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16 january 2023
vin_lee_xxz.pngVin Lee, the self-made billionaire CEO of Grand Metropolitan of USA, is popular as the 'King of Luxury'. The Beverly Hills family office 'Grand Metropolitan' is a $7 billion AUM privately held luxury goods holding company with a 60-brand portfolio.

The Group specializes in distressed debt assets of luxury brands. Finlay Fine Jewelers is one of the largest private jeweler groups in North America. Heilig-Meyers is also one of the largest private furniture retailers in the United States.

Grand Metropolitan also owns Pushkin Caviar, Gallery Rodeo, The Beverly Hills Cigar Club, and Beverly Hills Sports Car; participates in charity auctions, celebrity events, and red-carpet functions including the Cannes Film Festival, Oscars, Grammys, Emmys, and Independent Spirit Awards, and many more.

Vin Lee spends his time between the Gulf Coast, Florida & Southern California.

In this exclusive interview with Rough&Polished, Vin Lee, who is known to call a spade a spade, mirrors the US jewellery market as it is at present ...

Some excerpts ...

USA's Jewelry trade reportedly decreased by 5.4% in the USA during the holiday season. Is this a norm every year or is it due to the current apprehension of inflation/recession showing up in the coming days? Your views?

A significant contributor to this dip is that while investors are pulling capital out of the markets around the world, they are fleeing to more traditional safe havens like commodities. Gold is climbing towards $2,000 driving costs up for the trade. The introduction and push of LGDs could be identified as a contributor to the drop in overall revenue as consumers are testing a vastly less-expensive alternative to natural diamonds. We are in a unique time.

Jewelry companies have been closing down in the US in recent times too. Has the situation stabilised as of today? What is the situation right now and how do you see things reacting, going forward?

Over the last decade, most of the Top 25 US speciality jewelry retailer chains have filed for bankruptcy protection. It is very difficult the more you go upmarket, the more seasonal revenue becomes for jewelers with inventory carrying costs climbing. We were fortunate during those periods to acquire the majority of these brands, adapting them to the new economy by moving them to our digital platform. This strategy has been emulated by Signet (Kays, Zales) with over a $1 billion investment in a handful of websites. They have done a phenomenal job of deploying resources to the digital customer experience while shuttering over 400 locations. These closures created a glut, especially in US malls. That is being back-filled by smaller more entrepreneurial jewelers but it is a slow progression. Developers no longer have access to cheap money.

The US is the largest importer of gems and jewelry from India, and the country's exports could be impacted in both loose diamonds as well as jewelry. Any suggestions from you to the Indian exporters?

I believe that if India wants to increase its share of the US gold and diamond markets it needs to educate the American consumer on the points of differentiation of its offering whether digital or brick & mortar. There needs to be a distinction for why these assets are advantageous besides just price or availability. Put some resources into relationships with retailers as well as a media campaign. DeBeers was famous for this in the 80s and 90s.

How are your group companies faring and what steps are being taken in these challenging times in the US? Please give a clear picture as the current media reports of the US market are rather contradictory.

As CEO, it's my job to push an ever-positive narrative of our portfolio companies so it's difficult to not sugarcoat things. My family is the only shareholder, so we have taken a long-term position in each market segment. But I do appreciate the opportunity to discuss our positions briefly. During the pandemic, we saw a significant drop in revenue as everyone was instructed to stay home. Initially, it was to be only an 11-day shutdown which would not significantly impact sales during that time of year.

As the preeminent American luxury retail group, Grand Metropolitan saw an over decrease in asset value of about 50% in the first year counterbalanced in the second year by the addition of Bailey Banks & Biddle Jewelers and Scott Shuptrine Interiors. Even with our market share improving we are still off 30% this last year mostly in home furnishings as competitors dump inventories. Meanwhile, our newest company ARENA is expecting to add $2 billion to our portfolio in 2023.

Caviar, cigars, and sports cars are all seeing substantial growth especially due to all of those crypto-millionaires popping up. Some of it is timing as tobacco and other consumer perishables (fisheries) are often 10-year investments. As credit vehicles are so readily available to American consumers, especially for millennials market conditions are slower to impact luxury goods purveyors. In addition, the "side hustle" has become a force majeure on the global landscape converting likes/clicks to real spending power.

Lab grown diamonds (LGDs)and jewelry is reportedly doing well in the US, with higher demand compared to naturally mined diamonds and jewelry. Your opinion?

There is a place for synthetic stones in the market, it's just not retail fine jewelers. This is too confusing for consumers. When fake diamonds filter down into the secondary markets it's going to be devastating. They believe these are investment-grade assets. They are not. I still don't know how you tell your wife you spent $8,000 on a fake diamond.

Has your personal opinion about LGDs changed from earlier times? And do you intend to get into the business of LGDs and jewelry in the future? Your thoughts?

Abbreviating fake diamonds as LGD doesn't make them any cooler. This product is a serious source of contention for me that I have been up against since I bought my first jeweler more than 30 years ago. When DeBeers announced Lightbox, it shattered my respect for them. Since the pandemic, I have seen a thousand "LGD" companies spring up around the globe and not by revered and esteemed jewelers necessarily. Ask Slocum and Chatham (both of whom I was/am friendly with) how many billions they have made on their synthetic stones in the last 50 years. We will never offer fake diamonds to our clientele. It's tacky.

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