Canadian Diamond Conflict and Confusion

The current debate over the CDCC amounts to conflict and confusion.  If you take the 7 minutes to read the following article it will leave most in this industry scratching their heads in bewilderment.

http://www.jewellerybusiness.com/2/newsletters/272-december-19-2011/1183-exclusive-industry-groups-disagree-over-changes-to-canadian-diamond-code

Here's my take on it all:

Companies that proudly purchase Canadian diamonds and pay high wages and benefits to cutters in Canada want a marketing advantage over those who cut Canadian diamonds over-seas.  Now that didn't take 7 minutes did it???  Diamonds mined and cut in Canada should be a good thing for our economy, right?

If the XL Pipeline project gets shot-down by Obama, more Canadian companies will have opportunity to upgrade bitumen from the oil-sands and it will create more "value-added processing" for Canadas economy.  Why aren't we doing everything we can to support value-added processing in diamond cutting?  Mostly because the largest manufacturer and seller of Canadian cut and mined diamonds is a villain in our diamond industry.  Remember "Snidely Whiplash" from the Dudley Dooright cartoons?  He had a black cape, black top-hat, crooked smile and a curly black moustache?  That's who is lobbying to gain a marketing advantage for their diamonds which are mined and cut in Canada.  They have never tied poor Nel to the railroad tracks, but they are highly criticized for gaining an unfair and unlawful advantage by overinflating their diamond quality through bogus grading certificates.

Many Canadian diamond dealers and manufacturers lose business to Snidely Whiplash already because his G/SI2 diamonds are 20% less expensive than others.  Well, okay, they're actually J/I1s with a really low cut-grade, and they're worth 22% less, but that's besides the point.  I think Snidely has masterfully taken the spotlight off of their biggest crime by pushing their "Made in Canada" agenda.  It's the classic "bate and switch" ploy.

My wish for 2012 is that Snidely will come clean and begin selling honestly graded diamonds.  Ya, right, and that development will be celebrated by a troop of tap-dancing snowmen.

By the way, CDCC, no matter how you define a Canadian diamond, it won't matter.  The jewellery industry buys $Millions worth of bogusly graded diamonds every month.  What makes you think they're going to accurately promote Canadian diamonds with those added 122 words to define their origin?

Embrace your inner "Diamond Monger"

A recent CBC radio article focused on lax standards in Canadian food labeling.  With lax requirements and deceptive practices, up to 40% of the fish you buy could be different than what you thought you were getting.  According to the experts involved, a variety of fish species can be substituted for “sole” and marketed as such.  It is also easy to substitute farmed fish where consumers might be expecting natural ocean caught varieties.  Once the head is off the fish, it might take an expert and/or DNA testing to catch the substitution of a $4/lb fish for a $16/lb fish.

While it would be natural at this point for me to go-on about misrepresented diamonds, I’ve got another take on this issue.

Grocers could send samples of the fish they buy to DNA labs to ensure that they’re offering accurately labeled product (and not getting ripped-off themselves.)  CBC’s Anna Maria Tremonte made the point that traditional “fish mongers” were much better able to identify and accurately represent what they sell.  While fish can pass through up to 7 different hands before reaching the consumer, fish mongers deal more directly with fishermen and direct suppliers. 

An expert fish monger would not be fooled by inaccurately labeled fish because they know their product.  They can tell the difference between varieties by their smell, their texture and because they control their supply-chain more closely than larger retailers.

You who I write to and serve are independent jewellery stores.  You are the modern-day fish mongers… in fact… that would makey you… you’re DIAMOND MONGERS.  You know your product, you control your supply-chain more closely than the chain stores.  The larger the operation, the harder it is to keep up quality.  How do you compete against the big boys???  Your quality has to be better, and you need to know your product more intimately.

Are you intimidated by the buying power of the big chain stores?  You shouldn’t be, because you’re a diamond monger.  You buy from smaller manufacturers like Customgold who hand-select each gemstone they sell, and who know a good and fresh cert from a stinky-one.

When I hear comments like “Wow, I thought we couldn’t get nice diamonds like these because the Asian buyers were buying-up all of the good stuff,” it tells me that this retailer has only seen product from the big institutional manufacturers. 

You have options.  Think small in order to think big.  Embrace your inner diamond monger.  Keep your supply chain tight and know your stuff.  Anybody that sells you a carp in place of a halibut should be eliminated from your supply chain.  Enjoy the current climate where people who have money want the good stuff.  Give it to them; or else your competition will.

