Executive board member Daniel J. Cohen talks about how the European super-brand sees its newest category
This week, it was revealed that Swarovski was entering the lab-grown diamond business. This morning, Daniel J. Cohen, an executive board member and member of its founding family, spoke to JCK about how the European super-brand sees the category.
JCK: What attracted you about lab-grown diamonds?
Daniel Cohen: Swarovski has a long, rich tradition on a number of different fronts. We are more than 120 years old and have 50 years’ experience selling natural and created gemstones. One of the ways we try to grow is by looking for new materials. So this fits right into that strategy.
My cousins and I are the fifth generation to run the business. One of the things that we aspire to do as the fifth generation is to find growth paths going forward and to figure out where our competencies as a business lie. We have a demonstrated competency in things that sparkle, for lack of a better term. We are good at building consumer product brands and operating as a retailer.
The jewelry industry has grown in the high single digits on a compound basis over the past decade. We expect growth to continue at that pace. We are also a highly fragmented industry so the leading players have a fairly small market share. You would be hard-pressed to say that any of the leading players are above high-single-digit market share. So we have to explore opportunities that are ripe. This is one of a number of initiatives that we are pursuing in trying to grow Swarovksi.
JCK: Would you consider this a test?
Cohen: It is absolutely a test at this stage. We think long-term about these opportunities. We want to be sure we get the playing field right and get the context right and really build a product proposition that resonates with our target consumers. Like anything we do, we have to test it and get the formula right. We are going to keep our eyes and ears open and see what consumers have to say.
JCK: Do you see this a possible big business?
Cohen: I don’t know. We just need to understand how people perceive the material and where it falls in the spectrum of stones in general. From crystal going through cubic zirconia, there is a whole continuum of sparkly clear materials, and we want to try to understand how the material fits in that context. We are keeping an open mind. The consumer will tell us what they think, very directly.
JCK: Any feedback so far?
Cohen: We are in just a handful of doors. The product, the training is just taking place over the last few weeks. Based on anecdotal feedback, it is positive so far.
JCK: Do you see investing a lot of money in this?
Cohen: The test is going to drive how we go forward from a content perspective and also how much capital we put aside. If the idea gains traction, we are willing to invest. It is too early to tell. We are a 120-year-old company. We will do about 4 billion euros this year. We are clearly looking for ways to grow. But it is really early.
JCK: Has Swarovski carried diamonds before?
Cohen: We have tested fine jewelry in our stores in Asia. Like a lot of brands, we are trying to find the right balance between luxury and accessibility. We have explored fine as well as bridge jewelry.
There has been a lot of talk in the jewelry business about segmenting the fashion, bridge, and the fine categories. In broad brush strokes that is really secondary for consumers. We shouldn’t be limited by the way the industry slices materials up. We find consumers tend to make choices based on product design and price point,
JCK: How do you see this product working with your crystal business?
Cohen: There will be discussion about conflict between the materials. That is inevitable. I would draw the analogy to the old channel-conflict discussion we had in the U.S. If I’m in independents, can I be in chains? With me personally, I shop at everything. I use different channels for different purposes.
We believe the materials situation is analogous. Consumers are ready to blend and combine materials in a way the industry really isn’t ready for. That confluence is something that is continuing. We want to play into that trend and not resist that.
JCK: It seems, in contrast to other diamond growers, you are spotlighting product design more than the properties of the material.
Cohen: Absolutely, that is our focus. Design, product quality, branding—those are our capabilities. We are focusing on the fashion self-purchasing consumer. That is what we are good at. That is what resonates with people. Our desire isn’t to be tremendously disruptive to the mined industry. We feel this is a new market that we can play in.
JCK: So you don’t think this will hurt the natural business?
Cohen: That is fairly bold statement. I don’t know if I’d go that far. It is a question of looking at the larger pie, which is the jewelry industry.
JCK: Do you intend to stress the conflict-free and eco-friendly sales pitches?
Cohen: Our testing so far—we have only done focus groups, so there is an anecdotal aspect—indicated that is a supportive factor in the purchase decision for some consumers. We have made the decision to not really play that aspect up.
JCK: Are you producing the material yourself?
Cohen: Diama represents a test for Swarovski. We are trying to figure out the formula and the model that works. That applies to both sides of the equation: supply and demand.
Swarovksi has a long history of being vertically integrated, but this product and this material are very different from other things that we do. The people manufacturing this product are not really industrialized. When Swarovski makes product, it is hundreds of millions of pieces. We are buying from [lab-grown diamond growers] and hopefully as this opportunity grows, we can look at our supply. We are looking at all alternatives that exist on the supply side.
JCK: This week’s Diamond Intelligence Briefing article reported that Swarovski held talks with De Beers–owned Element 6 about possible supply. Do you have any comment on that?
Cohen: No, I don’t. I think [journalist] Chaim [Even-Zohar]’s assertions and inferences and implications are provocative, as always.
JCK: Any other thoughts on this?
Cohen: We are really excited about it. We think it’s a big opportunity. I am waiting with bated breath to get some feedback out of the test. This is a stay-tuned kind of play for us.
(Photo courtesy of Diama)