Synthetic Diamonds

Martin Rapaport hosted a town-hall discussion the subject of synthetic diamonds at JCK on the Monday morning.  Being so late in the calendar of events (not to mention, the morning after JCK Rocks the Beach with Train,) the turn-out was pretty good.  Mr. Rapaport respectfully gave a lot of time to synthetic diamond promoters to state their case for the industry to embrace their product.  As that time was drawing to a close, Martin predictably attempted to turn the tables on their arguments; using phrases like “bullshit” and “parasitic leeches.”  It wasn’t all acrimony, and there were plenty of industry members who were there to advocate for the traditional natural diamond market.

Here are a few things you should think about when contemplating the roll of synthetic diamonds in our industry:

What do we call them?

·      Much has been made about the use of words and phrases like artisan created, foundry diamonds, lab-grown, cultured, mined diamonds, synthetic, etc. 

o   Rapaport maintains that the proper gemological classification is “synthetic diamond.”

o   Synthetic producers will attempt to use whatever euphemisms to romance and market their own product. 

How should we view synthetic diamonds?

·      Their product is only relevant in the jewellery industry because jewellers and the Diamond Promotion Service spent countless millions of dollars over decades, convincing the world to buy diamonds.

o   They’re not going away.  Producing flawless diamonds could be the “holy grail” to producing Qubit or quantum computers that can store exponentially more information than current technology.

o   After a period of adjustment, they might well prove to validate the worth and desirability of natural diamonds.

o   In the same way that we cannot identify and certificate small Canadian diamonds, synthetic producers acknowledge that synthetic melee will likely never be identifiable.  Currently there are synthetic melee on alibaba.com for a fraction of the price of natural ones.  How long before those allow an unscrupulous manufacturer who doesn’t disclose their origin to gain an unfair price advantage?

Will you sell synthetic diamonds, only to risk what you sold for $7,000 becoming available for $2,000 in a few years when their prices come down?

·      Dissenters believe that as technology and the number of growers increases, the value of synthetic diamonds will drop precipitously.  What now costs 30% less than a natural diamond could devalue to 80 or 90% less than natural.  Maybe even to $100 or $200 per carat.

o   Synthetic diamond proponents could not quantify how many labs and/or foundries are currently competing to produce lab-grown diamonds.  Further, they attempted to convince the gallery that due to the energy required, time-frame and percentage of failure, that prices cannot drop to nominal levels.

Can you endorse a product that Rapaport calls a “parasitic leech” to the natural diamond industry?

·      Natural diamond proponents maintain that those promoting synthetic diamonds are unfairly benefitting from decades of promotion and investment by the natural diamond industry.  Lab grown diamonds did not create a market for their product, they’re riding on the coat-tails of the natural diamond industry.

o   Synthetic diamond producers claim that they are simply filling a demand in the marketplace.  “If The Signet Group needed 1,000 one carat SI/G-H colored diamonds and the traditional (natural) diamond market can’t supply those, then lab-grown diamonds can fill that order.”

·      Sceptics accuse synthetic diamond producers for taking advantage of the value of natural diamonds to make unfair profits

o   Synthetic producers admit that they are charging what they believe “the market will bear,” and couldn’t deny that the prices they charge are linked more to natural diamond pricing than a “cost-plus” value.

o   A common sentiment was that getting down to cost-plus value will inevitably happen when competition and better technology increase.

Are synthetic diamonds an answer to Millennials desire for ethical and environmental products?

·      Lab growers assert that their diamonds avoid harmful mining practices and that there are no synthetic “blood diamonds.”

o   Rapaport emphatically defends the estimated one million artisanal miners in Africa whose entire livelihoods depend on first-world consumption of natural diamonds.

o   Nobody asked what kind of environmental impact is required to produce synthetic diamonds, but nuclear reactors were mentioned as part of the process.  If anyone knows whether that’s just to produce power, or if it’s part of the crystal formation process, please post your comment below. 

Are synthetic diamonds going to become as inconsequential to natural diamonds as other synthetic gemstones?

·      Synthetic emeralds, and sapphires haven’t eliminated the demand for natural ones; rather they have arguably created more reverence for the natural ones

o   A speaker against synthetic diamonds pointed out that retailers still deal with confusion over Grandma’s ruby which the inheritor believed was real, because “Grandma had money, and she never would have bought something imitation.”  Then they assume a jeweller must have switched the ruby.  Most of us in the industry can spot a synthetic ruby from across the room, but diamonds take laboratory scrutiny to identify.  Synthetics will cause massive errors in identification, and with a growing disparity in value these errors will cause front-line jewellers big problems in the future – unless they are indelibly marked.

