Last week, Charles & Colvard, the main source of moissanite, appointed Marvin Beasley its new CEO. He replaced Randy McCullough, who held the post for five years. Beasley, who has served on the Charles & Colvard board since 2009, is no stranger to the industry, having headed Berkshire Hathaway–owned Helzberg Diamonds from 2004 until his retirement in 2009.
Shortly after his appointment, he discussed his plans for the company with JCK:
JCK: You have been retired for a while. Is this an interim position?
Marvin Beasley: I wouldn’t have taken this if it was an interim thing. I don’t like those kind of things. I really don’t.
I don’t have a time frame for this. It will take a while to do what I want.
Obviously, at 71, I don’t think it’s going to last 20 years. Though my old friend [Berkshire Hathaway vice chairman] Charlie Munger keeps marching on at 91. But I don’t think there are many Charlie Mungers.
JCK: Is there anything you plan to do right away?
Beasley: When you land at a job, you try to have as few preconceived notions as possible. I have been on the job a couple of days and when you walk in the business you can be overwhelmed. There are lots of things to sort out.
Obviously, we need to improve our topline. We need to improve our gross margin. We need to improve our merchandise and marketing. I’m not saying it’s awful; Randy is a seasoned veteran. But sometimes a fresh set of eyes sees things that could be improved.
JCK: What are your goals?
Beasley: First, I want to see us produce profitable sales. We have an inventory issue. It is extraordinarily high. That has happened for a number of reasons, but it’s the case. We need to do something about that. By the end of the year, we will improve our inventory position. I do believe that.
Lulu Avenue is our home party concept. It’s hard to do, and I think that’s why it’s good for us to do. We have invested heavily into it. It’s a hockey-stick thing, and when it bounces, it bounces really strong. We have every intention of making it work.
That had a rough start, and we didn’t have the right human resources. Those things are fixed. We believe it could do substantial volume and be the cornerstone of our business.
JCK: I have heard complaints that the company is targeting too many people: consumers, mass merchants, independents, plus wholesalers.
Beasley: This is something I have asked a lot: How do we satisfy all these channels of distribution and make them work for us and make them work for our customers? Otherwise, everyone is stepping on everyone’s foot.…
Wholesalers—no matter if they are selling jewelry or pots and pans—are having a difficult time and are getting squeezed. A lot of folks are selling direct. We are trying to get to a point where people who really provide a service should make some money. If we are just selling to a wholesaler who is just cross-stocking and putting a markup on it and selling to a dot-com, that has got to go. It isn’t terribly efficient. We have begun that process.
JCK: There are also complaints that the price of moissanite was reduced too much.
Beasley: It’s always about what the customer is willing to pay. Salespeople always believe if you lower the price you sell a lot more. That is not always the case. We are trying to deal with all these channels of distribution and come up with the right margin.
JCK: You have said that many jewelers don’t want to carry the product, as they worry it will hurt their diamond sales.
Beasley: There has been reluctance on the part of the retail jeweler to carry this product. It’s a pretty good product. It looks really good. But they say: Why would we carry a $500 item in the place of a $5,000 item? It comes down to: Do I need moissanite in my assortment plan? Will it reduce my average ticket? We have not been able to break through that, and that is one reason we have been relying on the direct-to-consumer sales. If you can’t depend on the people in the middle, to some extent we will have to do it ourselves.
JCK: Will you still target jewelers?
Beasley: One of our objectives is to open a major brick-and-mortar account for the year. You can never stop doing that. Landing an account like that can change the dynamics of your business.
JCK: Could you ever open a retail store?
Beasley: Both Randy and I understood the difficulties of doing that. We would love to find a business partner who is an operator who can worry about the human resources problems and the rest. It would be a wonderful thing.
JCK: When you introduced Forever Brilliant, some said there was confusion about how to handle that and VG (“classic”) moissanite?
Beasley: I think anytime you discover something like this and put it into your merchandise mix there can be initial confusion on how to segment it and put it into the market. When I saw the stone, I thought it was one of the neatest things I have ever seen. I thought it was much better than the previous material. I’m not sure we made all the right decisions. We are getting pretty good yield, about 70 percent in Forever Brilliant, and 30 percent in VG. There’s nothing wrong with VG; it’s a pretty darn good product.
I can tell you this product has the potential of getting whiter and whiter with less color over time. It will soon look like the most incredible thing you have ever seen. The future looks very positive.
JCK: You have said that you plan to do more marketing. What form will that take?
Beasley: Randy hired a classically trained marketing person who has incredible experience. For me to comment would not be fair to her. I have a history of listening to the marketing folks. It is important to pay attention to the experts.
JCK: Will you be increasing your marketing spend?
Beasley: Awareness is definitely an issue. If we can reduce the inventory, and make our balance sheet look better and get our sales level up, we do plan to put money into marketing.
JCK: Your patent for moissanite expires this summer. What will that mean?
Beasley: Some pressure will come to bear this summer. We have already seen some product produced in China and possibly India. It looks like the product that [product supplier] Cree was producing in 1995. It’s of poor quality, included and very dark. That is where Cree started with it, and they have been doing this for 20 years. It’s a hard thing to do.
I am preparing for it. We take it seriously. That’s why I’m glad we have a brand name: Charles & Colvard genuine moissanite. We will continue to promote that. Being different is important.
We are ready for it. It will be an interesting experience, the next phase of our journey. It may not be a bad thing. It may raise awareness and lift all boats.
JCK: You live in Kansas City, Mo., and the company’s headquarters are in Morrisville, N.C. What will it be like to commute?
Beasley: I will be flying into Raleigh Monday and flying out on Fridays. A lot of people commute these days. You can get a lot of work done on an airplane. I told my team you can look for me being here every day. And I mean that. I have the energy for it and I have the passion for it. I don’t think that I will be a problem. My wife loves Kansas City; so do I. It would be a big move. It’s one step at a time. We will see.
JCK: Anything else you want the industry to know?
Beasley: We appreciate the five-plus years that Randy McCullough put in here. Frankly, he has been looking at Florida a long time. He has done a wonderful job; a lot of the things that he did have not come to the surface yet. They are investments. We thank him for that and thank him for his service to the company. He’ll be on retainer for two years. It’s nice to be able to pick up the phone and say, “Hey Randy.” It gives me a great deal of confidence.