“The clients raised questions about the place of origin of our furniture， and almost all the new orders have been cancelled or postponed since the Da Vinci controversy was reported，” said Zhou Yufeng， China managing director of the Roche Bobois (RB) Group， at a press conference held on July 20 in Shanghai.His words showed his concerns of RB in China. However， RB is not the only furniture firm to suffer from the Da Vinci scandal. Other foreign brands are also facing a credibility crisis.Da Vinci under fireThe Da Vinci Furniture Company is a Singapore-founded and Shanghai-based luxury retailer that sells Versace Home， Fendi Casa， Kenzo Maison， and Cerruti among other upscale brands to wealthy Chinese consumers. Known for its high prices， Da Vinci has gained a reputation as a well-known sales agent for overseas furniture brands in China， with nearly 20 stores in China and Asia.The state-owned CCTV news station recently conducted an exposé after an investigation into Da Vinci. CCTV reporters not only found quality problems with the company’s products， often priced in the tens of thousands of dollars per piece， but the Shanghai Entry-Exit Inspection and Quarantine Bureau announced that the company’s “made in Italy” products were actually made in China， CNBC reported.The products were shipped to China’s border， and then suddenly became “imported”the next day after having them certified as imported or ‘Made in Italy’. The situation has caused uproar among Chinese consumers and has become a media circus， said the report.In the first half of 2011， Da Vinci “imported” 11 batches of furniture that were made in China at the Port of Shanghai， a spokesman with the Bureau was quoted as saying by Xinhua News Agency. Ten of the 11 batches of furniture were manufactured by two domestic companies in the city of Haining and Ningbo in the eastern Zhejiang Province.The two companies “exported” furniture to the Shanghai Waigaoqiao Bonded Zone， and later Da Vinci “imported”and stored the products in its warehouses in Shanghai， he said， adding that the practice was unethical.The survey also showed that the DaVinci furniture that consumers purchased contained unqualified products.Tang， a customer from Beijing， said her furniture gave out a strong chemical smell， and the size of a single bed was 30 cm shorter than advertised.However， tests showed that furniture was made from high density boards instead of solid wood， the Shanghai Daily reported.CCTV tracked down another furniture company that admitted that they produced the so-called imported furniture， which was made of resin and high density boards.The packaging used for the furniture just said ‘imported from Italy’ and didn’t mention where it had been made.Foreign brands in the shadowDue to the scandal at the Da Vinci Furniture Company， many high fashion furniture brands face a decrease in sales. Most customers who planned on buying foreign brands are now going to wait and see， CRI reported.Da Vinci itself was hit by the disastrous decline of its sales. “Before this， the daily turnover of Da Vinci’s seven stores across the country stays at a few hundred thousand RMB， with the highest of 700，000 to 800， 000 RMB. The total turnover a month can reach 50 million to 80 million RMB. But recently， the turnover has dropped by 80 to 90 percent.” said Huang Zhixin， the press spokesman of Da Vinci， at the conference held on July 22. The Beijing COFCO Plaza， a hub for international top-end brands， recently ahs seen a sharp decrease in consumers.“That the sales volume this month reaches half of its normal is all that I can expect，”a salesperson said， adding that “Those consumers who have placed orders choose to wait and see.”“Our store has also been involved. The clients ready for signing the purchasing contracts have suspended the payments， and ask for relative certificates and materials， saying that they will make purchasing decisions later，”said another merchant.The brand stores of Italy-based NATUZZI and Australia-based Calia has also been affected. Recently， many consumers require to see the certificate of the place of origin or other related materials for the assurance of the origin of the products. Accordingly， the sales suffered to some extent.“The certificate of origin was placed in our company before. Now the certificate of authorization and origin has been sent to the stores here，” said a salesman.“According to what the association knows， the highend furniture brands are badly affected，” said Tong Zhaoxiang， Director of the Information Consulting Department of Shanghai Furniture Industry Association，Ms. Lu is a fan of the style of French furniture， but she is now hesitant to make the purchase. “After the fakes scan- dal， we customers will definitely hesitate and have questions.”The foreign brands which used to be the favorite of many Chinese customers are now faced with an integrity crisis. RB is a France-based luxury furniture manufacturer and retailer with five stores in China. “The industry is experiencing a credibility crisis and we are seriously affected by this controversy，” Zhou was quoted as saying by China Daily， though he did not mention the exact number of orders that were affected by this incident.It is the first time the French furniture maker has come confronted this situation since it entered Chinese market seven years ago.“It is shocking that our sales of the first half of this month reduced by more than 80% compared to the previous six years. We’ve never had any crisis as serious as this one，”Zhou told China Radio International (CRI). “Only those consumers who really understand our brand and intrinsic value continue buying our products，” He added.Zhou， on behalf of the Roche Bobois Group at the press conference， read the statements， which said “All of the RB products are made in the European Union (EU)， with the main production site in France， and also other sites in EU countries like Italy and Portugal. RB， with its focus on quality and creative design， has always been staying active in international home decoration and design. Pursuit of excellence makes it the leading one in the world with 240 stores over 40 countries.”The statement was expected to ease consumers’ concerns and doubt. But it may still have a long way to go， though Zhou said “We have zero tolerance toward any type of violation， including the use of fake materials and 1 labels of origin”.Industry insiders said domestic furniture seller Da Vinci Furniture’s country-of-origin controversy has created difficulties for domestic and international top-end furniture retailers alike， because many Chinese consumers no longer trust the retailers， China Daily reported.Xinjiang-based Markor Furnishings， which is one of the largest luxury furniture retailers in China， also had some orders postponed.