These guys are cleaning up and sticking it to mass production!!
Business Plans That Rest on Imitation
By AMIR EFRATI
“When Steve and Grace Hassid need a new kitchen table or bookshelf, they browse online catalogs of chains such as Room & Board and Crate & Barrel—and then get the pieces custom-made for half the price.
Their secret weapon is Sphere Designs, a start-up in San Francisco’s Dogpatch neighborhood that began manufacturing furniture in-house two years ago for huge discounts to retail prices. ”You get what you want, and the price is better than most of the stuff that’s ready-made,” says Mr. Hassid, a 51-year-old cardiologist.
Sphere Designs and Furniture Envy, another San Francisco start-up, are shaking up the local furniture industry by copying designs from popular chain stores such as Pottery Barn for a big discount. Furniture Envy is on pace to generate $1.2 million in revenue this year, up from about $500,000 in 2008. While Sphere Designs’ revenue is down from 2008 when it sold imported furniture, its sales of custom-made furniture are projected to reach $600,000 this year versus $500,000 last year.
Larger furniture retailers have struggled in the weak economy. Williams-Sonoma Inc., with 610 retail furniture and home-goods stores including Pottery Barn, West Elm and Williams Sonoma Home, says retail revenue declined 17.5% over the two years ended Jan. 31, to $1.8 billion. Sales at Ethan Allen Interiors Inc.’s design centers fell 40% in the two years ended June 30 to $439 million annually. The more-established rivals say the lower-price knockoffs can be inferior. When prices are “undercut by that much, it brings some questions about the true quality,” says Michael Gargiulo, manager of the Room & Board store in San Francisco, which has grown quickly since opening five years ago. Crate & Barrel declined to comment. Williams Sonoma didn’t respond to requests for comment. Furniture Envy and Sphere say they can sell furniture more cheaply without sacrificing quality because as small operations their overhead costs are lower. Copyright experts say the vast majority of furniture designs wouldn’t be protected by copyright, especially those with few distinguishing features or ornaments. “For three-dimensional designs, copyright will not protect anything that…performs a utilitarian function,” says Lawrence Robins, a copyright lawyer outside of Boston. “Most everything about an item of furniture is functional.” The use of certain images and names of furniture in marketing materials can be protected by copyright, however.
Furniture Envy was started in the Marina district in 2007 by Brian Norris, then a 27-year-old financial analyst. At the time, he and his wife, Shirley, went into $100,000 of debt to launch the business. Sales grew steadily at first and the couple paid off their debt within a year. But the Norriss say they also lost business because they couldn’t accommodate many custom orders. They began doing more custom work in 2008 and in early 2009 found a wholesale manufacturer in Los Angeles that could customize popular designs.”