Just imagine these scenarios, not too far in our future:

Buddy goes out to buy a diamond engagement ring for his sweetheart.  He wants to buy her a one carat diamond, but his budget affords a 3/4ct diamond.  The jeweller offers him a 1ct synthetic to accomodate his budget.  He buys it, and gives it to the girl without telling her it’s synthetic.  They tragically part.  She goes into a pawn shop and sells the diamond.  The pawn broker says, “I’ll give you $1,000 for the diamond because it might be synthetic.”  The pawn broker now owns a diamond that he’s not sure about.  Is he going to sell it as “possibly synthetic?”  Will he identify it by the laser inscription as synthetic?  If he knows it’s synthetic will he have the laser inscription rubbed off?  Will he sell it to a retail jeweller who resells it as natural?

It’s a lot to think about!

Based on a True Story

Last night a friend and I enjoyed our weekly “cheap Tuesday” movie outing.  We chose “Unbroken,” which is an inspirational story based on Olympian, Louis Zamperini, who survived some harrowing ordeals as a soldier in World War II.  I highly recommend the movie, so I won’t spoil it for you.  Like many movies based on true stories, the ending of the film involves telling the “story-after-the-story.”  Pictures of the real Louis Zamperini, were captioned by facts that show the enduring effects of his bravery and character.

The film was beautifully directed by Angelina Jolie (whom my wife Jana hates – probably because Angelina and her Collagen-inflated lips edged her out for a most beautiful woman in the Universe award – but I digress).  The cinematography was epic, the characters very well developed and the viewer could easily slip into the illusion that they were really crash-landing into the Pacific or seeing through the cracks at Louis in the dark depths of a detention camp.  The “story-after-the-story” jolted me out of the cinemagraphic dream I’d been lost in.  The reality of the actual life and impact of Louis Zamperini hit me like a ton of bricks.  It moved me so much that I couldn’t tell Jana about the movie the next morning without a few tears leaking from my puffy eyes.

It was a very enjoyable movie, but I’m writing to explain to you the revelation I had about how this movie was produced.  The first 2 hours and 15 minutes was impressively crafted, but it was all just a precursor to final 2 minutes: the truth about of one man’s life.  In your business, you can have a million dollar construction budget to create an amazing store with a coffee-bar to make Starbucks jealous, kids play area, luxurious well-lit showcases, and décor that is the envy of the town.  You can spend tens of thousands of dollars training your staff to provide professional white-glove service.  You can create advertising that moves people to tears and have them giddy with positive expectations when they come into your store.

If you spend 2 hours and 15 minutes with a client, treating them to the best shopping experience they’ve ever had, the last two minutes will still be the most crucial.  Will they walk away with something that inspires referrals for a lifetime, or will they end-up with jewellery that forever leaves a bad taste in their mouth.  The quantity of jewellery you sell this month will help pay the bills.  The quality of jewellery you sell this month will help you build a dynasty of clientele.

Selling anything is hard enough.  If you think that selling is trying to solve a mystery as to which item in your showcase will tick all of the boxes and get them to say yes, you’re not thinking big enough.  Selling the right product to the right person to maximize their long-term enjoyment of jewellery and reverence for the business and the person who sold it to them is even better. Some guys have two boxes to check: A) it’s got to look like it cost $1,000 and B) I want it to cost less than $500.  It doesn’t take two-and-a-quarter hours to make that sale, but what if you asked a few questions, listened to his story and then gave him a few more boxes to check.  He might end-up with something much more valuable, and something she’ll get 10 times the enjoyment out of.  If that happens, do you think they will tell their friends about your store?

Create a fantastic client experience, and then ensure that you make every effort to promote the best you have.  Sure, they might still choose the easy-to-sell trendy cheapo that’s not built to last.  But they just might make an inspired choice that will set you up as a hero, and inspire generations of jewellery shoppers to return to your store.

When Style Counts

Sorry for the length of this article.  It was written for a magazine submission, but this message couldn't wait.  Focus on this during the coming holidays and then build your future business on these key principles!!!

