The Diamond Alternative

Cubic zirconia, unlike some of its predecessors in the lookalike game, has now been around for almost three decades. Despite some bumpy times, it has continued to grow in popularity. That kind of staying power can provide insights that can be applied to a jeweler’s business.

We recently had the opportunity to speak with a number of mass merchants around the country about their CZ business. While all their businesses were different, some telling parallels emerged that indicate a maturing and strengthening product.

CZ jewelry is becoming a real category. At the outset, CZ was used almost entirely to put on an unreal show – big stones set in cheap mountings – all aimed at producing a lot of “flash.” There was little pretense that it was a diamond or that it replaced the real thing. The last great experiment in “flash” was the pink CZ boom and crash, which highlighted the truly faddish nature of this kind of product. Nevertheless, CZ not only survived its trashy beginnings, but has come on stronger than ever.

Certainly, there are plenty of these goods still around in the bridge and costume jewelry departments of many department stores. But a real place has been found for the most important CZ category – knockoffs of generic diamond pieces. Stud earrings top the list, followed closely by the diamond solitaire and the tennis bracelet. For some companies, those items are the sum total of their CZ business. It’s also a more profitable business than most other categories, and they are not about to give it up.

Over the years, the cost of CZ has dropped precipitously as production increased. But the lower price did not necessarily enhance the “big flash” thinking. Rather, there was a shift toward real diamond-like pieces, beginning in earnest about five years ago.

Jewelry manufacturers may have been an early, though perhaps unwitting, promoter of this trend. Some began to mount their lines with CZ for security and cost reasons. The difference between these pieces and those mounted with badly imperfect diamonds (at higher prices) was probably not lost on some buyers.

The biggest push today, by a number of mass merchants, is to obtain the same jewelry quality and proportions found in real diamond pieces.

In this regard, many retailers are far ahead of suppliers. One buyer laughed about the difficulties he has in getting manufacturers of CZ jewelry to understand the concept of a real lookalike, a stone that could pass for the real thing. “They still want to put in a 5-ct. stone that is so large that everyone would know it’s a fake. I have to tell them, ‘No, I want it to look real.’”

Another buyer spends a good deal of time going through diamond lines to find product for CZ merchandising. An example of how far it has gone can be seen at Sears, which introduced a CZ bridal set line in 1995. The line has sold well.

Divergent demographics

A good sampling of retailers revealed a commonality in how they view their customers. Three general types can be defined:

  • Diamond Seeker. This customer wants diamonds but cannot afford the real thing, at least not in satisfying qualities or sizes. So the customer projects the CZ into that role, as the “perfect alternative to diamond.” This is not the affluent customer, but one who is relatively less quality-conscious.

  • Image Seeker. This customer is confident in her self-image and sees the CZ as an inexpensive way to augment, replace or expand a diamond wardrobe. The public often assumes CZ is really diamond when they see someone wear it, and that’s the desired effect. One buyer related an experience with a female coworker who held a top management position. Given the choice between a $5,000 diamond bracelet or a good $500 CZ copy, she chose CZ. The purchaser believes her position and image in the community is strong enough for people to presume the piece is real. The other $4,500 went into a mutual fund. There also are security motivations at work here – as in the use of CZ jewelry as “vacation jewelry.” This customer is often affluent and does seek quality jewelry products that are equal to well-made diamond jewelry. In other words, good “lookalikes.”

  • Fun Seeker. This customer wants show, diversity and low price. This buyer looks at CZ as nearly disposable and changeable with the latest fad. Pink CZ is an example of the power of this kind of merchandising, and the risks. This buyer most often shops in the bridge and costume departments and accounts for the largest percentage of CZ sales, in units, though somewhat less in total retail dollars.

These consumers are all evolutionary extensions of the early days of CZ. The days of ostentatious trashy looks in cheaply made jewelry are quickly fading, left for the base metal and paste counters. CZ has maintained some of that position, but also has moved strongly upstream.

Diamond crossovers

The parallel with diamonds is sometimes strikingly evident right in the showcase. In one store, the CZ tennis bracelets and the diamond tennis bracelets were shown together. The salespeople showed both and allowed the customer to decide whether to buy “diamond” or “show.”

On first look, one has to wonder how this makes sense. The rationale is one all jewelers need to consider. Mass marketers do not take a nostalgic view of any product. They work in hard demographic facts and merchandise their showcases accordingly. One important fact is that more than half the nation’s work force is female. Many jewelers today say they want to keep women out of the engagement ring buying decision. Why?

Because women earning their way tend to be more practical in how they spend their money. Men tend to want to project status and image. The typical CZ customer is a woman making a self-purchase.

Tough seasons, tough reasons

These kinds of decisions go right at the middle market, exactly where retail sales in the past couple of years have been the toughest. Customers who have been able to buy at the luxury level are not involved here, and this holds for the lowest income brackets as well. But the customers in the middle market, what we used to call the middle-income class, are making these buying decisions and reevaluating priorities.

We should not presume this situation is temporary, a result of job insecurities, tuition and retirement worries, and long-term wage stagnation. What we’re seeing is a basic change in the underlying motivation of a significant part of the population. Not that jewelry has lost its appeal. The desire to possess precious adornment, if anything, has grown dramatically in the past 30 years. But Baby Boomers, single parents and demoted executives are redefining the line between affordable jewelry and psychic gratification, and between diamonds and CZ.

No retailers, other than QVC and the Home Shopping Network, say CZ claims more than 10%-15% of their overall jewelry business in dollars. QVC and HSN, interestingly enough, have done hundreds of millions of dollars in CZ business in general jewelry, not just the generic goods that mass merchants emphasize. This points to the viability of the product. A number of large chains, some of which barely stocked CZ a couple of years ago, now have full merchandise plans for it.

The millennium is coming The public has not cast all its votes yet.

We are clearly in a transitional period of the Consumer Age. Some pundits have already declared the consumer is fading as the engine of our economy – currently consumers account for two-thirds of our gross domestic product. Still, gold and gems represent a great storehouse of value to the public on other continents, despite gold’s failure to keep up with inflation by a wide margin.

But in this country, that attribute is fading fast. Here, the motivation may be based on a desire for adornment, ostentation and displays of wealth, achievement, power and more, but not transportable wealth in case of political upheaval. This may explain why a female executive bought a $500 CZ bracelet. It would have been too financially painful to buy a diamond piece that suited her self-image and position. “Storehouse of value” was not in the calculations.

Jewelers have tiptoed around this fact for years. When gold and diamond prices skyrocketed, many refused to downgrade their diamond standards to maintain reachable price points. Others downgraded, only to find themselves facing big chains selling on short markup and possessing tremendous buying clout. While many alternate retail channels also began to sell CZ, jewelers steadfastly refused to cross that line.

To paraphrase an old expression, jewelers were saying “Carry CZ? Sure, come the millennium!” Meaning, “Maybe in a thousand years.” Well, the millennium is arriving, and with it is coming not just more CZ, but treated and synthetic stones of every color and variety. What the public will do and how jewelers will satisfy and keep more of those high-income customers is an unanswerable question.

Nobody would suggest that CZ is a replacement for diamonds – the majority of customers will continue to want the diamond label. We should not forget, however, about the millions of units of CZ jewelry sold each year or the message those customers are sending. Department stores and catalog retailers have been selling the two products for years without confusing the customer. Service Merchandise, for example, has been one of the country’s biggest diamond retailers. But four valuable pages in the company’s catalog are devoted to CZ jewelry.

Retailing is changing fast, so adaptability is a major asset. CZ has already outgrown its trashy reputation for many major chains. Savvy jewelers will keep a sharp eye on where it goes from here.