Stephen Lussier, CEO of Forevermark, spoke to JCK on May 29 after his brand’s breakfast in Las Vegas for a wide-ranging conversation that touched on not just his product but larger challenges the industry faces. Here he speaks about why retailers are stuck with declining diamond margins, whether future generations will still want fine jewelry, and what the industry can learn from Coke and Pepsi.
JCK: Who do you see as the biggest competing brand to Forevermark?
Stephen Lussier: This will sound rather arrogant, but that is not something that we have given a lot of thought to. We expect and understand that retailers will do multiple brands. But as far as differentiating Forevermark, I don’t think brands are competing. We have a bigger competitive challenge, and that is to grow the market share for diamonds as a branded product. Brands will sustain the category. We are much more interested in brands taking share from commoditized [diamonds] than in taking share from other brands, all of which contribute to the health of the industry. If there is one really marked change we are seeing [in our consumer surveys], it is the percentage of engagement rings that women are claiming to be branded….
For us it’s not a market-share game. The biggest competitor is someone selling at no margin. That is unsustainable in the long term.
JCK: What can the industry do about the issue of declining margins?
Lussier: The industry has made a lot of mistakes that have gotten them in the position they are in now. The biggest mistake is the independent jeweler misunderstood the difference between a certificate and a brand and they are building their images around the image of a GIA certificate. A GIA certificate is not a brand. It doesn’t make a judgment on the diamond. It doesn’t control its distribution. That has lead to companies like Blue Nile that have been able to use that name of GIA. That is where the independents have let their margins go. Our message is that we don’t have to accept this reality as something preordained. There is an opportunity to shape the business, and if we do that, there is a bright future for selling diamonds.
JCK: Speaking of margins, Forevermark has what is considered a 2 to 3 percent premium in the United States. Do you expect that to continue?
Lussier: Globally, the premium is higher on average. We will find it this year to be higher than that. I know retailers are cautious about talking about premiums. In China, we get premiums of 10 to 15 percent. I think there is every likelihood we will end up in that ballpark.
JCK: Many members of the millennial generation have never seen a De Beers ad. Do they have the same desire for diamonds previous generations did?
Lussier: There are signs both ways. We must be very careful not to take [their demand] for granted. That would be a dreadful mistake.
We are seeing the whole bridal area as being extraordinarily strong. Consumers continue to buy diamonds around bridal. So the core tradition remains strong. Acquisition among single women remains very strong.
We also know that it is not really diamonds but fine jewelry that is under stress. The experiential category is improving its competitive position. We are under challenge in a way we haven’t been before. If we keep doing the same thing, we will be in trouble.
What makes us feel positive is that while there are challenges from new competitors and indicators that fine jewelry is slipping down the list, the diamond still remains the king of the gems.
If there is a call, it’s where are the Kays and Jareds and other people with the potential to shape that diamond dream. They have the responsibility as well. Are their messages going to sustain it?
JCK: Can you elaborate on what you see Kay and Jared not doing?
Lussier: I am not picking on them. It’s just that they have the resources. There are only three big advertisers in the industry: Forevermark, the Sterling-Zale group, and I guess Tiffany. It’s been expected that De Beers will look after the diamond dream. That is atypical of how most businesses work. If you look at beverages, you have Coke and you have Pepsi, and they market in such a way that gets their message out but also inspires people into the category.
De Beers is doing its part with Forevermark. But us alone is not going to be enough. We have to sustain the long-term category as well as differentiate ourselves from the guy next door. That will be the challenge to all of us. How do we make sure that we compete in a diamond-product-enhancing way?
JCK: The latest Forevermark campaign is built around the diamond, rather than a product idea like Center of My Universe. Do you see that continuing?
Lussier: It doesn’t mean we won’t continue to develop product ideas like Center of My Universe. The key to long-term sustainable brand advertising is an emotional attachment to a brand. You can copy brands and different things that rationally differentiate, but you can’t copy the emotional attachment. This is about really cementing with consumers what a Forevermark diamond is. We will use new product initiatives, but we want to make sure we have that emotional attachment.
JCK: Your new campaign is built around the idea of a “promise.” How did that come about?
Lussier: It came from our consumer research. We were just talking about diamonds to consumers and what they mean to them and trying to understand how that landscape has changed. And “promise” was something that emanated from the consumer side. And with our concept of the Forevermark promise, it was like a bridge between the rational and emotional. If you are making a serious promise, one that you intend to keep, that justifies in the consumer mind that you buy a product with its own promise. It is a way to reinforce the core values of the diamond dream, which is a broader De Beers goal for the Forevermark.