“Some customers called us to confirm the place of origin， while others said they will delay their orders to see what will happen next，” Mao Yawen， deputy manager of a Markor Funishings store in South Xizang Road in Shanghai， was quoted as saying by the report.With the Da Vinci scandal in mind， furniture retailers in China are becoming more careful about what they tell consumers with respect to the origin of their products.“We have told our sales personnel to state clearly to customers where the furniture was produced， so as to avoid confusion，” said Mao.“The impact is temporary”Though the top-end furniture is facing hard times， most merchants believed that with the rigid demand， its future growth will bounce back， even better than before.“The monthly sales of Da Vinci at the COFCO Plaza can reach as high as nearly 10 million RMB， almost equal to the yearly sales of the single brand store of ours. Da Vinci， which once occupied half of the high-end furniture market， is losing lots of orders. This can be seen as an opportunity for us，” Mr. Nie， whose business is to import Italian home furnishing， was quoted by Beijing Moring Post as saying.“Most consumers choose to place orders carefully. Though， the hit for the industry is temporary. Especially when the leader loses its confidence， the consumers will shift to other brands they trust. The rigid demand still exists，” he added.The scandal will pass by over time. The exposure of the scandal has aroused great attention of the industry associations. Consumers also learn to be rational when purchasing foreign furniture. All of these are beneficial for a normal and orderly market.The China National Furniture Association (CNFA) issued a statement on July 15 telling all furniture makers to tighten up internal controls and improve their credibility to rebuild the sector’s reputation， China Daily reported.Zhu Changling， the director-general of the CNFA， was quoted in media reports as saying that the Da Vinci contro- versy was an isolated case and did not reflect the situation of the whole industry.He said government regulators might need to establish a monitoring system to keep fake products out of retail channels.With their surging wealth， some Chinese ultra-rich tend to believe that foreign brands are superior to domestic ones. Thus， some low quality products are labeled foreign brands and sold at high prices.Therefore， consumers are advised that not all imported goods are better than those produced in China， and they should make their purchasing decisions based on genuine need.The lesson for foreign brandsSince the Da Vinci scandal has exposed many problems， foreign brands can draw a lesson from it. The CNBC report says that the scandal engulfing Da Vinci， and by association its partners， shows western brands need to be very cautious about whom they choose to represent their brands or to whom they license products. It is common for western brands to enter China via partnerships or licensing agreements rather than doing it alone.Now that the markets are more transparent than even a decade， it might make sense for some foreign companies to take back ownership of their China operations as Starbucks did when it bought out its partners for control of its store operations in the country. Luxury retailers Ralph Lauren and Burberry did the same thing to manage their brand and operations better.Companies like Pierre Cardin or Disney generate a ton of sales from licensing and have done well so far. But if brands are going to go the route of licensing or partnerships， they need to police their partners well. Brands like Versace and Fendi will most likely take a hit on their reputations because of their association with Da Vinci. Consumers might wonder if these firms’ furniture products are made in China and have quality control problems， and they might have the same worries about their luxury clothes.The report indicates that since Chinese consumers are so hypersensitive about poor quality products， brands must create trust with consumers and do everything they can to maintain it – even if it means charging more to ensure quality control.Chinese consumers are well aware of the risks of buying from some local companies. In interviews the China Market Research Group conducted with five thousand consumers in fifteen cities last year， the overwhelming majority of consumers said their biggest fear in life was buying toxic products that could harm their health.When buying critical products， which are ingested by children， consumers said they would pay 20 percent or more for brands they trust. For products at home， they will pay an even larger premium if it is something that children will come into contact with.In a separate study， the China Market Research Group interviewed one thousand consumers in six cities in the last six months about home decoration. The biggest fear consumers had when buying furniture， was buying toxic products. They worry about furniture brands selling products with bad quality glue or toxic varnish.Da Vinci got the first part right. It built up a reputation for having the most luxurious furniture brands in the country. Yet their business is in serious jeopardy because it seems their high-quality brand image was based on a sleight of hand.For a company that sells products like furniture that people buy only once every several years (when they buy a new home or renovate an existing one)， it will be incredibly difficult for Da Vinci to survive because consumers will skip them for at least one or two sales cycles.Compared with their American counterparts， Chinese consumers are not only far more concerned and hypersensitive about quality control， but are also much less forgiving. It is unlikely that brands tainted can bounce back the way Johnson and Johnson did after its baby Tylenol problems in the 1980s. The key lesson that companies operating in China should learn is to never do anything that can damage trust with consumers – ever， said the report.
