Playboy Sues E-Commerce Management Provider

Jun 23, 2009 12:41 AM  By

Fifteen months after Playboy Enterprises finalized a deal for eFashionSolutions to manage the company’s catalog and e-commerce operations of its retail brands– and – it has sued the New Jersey-based firm for breach of contract.

According to a story in Crain’s Chicago Business, Playboy’s lawsuit filed June 17 claims eFashionSolutions is attempting to withdraw from its contract obligations on July 1, which “will irreparably harm Playboy, forcing Playboy to shut down its e-commerce and catalog business,” the lawsuit reads.

Playboy wants a federal judge to order eFashionSolutions to pay damages and honor its business agreement until Playboy can find a suitable replacement, the story says. According to the lawsuit, eFashionSolutions wants to end the relationship on July 1, claiming that Playboy breached the terms of its contract.

A Playboy spokeswoman declined comment, saying the company does not discuss pending litigation. No one could be reached for comment at eFashionSolutions.

EfashionSolutions is a full-service e-commerce provider for brands such as Rocawear, Ben Sherman, DKNY, and Baby Phat. According to the deal with Playboy, eFashionSolutions would handle all aspects of the direct business for Playboy, including design, photography, inventory management, merchandising, marketing, payment, fulfillment and shipping, and customer service.

Playboy officials said last year that the deal with eFashionSolutions would improve profitability “in what historically has been a very low-margin business and allow our licensing business to generate much higher sales through the e-commerce distribution platform than they previously have been able to achieve.”

According to the lawsuit as described in the Chicago Business story, Playboy said that in 2007 its e-commerce and catalog division generated $17 million in sales, but under eFashion’s management projected revenue was on track to be between $4 million and $5 million.

EFashion CEO Ed Foy said his company couldn’t operate under the financial terms of its agreement, the suit said. Playboy claims in October it signed a modified contract with eFashion that stipulated concessions, including slashing the first-year minimum royalty payment to $750,000 from the previously agreed $1.5 million.

Playboy claims that eFashion has yet to deliver the first-quarter payment of that royalty. “Throughout the parties’ relationship, Playboy has continued its good faith efforts to sustain the relationship. . . .EFashion, however, has repeatedly failed to honor its commitments,” the suit said.

Playboy’s lawsuit did not detail why eFashionSolutions claimed Playboy was in breach of contract.