Black and White

I had a great visit with two young gentlemen in the retail jewellery trade this week.  Both work in high-end stores, and both are concerned about the pesky competition we face from on-line diamond sales. 

Both Andrew and Matt have been in the industry long enough to have seen the client you dread.  The one who already bought the diamond or the ring on-line and now wants you to set their diamond or make a matching wedding band.  Once that ship has sailed, you can try to earn their long-term business, but there’s always that “burr in your craw” about the bigger sale that you didn’t get.

The answer to this problem does not lie in what you do with this customer now, but how to keep them from buying online in the first place.  It’s not necessarily the younger generation buying on-line; rather it’s just a whole new paradigm that has taken hold of modern individuals of all ages.

The new paradigm is all about Freedom of Information.  Don’t forget that most people have come through your store before deciding to buy on-line.  You had your chance, and blew it.  They felt that they might be missing out on something after leaving your store.

At one time, we elected officials and trusted that they would act earnestly on our behalf.  At one time, you’d visit a doctor and hang on his or her every word.  At one time, you would seek council from a sage car salesman for explanations of features and benefits of the car brands you were loyal to.

In today’s paradigm, we exercise our right to Freedom of Information.  It’s all there at our fingertips: the Kelly Blue Book (used car values), patient ratings of doctors, online medical self-diagnostic tools, parliamentary meeting minutes, Wiki-lieaks, and all kinds of consumer information websites.   These give your clients just enough information to be dangerous.

One way to combat this new paradigm is to fight fire with fire!  Almost 20 years ago now, we decided to increase our repair prices.  It felt risky because a sizing had been $12 for so long, and jumping it to $20 seemed drastic.  What did I do?  I took a really nice binder, and printed on fancy paper a shiny new repair price list.  When a client asked how much for 4 tips and a new half-shank, I just opened up the binder, ran my finger down the page and read-off the prices.  It was right there in black and white.  I didn’t REALLY have to look it up; I knew what exactly what the pricing was.  But, we never had a challenge to our newly raised pricing because it was in BLACK AND WHITE.

Consumers are mistaking information on the internet as accurate; even though only some of it is.  If you're open and concise with your information; show a good selection of diamonds and jewellery; and they can see, touch and feel your jewellery, how can you miss?

Suggested content for your very own information binder:

• ·      Repair price list
• ·      Diamond price lists with retail pricing
• ·      Four C’s (I suggest you write your own with an emphasis on the rarity of higher quality and size levels)
• ·      Gold and platinum information; including alloy content, nickel allergies and rhodium plating
• ·      Jewellery care and maintenance
• ·      Warranty policy
• ·      Return / exchange policy

Again, even if you know all of this information by heart, reciting it with the open page in front of you will add weight to your assertions.  If you do this well, they might even come to trust you more than the internet.

Carpe Diamond

Okay, I admit it… I sat and watched the Home Shopping Channel for about 20 minutes last night in my “not so fancy but clean, cheap motel room” in Farflung, Saskatchewan.  Now to be fair, I turned there when I saw the listing show “Ammolite”.  Some of you know that “Korite Ken” is my cousin, so I just wanted to watch long enough to have something to bug him about.  The thing I found interesting is that everything they were selling was in silver.  I’m sure they still sell gold, but like all of us, they’re trying to keep price points down to reasonable levels.

Here’s the thing about price points.  Trying to chase them down the scale is what Wallmart does.  Wallmarts’ suppliers have a price-point and a look in mind.  In order to make those two factors happen, they make jewellery cheaper, thinner and with lower and lower quality gemstones in order to fit the price-point.  I’m not equating Korite’s product with Wallmart at all.  I’m simply saying that jewellery is and should be more expensive today than it was 10 years ago.  Vive la difference.

All of this talk about making 6kt and 8kt gold, the silver bead phenomenon, stainless steel, titanium and other alternative metals reflects irrational fear.  What if home-builders decided to make houses out of cardboard in order to keep price points the same as they were 10 years ago?  What if Detroit, Japan and Korea decided to start making cars without airbags, without ABS brakes and with Firestone tires? 

Homes are being built to a higher standard than ever.  Cars have more features than ever.  They’re fetching higher prices than ever.  More money is being spent than ever, so why are we reducing features?

Some aren’t.  We have retailers selling more caraters than ever, more 2ct diamonds than ever and more one-off pieces than ever.  This is the time to not only carpe diem, but it’s time to carpe diamond!  Seize the diamond!

Social Networking

Social Media is a new buzzword for our industry.  Everyone wants to be on-board, but few are familiar with “how”; let alone “why”.  I’ve spoken with many jewellers who feel like they’re going to miss-out on something big unless they are involved in “social media.”

