CEO Eric Lindberg talks about the plan to open four stores, embracing man-made diamonds, and how diamond stores are like mattress retailers
Seven-store Canadian jeweler Spence Diamonds yesterday announced plans to enter the United States market, with plans to open four stores over the next year.
The company’s first two stores—in Austin, Texas (pictured), and San Jose, Calif.—are opening on Nov. 7 and Nov. 10, respectively. Two more stores—in Scottsdale, Ariz., and Dallas—will open next year.
Spearheading this U.S. expansion is CEO Eric Lindberg, who joined the company from Lion Capital, which bought 80 percent of Spence last year. Here Lindberg talks about the opportunities in the United States, Spence’s surprising embrace of man-made diamonds, and how diamond stores are like mattress retailers.
JCK: Where do you see the opportunity for Spence in the United States?
Eric Lindberg: We are referring to the U.S. stores as Spence 2.0. It’s an attempt to take a dramatic leap forward.
We feel—and I think the industry is very aware of this—the jewelry and diamond industry is poised for change. Frankly, the diamond purchasing experience is viewed extremely negatively by a large number of American consumers. They will tell you that this is not a category that is very fun and it is not a great buying experience.
When you take a step back, you take a look at so many categories of retail. So many retail verticals have gone on to become very experiential. The way you buy shoes, cars—those are completely different buying experiences than they were 30 years ago. But the diamond buying experience is the same as it was 30 years ago, and consumers don’t like that experience.
JCK: What role are lab-grown diamonds playing in the company?
Lindberg: We present everyone with the option of both mined and artisan-created diamonds, and we have a substantial education process. We have found that the industry’s resistance to created diamonds is not shared by consumers. We feel that created diamonds have the potential to be extremely disruptive to the industry. We have found that consumers don’t want to buy something called a lab diamond. But we have introduced our Spence Artisan Created diamonds. We go through an education process of what’s a mined diamond, what’s a created diamond, and let people compare for themselves. When we did consumer trials at our Vancouver stores, the results were off the charts.
JCK: Are you concerned that selling lab-grown diamonds will mean lower price points?
Lindberg: We think that is a real misconception by the industry. We have hard internal data, having now sold a number of these, that consumers approach this purchase with a budget in mind. They don’t say I want a 1.04 ct. diamond. They say I’m looking to spend $8,000. When they are focused on a budget, rather than purchase criteria, we have found the average price is higher, because it’s driven by the excitement of: I’m getting more from my money.
And while we don’t talk negatively about the industry, we do find there is some negativity around the industry, about blood diamonds and the cartel. So, people are happy that there is a technological alternative. We are just going to listen to what consumers tell us they want in this category.
JCK: How do you see this as Spence 2.0 from a retail standpoint? Will you keep Spence’s brass-and-glass format?
Lindberg: The bridal component will be exactly the same—prototypes and CZs. The cases are open, and the product is custom-designed. We want to keep that super-friendly customer experience.
In terms of the retail experience, people will hopefully be astounded by the actual stores. We have thrown out every conventional notion about a jewelry store and a diamond store. We engaged some really super store designers. Our mandate to them is: If Steve Jobs would design a boutique, what kind of store designs and locations would he want?
The designs are very modern, very young, very customer-friendly, while still being appropriate and engaging to customers in their 40s, 50s, and 60s. We have a huge of array of high-definition 4K video panels. We use the high-definition panel in our sales, and they are part of the education process. The companies who are producing created diamonds are usually very nervous about someone copying their processes. But we show the reactor, the growing process. We think that is super-illuminating to consumers. We really take you into the laboratory. It is part of our ethos of educating the customer.
JCK: Do you plan further expansion in the United States?
Lindberg: The first four stores are the proof of concept. We do have a national road map where we intend to introduce consumers to the Spence U.S. model. We see the opportunity in the U.S. between 2018 and 2020 to be numbered in the dozens of stores.
JCK: Do you plan to stay mainly on the West Coast?
Lindberg: That is not a geographic decision—these are specific market decisions in terms of the kinds of customers that we want: younger, tech-oriented. We want to reach the group that is not currently active diamond customers.
We have gotten into some very attractive retail spaces in the United States because we are bringing a fresh concept. In Austin, we are across from the Apple store. Many of those landlords carefully curate who they will let into those locations. They want people who will look good next to the Apple store. One, when we were talking to him, said the only thing worse than having a diamond store, in terms of how hip customers will react, is a mattress store. The existing retail concepts have some troubling connotations. But these landlords also told us, they think we have the ability to grow the overall category.
JCK: Do you plan to sell online?
Lindberg: No. We do have a U.S website, but we do not have any e-commerce. A lot of people think online is the solution for everything. But what you have seen with diamond e-tailers is they have gone sideways after getting a lot of initial attention.
JCK: So it seems like you believe in brick-and-mortar sales for jewelry.
Lindberg: Absolutely. We think this purchase is such a big deal that people want a personalized experience. We believe that brick-and-mortar is the future of diamonds. There’s an emotional component, it’s a large purchase, people don’t know what they are doing.
I have bought diamonds online. Even for a relatively educated consumer, it’s a little bit harrowing to figure it out. Should I buy a VVS1? Am I really comfortable with this? We feel the ability to see the diamond, to see the alternatives, to be fully educated, and have an expert help you, is an important part of this process.
JCK: Lion Capital also owns part of Alex and Ani. Could that become a part of this?
Lindberg: Not at this time. But we like to be entrepreneurial, and we are always open to thinking what is best for our companies.
JCK: Spence has tried to enter the U.S. market twice before—once in Minnesota, once with former Robbins Brothers stores. How is this different?
Lindberg: From a Spence standpoint, that was a long time ago. Those were efforts to expand the Spence concept, without any particular evolution. They were also fairly opportunistic. Neither of those ended up being successful or unsuccessful. They were just okay. The ownership group thought that, given the logistical hurdles, the payback was not worth it. This is a whole new era in terms of brand reinvention.
JCK: Anything else people should know?
Lindberg: We are eager to get into this market and hear what consumers want. We think that there is an opportunity to grow the category, to reignite interest in it, and show that there is a better way to sell this product.
(Image courtesy of Spence Diamonds)