages seeking comment.

A fifth, Zanotta, said that it had done nothing wrong against Europe by Net, according to a spokesman’s e-mail message. Zanotta claims that the Web site is illegally using Zanotta’s logo and product images. Europe by Net disputes that claim.

Retailers based in the United States, meanwhile, have also lost their patience with the Web site, because it is siphoning away their customers. Pina Manzone, owner of Signorello of Westport, a Connecticut-based furniture seller, said she and other upscale furniture retailers had been visited by many customers who simply wanted to know the manufacturers’ numbers of certain pieces, so that they can shop for the same items online.

“Europe by Net doesn’t go to Minotti and say, ‘I want to buy a sofa from you,’ ” Ms. Manzone said. “They get it from Joe Smith in Florence with a retail store that sells Minotti. It’s like selling your product by the black market.”

Not black; gray, said Ms. Edwards, of Europe by Net. Black market is a term typically reserved for sales that violate price-control laws. “Gray market is what we’re doing, and we don’t shy away from it,” she said.

Ms. Edwards, whose site is six years old, said the company took orders on its Web site, found the furniture at retail stores in Europe and shipped it to customers. This is considered operating in a gray market because customers don’t buy the goods from sellers with official agreements with manufacturers.

Her prices, Ms. Edwards said, are between 20 percent and 40 percent less than those charged by retailers in the United States, even after shipping costs. “If you have the time to buy in Milan and ship it to yourself, it’ll cost you a lot less. But for some reason, the U.S. distributors have decided to sell it for much more,” Ms. Edwards said.

Europe by Net’s customers seem comfortable with the site’s approach, considering the company’s sales figures. Ms. Edwards said the privately held business sold between $5 million and $10 million worth of goods in its last fiscal year, which was double that of the previous 12-month period.

Ms. Edwards attributed part of the growth to a new catalog last year — a marketing vehicle that is one of the focal points of her complaint with the European Union. The complaint alleges that the five Italian furniture makers threatened to pull their ads from Britain’s edition of Elle Decoration, which is published by Hachette-Fillipachi, if the magazine did not stop distributing Europe by Net’s catalog along with newsstand copies of the magazine.

The magazine has stopped distributing Europe by Net’s catalog, according to Tony Long, a spokesman, but only because the Web site has not paid a bill of roughly $30,000. “We’re quite used to seeing some advertisers being upset by what others do, but it’s not our business to ban advertisers based on the actions of other companies,” Mr. Long said.

Ms. Edwards said Elle had not satisfied its obligations under the contract, but that she would pay the entire bill if Elle described, in writing, how the magazine had been pressured by furniture manufacturers.

“This situation will ultimately be resolved,” she added.

More troubling for Ms. Edwards’s company is what she claimed was a concerted effort among manufacturers and competing retailers to spread falsities about the Web site. For instance, Ms. Edwards said, prospective customers had been told that the company sold counterfeit furniture, a claim she denies.Furniture makers are far from the only ones bedeviled by gray-market sales, analysts said. Manufacturers of electronics, luxury handbags, jewelry and other goods often sell those items to distributors in the United States for higher prices than in other nations, only to find enterprising e-tailers selling the foreign items in the United States for less.

The Internet has made it easier for consumers to find those cheaper items, said Robert K. Passikoff, president of Brand Keys, a New York-based consultancy. Retailers who cannot demonstrate the value of their customer service — and physical proximity — may well have to drop prices to compete, he said.

Manufacturers, Mr. Passikoff added, run the risk that customers who receive shoddy service from gray-market sellers will associate that bad service with the manufacturer. But if that retailer strives to give good service, manufacturers need not fear that the lower prices alone will tarnish their image. “People understand they’re getting a deal,” he said. “They won’t think less of the product.”

The controversy between Europe by Net and the upscale manufacturers underscores the growing importance of the Internet for the furniture industry. According to comScore Networks, an online consultancy, online sales of home furnishings for the first five months of this year were 38 percent higher than the same period last year — nearly twice the growth rate of nontravel-related goods. Jupiter Research, another Internet consulting firm, predicts Internet furniture sales of $1.1 billion this year, up from $900 million in 2012.

Ms. Manzone, the Signorello of Westport owner, for one, is hoping that customers recognize the value of the services offered by offline merchants. “We spoil customers to death because they’re buying a piece of architecture,” she said.

What about customers who might not otherwise be able to afford around $8,000 for a Minotti sofa in her showroom that retails on Europe by Net for roughly $6,000, including shipping? “Then don’t buy the product,” she said. “Go to Bob’s Discount Furniture.”