I was walking through the mall the other day and I spotted a bar fridge in a music store.  It looked exactly like a Marshall stacked amplifier set.  The knobs even turned.  For someone who plays guitar or who is into hard-core rock’n’roll, this would be the ultimate fridge.  I remember shopping for the bar-fridge in our basement.  We looked at how many cubic feet it was, what the Energy-Guide rating was, how the interior was organized and how much it cost.  We compared at a couple of places and found one that suited our criteria for $179.  Had I seen the Marshall Stack bar fridge for $299, I would have bought it without even opening it up.
 
Further back, when I worked in retail jewellery, I had a young man come to me with a problem.  Despite his Mom’s recommendation to buy from me, he bought an engagement ring elsewhere.  When the engagement went South he needed advice as to what might be a fair return/exchange practice with the vending jeweller.  I gave him some guidance, and he pledged then and there to buy his next engagement ring from me.
 
A couple of years later it (almost) happened.  He came to me having found a new love and was ready to buy that engagement ring.  In their travels she had found a style that we would not agree to replicate; therefore, he ended up having to break his pledge to me.  The style was billed as a nouveau tension-style ring; essentially a ring within a ring, with a girdle-sized hole at the top of the outer band pressing the diamond’s pavilion against the inner band.  I explained the risk of such a setting, and politely suggested that if no other ring would do, they had best get it from the other jeweller. 
 
All was not lost.  This young man referred a friend to me for an engagement ring, who referred two other friends, and I ultimately received a lot of business from his recommendations.  The point is; style counted for a lot.  On that day, style was more important than his pledge or my ability to provide the professionalism he was looking for; and it superseded any thoughts of diamond quality, warranty, or even durability. 
 
There are two times when style counts for a lot.  The first is when you have a style that nobody else can or will supply, and the client falls deeply, madly, passionately in LOVE with that style.  That’s why it’s important to have your client try-on all kinds of diverse styles to see if something that was off-the-radar catches their fancy.  If you have distinctive and exclusive product, then you should romance the matchlessness of it and you should be able to captivate them with the fascinating story of the designer.  Here’s why: if they fall in love with something unique then you’ve eliminated a lot of your competition, and margins go WAAAAY up!
 
The second way in which style counts is when you’re working with styles that are popular.  Back in the 80s it might have been the 17-stone diamond cluster ring with ski-tip shoulders.  Today it’s the white gold halo-style with micro-set shoulders.  Style counts here because every manufacturer offers something of this description, and the consumer can’t tell one from another.  Because it’s hard to compare across the mall or across the city, your best business strategy is to have the least expensive of this look.  As the consumer begins shopping this style to see who has the lowest price, it drives quality and margin WAAAAY down. 
 
I still see some very beautiful and well-made 17-stone cluster rings, but they are likely the early models when VS diamonds were abundant and the claw-work was impeccable.  As the race to the bottom ensued the gold became thinner, the setting work more perfunctory and with diamonds diving ever lower in quality.
 
On the sales floor, there are often designs that are easy-to-sell, and those which are more suited to the jewellery connoisseur.  If you only ever sell the former, you can easily be replaced.  If you can sell to the aficionado, and turn a portion of bargain-shoppers into more sophisticated clients, then you’re worth more and you’ll surely earn more.   Let’s stop being lazy!  Todays bridal shopper comes in with pictures off of Instagram of the same things over and over again.  Those are the popular designs, and if you don’t have the cheapest one of those, you’ll lose.
 
Here are six keys to selling better, more valuable jewellery which fetch higher margins:

• Show clients exquisite design alternatives at every opportunity – even if they’re coming in for a watch battery or some other product. 
• Research and then talk-up the merits of the designers you have chosen to carry in your store. 
• Never miss a chance to tell them about the advantages of buying from your store.
• Get to know them and their lifestyle.  Then as their friend, guide them toward designs will compliment their stated preferences and lifestyle.  By listening to their story and then repeating back aspects of designs that relate to them, you’ll blow them away because very sales associates truly listen!
• Focus on style rather than diamond size/quality – remember if they love the style, you might not even need to talk about the 4-Cs.
• If all of that fails, then sell them what’s easy to sell.  You may have expanded their horizons for future purchases anyway.

