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Reflecting the nature of the industry, US jewellery market is significantly seasonal with great ‘ebb and flow’ in demand, opines Vin Lee

27 august 2018

vin_lee_aa.jpgVin Lee, CEO of Beverly Hills-based Grand Metropolitan, a privately-held luxury goods holding company had migrated from Canada as a child. And one can see that it did not take him long to ascend the US luxury world, establishing himself as a formidable businessman today.

Besides his businesses, he monitors his companies' participation in charity auctions, celebrity events, and red-carpet functions. Constantly on the move, he spends his time in South Florida and Southern California.

In an interview with Rough & Polished, Vin Lee offers his views on the US jewellery market, synthetic diamonds, etc., very candidly… straight from the heart.

Some excerpts:

Please brief us on the new development in your Group in terms of business initiatives, changes, expansion, etc., during the past one year. Do you have any new plans for 2019?

Grand Metropolitan is one of the leading luxury goods conglomerates in the world. Founded in Beverly Hills, CA, the holding company operates about 130 brands across 7 industry segments. Our largest division is Finlay Enterprises that owns and manages about 20 of the TOP 50 jewelry retail brands in North America for the last century.

My goal over the last 30 years was to establish us as a prominent force in the world diamond and jewelry industries. I was in Moscow during the G20 and the IPO for ALROSA, with the intent of securing a relationship with Finlay Fine Jewelry Group and a new branded Russian sourced diamond. We equivocate it to the eminence the French cognac, Cuban cigar, or Italian sports car. Unfortunately, the current state of the global political environment has tarnished the opportunity to successfully promote and market Russian products in North America.

Today, in the light of the massive fissure created by the $2 billion demise of Nirav Modi’s jewelry operation, we will be aggressively entering the Asian and Indian markets. Unlike the past investments where we purchased operations or brands from organizations through the bankruptcy process, we will be proceeding with a fresh branding initiative. It is vital for Finlay Fine Jewelers to participate in a strengthening of the integrity of the industry that has been so terribly damaged over many years. We believe we can assist in restoring honor and trust between the communities and the diamond industry.

How did the jewellery market in the US fare in the last few months? Ups and downs were reported on the demand side for diamond jewelry in particular. What's the status of the current jewellery market in the US?

The first quarter of 2018 was focused on collections from a prosperous holiday season. The second quarter is historical slower for us as the market doesn’t participate in events with high priced ticket items. That really is the nature of our industry as a whole. It is significantly seasonal with great ebb and flow in demand, especially with loose goods, where brokerages attempt to hedge. This practice makes pricing volatile which also damages relations with consumers who often price shop through all of these types of stormy events. As a result, you have seen the market pull away from diamonds and lean towards precious and semi-precious as the perception of value is stronger from those product lines. This is obviously a boon for the producers of those traditional “birthstone” products during this term.

Of course, these circumstances are specifically attributable to opposite ends of the buying market, while the middle tends to be fairly consistent. An additional spike has been found in legacy or heritage pieces during this time. The nostalgia has added value for customers especially if there is a story/history attached to the ring. While this is a niche for the overall market, the metrics are often more attractive on the retail side as the cost of goods tends to be virtually nonexistent.

I started out as a jeweler almost 30 years ago. As we have grown, our focus has been on diversity as the diamond/jewelry market seems to be losing its lustre. More than 40% of our luxury operation is now non-jewelry related. I don’t believe it is simply in the North American market either. Culturally there has been a loss of messaging and romance across the diamond industry. This isn’t really news to the leaders around the world.

US's business/price war with China has the world agog and interested in the final outcome. Will the diamond and jewellery sector be drastically hit as well? What're your views?

Honestly, I do not see how there is a direct correlation between these international dramas and the customers' passion for diamonds. In the true world of luxury, these type of macroeconomic influences really just drive up pricing and therefore create “demand” or more so “desire” within the consumer. It is easy to believe that in certain industries, higher pricing created by natural disasters, tariffs, or competition destroys market share from the middle of the market. In luxury, those factors create a vacuum where participants in those goods and services are willing to pay more and in fact purchase more. We are currently experiencing that in the world lobster markets. Prices are being driven up and demand is chasing it.