I’m starting to use Facebook more, and I now tweet.  I have this blog and have published another one for a mission trip to Haiti.  With such limited experience, I can’t tell you what to do to make your business a success with the use of social media, but I can tell you that if you’ve ever been involved in “direct marketing”, you’re already a step ahead.

When I was in retail, I had a small 10^th floor operation in Edmonton.  I spent months gathering old job-bags and receipts to compile a mailing list because I believed it important to prospect from people who have already given you money.  I wrote, photo-copied and stuffed envelopes to get my “GemNotes” newsletter into the hands of friendly faces.  This was “targeted direct mail” using free information to earn loyalty.  When fax-mail became popular, I was on the road with Customgold and used that to distribute “road reflections newsletter.”  Now that email is available, I’ve used email to notify my targeted audience that they can “click-through” to the latest edition of my “Road Reflections Blog”.

The progression from direct mail, to fax-mail to email is all the same thing.  It’s all DIRECT MARKETING.  It’s getting a tailored message to targeted group of people.  The only difference is that we’ve gone from postage stamps to fax machine, to computers for our method of distribution.  Each step makes direct marketing cheaper and easier to do.

Here’s where the rubber meets the chicken --- due to technological advances, direct marketing is becoming easier and cheaper, so everyone can and is doing it.  If everyone can do it cheaply and easily you’ve got more and more competition.  Facebook, Twitter, LinkedIn, etc. are making it possible for little Becky’s “I’ve got a cold (frowny face)” to push your marketing down into the cyber-basement.  It takes no thought and almost no work to post a message on social networking.

How do you stand-out?  Ask Robert Collier.  He wrote the seminal work on direct marketing, “The Robert Collier Letter Book” in the 1930s.  The late Mr. Collier focuses on amazing headlines and convincing copy to spur consumers to spending.

Direct marketing actually takes three primary elements; a good headline, a compelling message and a great inner reality.  If you don’t have good headlines (the ad for the ad,) then nobody will read what you have to say. 

If your message doesn’t compel people to action, then you are wasting your time.  I’m not saying that they have to storm-on down and buy a 2ct diamond because you Tweeted them into it.  I’m saying in the immortal words of David Ogilvy, “the heart and soul of advertising is a BIG PROMISE.”  You’ve got to have a message that either brings people into your store now, or endears them to patronizing you in the future.  They have to be convinced that you have an offer that will not only be good value, but add value to their lives.  In order to draw people in, you need to promise the fulfillment of their need for love, acceptance, prestige, self-fulfillment or any other your targets’ hot-button “needs.”

Oh, and by the way, if you don’t back-up your boasts with a great reality, you’ll only sell them once if at all.  If you believe as P.T. Barnum did that “there’s a sucker born every minute,” you’ll suffer the downside of social networking.  In a recent discussion about the issue with Dick Jewell of Mitchell & Jewell in Red Deer, he pointed out the dark-side of social networking.  If someone has a beef against you, social networking can rapidly accelerate bad publicity.

If you want excel at social networking, study the masters of direct marketing.  Understand that the easiest most automated ways of direct marketing by far have the lowest response rates.  If you really want to make money from social networking, maybe try a hand-written letter in a hand-addressed snail-mail envelope. 

Your comments.......

The Fall Season Begins with a Bang

Over the past few weeks, I’ve been to Toronto for the CJG buying show, the Western Canadian Jewellery Expo in Edmonton, and begun my rounds through Western Canada.  So far, so good.  Businesses are reporting acceptable to good sales, and with few exceptions retailers are repeating on fast-sellers and adding a few new designs to replace slower sellers.

While you’d like to hear that we’re in for an amazingly prosperous Fall season, I can’t in good conscience promote that idea.  Since Summer 2008 retail has declined and then leveled-off.  Yes Virginia, there was a recession.  This is not news to most of you.  Customgold however is doing more business than ever in 2011.  Why?  Because the boom years helped remind consumers who have always had money and who continue to have expendable cash that good jewellery is a pleasure to own.

When I began with Customgold in the Spring of 2001, we were trying to find ways to make $1,000 engagement rings because the market was so incredibly tight.  When times are extremely tough, conspicuous consumption becomes unfashionable to those who have the means.  Take a look at the number of newer Mercedes, BMWs, Lexus, Mustang GTs, Camaros and high-end motorcycles on the road.  Those who “have” are feeling good about the freedom to enjoy their wealth. 