 
One last story:  Lilian Jensen and I were at a restyle show in Kamloops about 10 years ago.  A couple in their late 30s to early 40s came looking for an engagement ring.  This was to be his first marriage so he was really quite excited.  While looking at designs we talked about how they met and soon discovered that they were a match made in heaven.  Once a design was found that put a huge sparkle in her eye, Lilian pulled out a suitable sized loose diamond and floated it over-top the design to dazzle the giddy couple.  With a perfunctory pause to ask about the final price, they eagerly asked when it would be ready; then proceeded to plunk down the plastic.  After they left, we were thrilled for them, and I stood amazed that they left without knowing the size or quality of the diamond that Lil selected for them.  It wasn’t an issue.  They wanted THAT fantastic design and the designer had endorsed the selection of the feature diamond.  Done, and done!
 
That’s the power of a personal connection and winning style.

Let's Get Frank!

It's time to stop pussy-footing around important issues in our industry.

The world has become increasingly open to talking about things that were in the past considered indelicate.  Feminine hygiene, bladder leaks, bum-wiping and impotence are all boldly addressed during prime-time commercial breaks.  The world seems willing and even eager to brashly dive-in head-first to tackle problems formerly hidden in closets, and buried under mattresses.

Is the jewellery industry keeping up with the times?  Are we brashly standing up for our industry and our businesses?  Why do we pull punches.  Are we the embodiment of the polite Canadian stereotype?  Are we afraid of getting sued?  Do we have too much respect for our competition to somehow maliciously degrade them?  We probably don’t want to appear negative by putting someone else down.  Maybe we just don’t have good answers to some of our more embarrassing problems.

I enjoyed hearing about how a jeweller in Ontario posts a sign in his store titled “travellers alert.”  This sign points-out the real risks of buying jewellery while on vacation.  We can all testify about friends and clients who bought ridiculous jewellery while under the influence of margaritas, sunscreen or whatever it is that causes the irresistible urge to buy stupid things.  Independent jewellers can do a better job of warning our clients of the risks.  At the same-time you can also coach them on what kinds of things they should feel free to buy while on vacation.  How many times have I sold someone a $1,000 or $2,000 setting for a  $25 gemstone they bought on a cruise?  You’ll have a hard time competing with the experience of picking-out an opal in Australia, but if you tell them what kind of opal to look for, and then help them create a setting for their precious souvenir, you can be a hero and make a few bucks yourself.

Internet retailers are slamming you every chance they get.  They’re not afraid of telling your clients how inconvenient it is that you’re not open 24 hours, how much pressure it is shopping with you and how much you overcharge for your jewellery.  Are you just going to just take that lying down?  How about reminding your clients that you offer 60 more hours per week of opportunities to see, touch and feel real live jewellery (before they buy) than internet retailers?  You can stand-up for yourself, and say, “we who live in, work and support this community appreciate and need you shopping local.”  Spend time, effort and money reinforcing the value of hand-selected quality designs that are waaay more sought-after than the photo-shopped trashy leftovers available 24/7 on the worldwide dumping ground.

If you’ve invested the time actually looking at jewellery sold by volume retailers you might just be appalled enough to begin calling a spade a spade (or a F---ing shovel).  There’s so much frozen spit, misrepresentation, tinfoil-thin settings, rejection quality gemstones and truly impractical designs out there that you should be indignant, insistant and assertive when it comes to blowing your own horn!

Do you believe that you can’t compete against the volume buying of chain stores?  If you do, give up.  Do you think the industry will eventually get swallowed-up completely by the interweb?  Might as well pull the plug right now.  If you are convicted that as an independent retailer you have unique and high-quality jewellery, and that your delivery provides clients with unparalleled benefits, then I think you just might go somewhere in this business.  Don’t be shy.  Stand up for yourself!

Incredibility

It's a big leap from credible to "incredible."

The English language is full of words where prefixes and suffixes can adjust the meaning 180 degrees, turn it sideways, hyperspace it into superlativity (I made that one up!) or completely change the intent.  “Hospitable” and “inhospitable” are opposites, but what about “credible” and  “incredible?”

In the jewellery business credibility is a huge asset.  How will consumers buy something so easily fudged from us without trust?  We want to be perceived as “credible.”  So do cruise ship jewellers, Caribbean port shops, internet retailers, home shopping channels, chain stores and the dishonest jeweller right down the street from you.  They all want to make sales, and they all know that credibility, or the appearance thereof is the key.