Certainly, my credentials do not have economist anywhere in them, I can simply speak to what I see in North America and my company specifically. We do not have any manufacturing or retailing in China currently, so directly there doesn’t seem to be an impact. One may take a sophisticated point of view that an increase in tariffs for other industries, could pass increased costs through to the jewelry consumer limiting discretionary income and therefore have an adverse effect. In my opinion, though, that is just a little too much Butterfly Effect.

With De Beers planning to launch its synthetic diamond 'Lightbox Jewelry' in US this September, will the natural diamond jewelry sales be affected negatively, especially the entry level diamond jewelry?

Let me ask you a question as an answer. If I told you that after decades of fighting counterfeiters all over the world, Rolex SA has decided to manufacture cheap timepieces in Asia factories and market them globally under the Rolex banner? What kind of effect would that have on the watch industry? Or, maybe just the brand itself? I am fascinated that the world leader and most preeminent brand in the diamond world in history would dive to below the most entry-level market segment.

I have no reason to believe that a synthetic diamond has any more value than a cubic zirconia. I cannot imagine how someone would go home to their loved one and present a gift from this collection without having to add a disclaimer along with it. How do those conversations go over? I bought you a “synthetic” diamond but not a “fake” one? I love you more than a CZ, just not enough for a diamond?

The tobacco industry was faced with this type of dilemma during the last few decades. Cigarettes / Cigars versus Vape, SNUS, and others. A shrinking share of a shrinking market, wrought with political and ethical issues, being flooded with undermining alternatives. “If you can’t beat ‘em, join ‘em.” doesn’t work in luxury.

Finlay Fine Jewelers have had the opportunity over many decades to retail products of this nature. In fact, I met with Gemesis (now Pure Grown Diamonds) about their lab-grown diamonds in the late 1990s at the Long Boat Key Country Club. It was an absurd waste of time then and just as impossible of a sell today. If you want to know what is going to happen with this initiative, you should ask people at Charles & Colvard who have been trying to get moissanite into the hearts and minds of consumers since the mid-90s. The Chatham Stone has been around for decades as THE lab created emerald. John Slocum, from my old neighborhood in Michigan, never made the Forbes list with his opalite.

In your opinion, how effective are the Ad Campaigns by DPA? Any suggestions to add more 'zing' to the campaigns, to attract the millennials in particular?

I really am not in a position to critique the hard-working folks at the Diamond Producers Association. They represent massive global interests that are perhaps focused in another direction than Grand Metropolitan. As CEO of one of the leading PR boutique firms on the West Coast representing most of the major tech and entertainment companies of the last half-century including being the first agency that Bill Gates hired for Microsoft, we know a little bit about marketing. Diamonds are the epitome of aspirational lifestyle choices. There is a language to luxury that not everyone speaks or understands. It is drastically different than mass retail. The space we occupy is fine jewelry and haute couture, red carpets and celebrity events. This is not the same market as Target and Walmart, who incidentally sell far more diamond jewelry than we ever could.

My company doesn’t depend on the DPA's marketing efforts to keep the lights on. We have to focus on our clients’ needs and the relationships we have built with literally tens of millions of them over decades. One generation at a time. It is very difficult to market to one generation while consistently selling to another.

Today it is more intimate and engaging than it was when DeBeers championed the industry with “A Diamond is Forever”. Social media interaction is about the subtle consistent layering of messages and building report and trust not only with the product but also the retailer. You must create a desire for your product, and exclusivity to the experience of earning and attaining a diamond. Because most of those customers are not buying today but perhaps in 10 and 30 years.

We are in a lot of varied luxury businesses, leading in most. Demographics are less age driven than they are socioeconomic. You cannot identify a market segment, like millennials, and throw mountains of money at ads in an attempt to speak to all of them at once to buy buy buy. I have found that you can’t “sell” millennials or really any other group in luxury. They do not spend their money in the same fashion as previous generations. And “they” are not to be lumped together under a group of marketing checkpoints. They are a collective of individual, independent thinkers, who are all special and unique. Just ask them. I don’t believe in “Diamonds are For Everyone”. They should be presented as individual works of art, created for just that special someone. That’s what makes them rare in the first place.

I could go on and on about this all day, but that is, in fact, the special sauce my agency provides to Grand Metropolitan’s portfolio of brands. I will tell you this much. If you hope to be successful with millennials, or any other group, no matter how clever your camera angles and dialogue, it is ill-advised to have broken links all over your website.

Aruna Gaitonde, Editor in Chief of the Asian Bureau, Rough & Polished