China’s DaVinci Furniture and the Reverse Tip-off

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"We use only the finest hand-carved, chemically-treated Dongguan particle board."

The newest “intellectual property” scandal here in China involves a furniture company famous for its high-end products:

DaVinci brand furniture is famous for its high prices in China. One DaVinci single bed can be sold for more than 100,000 yuan and a sofa set can be sold for more than 300,000 yuan. Salesmen say that it is because DaVinci is an Italian international super brand and its furniture is produced in Italy. In addition, it claimed its raw materials are high-quality natural materials without pollution. (People’s Daily)

Funny thing. At least some of the furniture is actually made in factories in Southern China, the quality sucks, and the brand isn’t well known globally. Oh yeah, and about the intellectual property angle to the story? It doesn’t exist.

Small point, but this is a case of fraud, not IP infringement. DaVinci was telling its customers that the products were imported and high quality, and the brand was famous overseas. These were false characterizations — fraud.

For IP infringement, you need intellectual property rights. Trademarks, patents, copyrights, trade secrets. The bad acts here have nothing to do with any design or trademark usage. Just lying to customers. DaVinci does sell some products with famous foreign labels, but so far I haven’t heard any allegations concerning unauthorized trademark usage.

OK, so until the facts change, let’s hope we stop seeing news articles that try to shoehorn this story into the category of “just another China IP scandal” as opposed to “yet another crappy China product scandal.”

Although there is already pending litigation regarding the company’s fraudulent acts, the interesting aspects of this case have more to do with marketing in China and consumer behavior as opposed to legal issues.

Why are these consumers so upset? Because some of them spent USD 100,000 on bedroom sets, thinking they were made in Italy out of exotic wood or something. This furniture was insanely expensive, sold on this popular notion (in China) that high prices signal high quality, and that imports are better than domestic products.

When IP lawyers talk about counterfeits, a “tip-off” is a signal to the consumer about the origin of the goods. That Gucci bag sold for 45 RMB is a tip-off that it’s a fake. With a fraud like Da Vinci, there is a reverse tip-off. They sold cheap crap, pricing it high to signal the quality and origin of the goods.

And this is a pretty good sales strategy, at least until you get caught. Imports are often of better quality, and certainly there is often a relationship between high prices and quality or materials. But everyone knows the games companies play, and Chinese consumers are generally pretty savvy.

Go on a Chinese shopping BBS and check out some of the chatter between consumers. You will learn, for example, that Brand X, which has a vaguely Chinglishy (i.e. foreign) name, is actually run by a Chongqing family whose son, while studying abroad in Sydney, set up a one-room office in Oz five years ago; the company now claims to be Australian and charges a premium for products made under a foreign label.

Consumers here are educated and cynical. On the other hand, there are a whole lot of rich folks running around desperately trying to a) spend their money on anything their fat little sausage fingers can grasp; and b) signal to their colleagues/neighbors/family that they are fabulously well off. If the furniture has an Italian name and is priced well out of reach of the stinking masses, well, say no more. Gimme a couple of those.

Besides, DaVinci’s reputation for high-end merchandise up to now has been pretty good, and as frauds go, they were good at it. I mean, even if a customer is suspicious, once you see that “Made in Italy” stamp on that sofa, what are you going to believe?

Additionally, guess what, often the product really was imported!

Well, sort of. Apparently they manufactured some of this crap in the South, shipped it to the Waigaoqiao Free Trade Zone near Shanghai, let it sit in a bonded warehouse for 24 hours, then re-imported it back to China. Presto-chango, it’s now an imported product! Other products were shipped to Italy for re-importation, which covers that whole country of origin problem.

Fun facts aside, I am a bit surprised that this story has gotten so much attention. Fake foreign brands are all over China, and the phenomenon has been around for quite a few years. I suppose that once you start defrauding rich folks, though, someone’s bound to take notice.

So, any long-terms effects here? I doubt it. One might hope that this would serve as a wake-up call for consumers who automatically buy in to the import/high price fetish and to the government regulators who are supposed to catch this kind of thing. But there’s too much money floating around China these days, and rich folks will always be looking for big ticket items to put in their living rooms. Huge incentives for fraudsters, and that’s not going to change any time soon.

Although I’m somewhat sympathetic to those middle class families who saved several month’s salary to buy an end table from DaVinci only to find out later it was made of chemically treated particle board, I find it difficult to dredge up outrage on behalf of DaVinci’s target customers. To all those rich folks who were blindly searching for the highest price foreign products they could find, my reaction is a somewhat disinterested “Meh.”

2 responses on “China’s DaVinci Furniture and the Reverse Tip-off

  1. nan fix

    Exactly – except for one other fact. When a “Made in Someplace” logo or label gets hit – there is collateral damage. Studies show that when a geographical label is tarnished or fraudulently exploited – the whole industry loses reputation. After the Sanlun scandal – consumers were highly skeptical about ANY milk purchases. Likewise, consumers will be very weary and doubtful about their purchases of “Made in Italy” products. The same applies to idiots who “buy” their way through Ivy league schools and tarnish their alma mater or schools who permit big-time cheating. The whole group suffers because of the fraudulent “bad apples.” Missing the forest from the trees – Brand label reputations are damaged from fraudulent misrepresentation and unscrupulous business practices.