What do our competitors do to build credibility?  Cruise ships spend time educating passengers about jewellery while building rapport.  Port shops bribe port lecturers,  boast of their New York head office and international warranties.  Internet retailers build credibility through transparency of information and no hassle return policies.  The chain stores take advantage of their long histories to leverage lifetime trade-ups and long-lasting warranties.  The television vendors have extensive “risk reversal” policies to assert “we’re so sure you’ll love it, we’ll pay double the return postage if you’re not happy.”  The dishonest guy down the street peddles half-truths and lacklustre promises.

I still visit perfectly honest retailers who have no BBB, Chamber of Commerce nor CJA stickers on their doors.  Their hand-written signs behind the counter that say “NO REFUNDS, EXCHANGE ONLY,” make me think that numerous clients have desired refunds for suspicious reasons.  When asked about warranties, trade-ups and exchange policies there’s no document to clearly state the expectations.  “We’ll take care of you,” sometimes will lose to the chain store’s clearly stated documentation.  I love to see cork-boards full of thank-you notes and wedding photos of happy couples.  They confidently assert “others have tried us and appreciated the service, so you should too.”

Here’s the thing.  If your customer comes to you and says, “Peoples will give me my original cost towards something of double the value…” you might choose to match that deal in order to gain the sale, and the trade-in of something that might actually have some value to you.  If your customer says, “I think this was a manufacturer’s defect,” you often give them the benefit of the doubt and cover it anyway.  For ALL of those benefits you give to your clients after the fact, you could formalize them (to protect you against abuse) and use them as a selling feature to make more sales.

You need to prove your credibility in your long-term actions, but you also need to be able to articulate your credibility in a short sales presentation.  If you A) have credibility, B) clearly communicate how you back-up your claims of  credibility, and C) live it and prove it every day of your life, then you will surely achieve the status of “incredible.”

The 2014 WCJE

It's a whole new ballgame without DiGem and The Martin Ross Group

WCJE 2014

Well another show is in the books.  How was the show you ask?  Let me tell ya.  The big buzz was about the pending closure of the Martin Ross Group.  When A&A closed down it was big news in the industry, but Libman and Master Design both at the same time?  Monumental!  The void was already felt with their absence as exhibitors.  They weren’t the only ones missing, and the show was noticeably smaller than last year.  Without those two suppliers, this show offered their dealers a chance to source alternatives, but more on that later…

The Canadian Jewellers Association, JVC and the “Connect for Success” committee produced an educational day on Thursday ahead of the show.  Due to set-up I couldn’t attend the whole thing, but it was very well-received by those who took the time.  I will do what I can to encourage and promote this effort in upcoming years.  Increased show participation depends on the value and excitement that this show provides to retailers.  An engaged and successful retailer will do their Fall buying at the show, offering value to the exhibitors.  And truthfully, waiting for the sales reps to come see you will NEVER give you the front-of-the-line selection, networking opportunities and one-stop shopping that the WCJE offers.

I haven’t heard any official numbers, but I’m pretty sure attendance by retailers was down.  Without the annual general meeting and festivities surrounding the disbanded DiGem buying group, their members had one less reason to make the trip.  Some have joined the CJG, and attended the buying show the previous week in Toronto.  But little of the drop in attendance can be blamed on buying groups as there were quite a few former DiGemmers in attendance, including my good friend Connie Kitigawa.  We will always welcome her participation in the industry and our lives due to the contributions she’s made to Digem, the industry and her friends.  Over the past 5 years, DiGem raised over $75,000 for charity through their “Digem Decadence” dinners and the Edmonton show, and even though the event was missed, the amazing impact on those charities endures as a legacy of the group!

…back to the Martin Ross thing.  Corona put on a very impressive 55^th anniversary show of their own with a large addition to their usual space, including diamond cutting demos and a luxurious hospitality lounge.  While they stand to gain a lot of business from Libman and Master Design faithfuls, there will be circumstances where exclusivities, loyalties, flier program conflicts and capacity issues will have to be weighed-out.  It’s going to be a busy season for Corona and other suppliers (including myself) trying to adjust to these new realities!

I hope that it’s a long time before we forget the innovation, inspiration and enrichment that Mark Libman and the late Varouj Arkarakas (Master Design) contributed to our industry.  They were only successful because they helped so many retailers enjoy their own success.

Okay, so this turned into a sort of obituary for Martin Ross Group and DiGem.  On the bright side, those who came were upbeat about their prospects for a robust Fall season.  We sold some pretty amazing one-of-a-kind delivery pieces, leaving us working hard to assemble like-product for me to show you if I’m coming to see you soon.