Western Canadians who have money aren’t holding back on spreading around their wealth.  This trend has held strong since 2007 – 2008.  Many businesspersons have become wealthier because of the recession, as it gave them the excuse they needed to cut-out the fat from their operations and get costs under control.  The oil and gas sector couldn’t continue to pay the prices they were paying for labor and contractors, but the wells still need to be dug, the upgraders still need to be built and the bitumen still needs to be processed.  As I’ve quoted before from Gordon Pitts book Stampede, “oil companies are more interested in the price of oil 20 year from now.”  A two or three year delay in these expenditures isn’t a big deal to the oil companies who have 10, 20 and 50 year plans.

Those in our society who have seen a real decline in their income and have lost real jobs are getting their jewellery in $50 hits now thanks to those famous bead-lines.  Sterling silver is emerging to replace some of the lower price points abandoned by soaring gold prices.

Look forward to a Fall where your best customers have permission from society to treat themselves to the good-stuff.  CG sales in the West are up 17% over 2010 so far, primarily on the strength of reordered fast-sellers.  We’re not just eye-candy for your feature window; we’ve got designs that are proven to build you a healthy bottom line.  I look forward to seeing many of you very soon.

Post your comments below.  Do you agree that higher-end consumers are still spending???

Affluent Consumers

The following appeared in JCK Online today.  Please give it a quick read, and then I have a few reflections...

More Affluent Consumers Shopping at Discounters

By JCK Staff

Posted on June 20, 2011

A survey released by Unity Marketing June 20 showed wealthy consumers were more likely to shop at discounters like Target than at high-end department stores.

According to the survey, more ultra-affluent shoppers, defined as those with incomes of $250,000 and above, said they shopped at Target (39.5 percent), Macy’s (34 percent), and J.C. Penney (22.4 percent), than said they shopped at Neiman Marcus (20.1 percent) or Bloomingdales (19.4 percent). 

Affluent shoppers “are just as eager as shoppers with less disposable income to find good quality at reasonable prices,” said a Unity Marketing statement. “That’s why they shop at discounters like Target, Kohl’s, Costco and Wal-Mart, just like everybody else.”

Unity Marketing president Pam Danziger, said luxury shoppers have embraced a new “value orientation.”

Luxury products today must “deliver a meaningful return as measured in greater pleasure, comfort, superior performance, and longevity of wear and use,” Danziger said. “If the product doesn't measure up, [affluent consumers] won't spend the money; rather they will trade down to a cheaper, yet acceptable alternative.”

Danziger said high-end stores like Neiman Marcus have to understand that discounters are increasingly becoming their competitors.

“With Apple's retail innovator Ron Johnson joining J.C. Penney as CEO later this year, I expect to see exciting changes emerging from Penney's, particularly in the area of the customer's shopping experience,” she added.

This is an important sign of the times. Many retailers I know are focusing on "branding" their store either via the lines they carry; or how they advertise. What is branding? It's what you do to achieve the "X-factor" that makes you the cool place to buy jewellery from.

In mathematical equations "X" is an unknown, and mathematicians do complex work to "solve for X." Jewellers are doing complex work to "solve for X" in the problem what will make consumers choose me over my competitors. While many believe that X = prestige, the JCK article is suggesting that X = the perception of a good deal. Is X a constant or a variable?

The answer is this:

"X" is not a single thing that will trigger a viral response to your products and services; rather it's a number of things done consistently well that make your target audience conclude that "I'd have to be a complete moron to buy from anyone else, no matter what the price."  The value question is not a matter of a discounted price.

Value is the feeling that a person gets from weighing all of the factors and making their best possible decision.  Price is only one small factor for most consumers.  Just because the JCK article says that affluent shoppers are looking for discounts, don't think that price is the only way to earn their business.  

Value is justified and proven through salesmanship.  If you can help your client to answer all of the questions they have about a purchase and identify the key factors that they equate with value, then you're on your way to making the sale.  If you know anything about your product or your competitors product and believe that discounting is the best way to make people buy, then in the words of Donald Trump, "your fired."

If you're building a brand around an amazing client experience and you're increasing your product knowledge and salesmanship, then don't even give this dumb article a second thought.  Keep on that track.

If you want a glorious future in this industry there are two more things you need to do.  One is to focus your current energy on product that has a future.  In other words, enjoy the popularity of current trends, but unless they'll see you retired in a year, you'd better think about how you'll be selling diamond and gold jewellery 5, 10 and 20 years from now.  

The second is to learn how to be relevant to a new breed of consumer who think about material goods differently and who have completely new ways to shop for them.  Keep your eyes on Road Reflections Blog to learn more about these two aspects that are critical to your future.