A year after his company purchased Hearts On Fire, Kent Wong, managing director of Chow Tai Fook, the world’s largest jewelry company, sat down with me at JCK Las Vegas to discuss future plans for the brand, as well as general thoughts on the diamond market. Pay attention to his remarks at the end about Chinese consumers—they sound similar to what we hear about U.S. millennials.
JCK: What do you see next for Hearts On Fire?
Kent Wong: We acquired the brand one year ago. We appreciate that we have a great team in [HOF headquarters in] Boston. We expanded the design team from one designer to six, and the designers are from all over—New York, Hong Kong. We are committed to producing the best design. We are also expanding the management team.
We are committed to building a different diamond brand. We want to see Hearts On Fire leverage Chow Tai Fook’s competitive strengths. Now it can source diamonds directly and have them cut by the best masters.
We will increase our investment in marketing. We have more than doubled the marketing budget this year. We will launch a new TV commercial to inspire customers to dream of diamonds.
JCK: Will the commercial air this year?
Wong: Yes, it will be a brand-new campaign.
JCK: Can you tell me something about the commercial?
Wong: Please allow me to keep some secrets.
JCK: Will Hearts On Fire expand into low-end price points?
Wong: We have a group of very loyal retailers. They believe the dream. It is not easy to sell Hearts On Fire. We cut the best of best. There is a premium.
We want to expand our customer collection. We have extended some of our designer collection by using the same designs at lower-entry price points. We want to attract more customers into the brand.
JCK: Any other plans with Hearts On Fire?
Wong: We have selected top-tier retail partners for shop-in-shops to sell Hearts On Fire. It will be a special program with brand-new display.
JCK: There is a stand-alone HOF store here in Las Vegas. Do you see more?
Wong: We may in the coming few years have two to three more. But we are very selective. Whatever we do, it will be to build the brand of Hearts On Fire.
JCK: In the United States, Forevermark and Hearts On Fire are considered competitors. Do you see it that way?
Wong: I don’t think so. It is a different branding position. We are the biggest seller of Forevermark in China.
I think we need competitors, more brands, more marketing. The whole industry is doing too little to attract customers. I salute those who inspire people to the dream of diamonds.
JCK: Could you ever see a co-brand between Forevermark and Hearts On Fire?
Wong: Anything is possible. We are open to have any opportunity.
JCK: In the United States, Forevermark is bringing back the “A Diamond Is Forever” slogan. Would that matter in China?
Wong: Chinese consumers know about “A Diamond Is Forever.” It is an everlasting slogan. I think emotionally it can touch people, especially for engagement rings.
JCK: When I talked to the De Beers CEO, he said that vertically integrated companies such as Chow Tai Fook are able to make profits in diamond manufacturing.
Wong: We are also suffering from the slowdown. We feel pressure on keeping margins and being more effective. Controlling costs is a big topic for us. The global economy has not fully recovered, particularly in China. We see overcapacity in industry production. The entire industry has to slow down.
We are lucky. We are in China, one of the fastest-growing economies in the world. But there has been a slowdown. In the past, Chinese jewelry sales increased by double digits year after year. But the industry has to recognize this high-growth period is over. We cannot always look for double-digit year-on-year growth. In the future we have to look at the best service and products that meet customer demand.
We are seeing a reforming of industry’s model. Social media is so popular: We have to study how to use social media and new initiatives like smart jewelry. We need better tools to understand consumer preferences through what they call big data.
JCK: In China there is a talk of a shift away from luxury. Have you felt that?
Wong: The Chinese consumers’ buying preferences have changed. Maybe a decade ago, the Chinese customer spent on luxury products, like a watch. They wanted to show off their achievements.
But the younger generation is no longer chasing after logos. They are chasing high-quality products and design. They want a personal connection.
Two years ago, we launched some new one-of-a-kind products to attract new customers. We are shifting into more design-driven product and also lower price points.
The younger consumers need more storytelling. They like to share stories with each other through instant messaging.
JCK: Does the marketing and products that work in China have to be adjusted for the United States?
Wong: Every Hearts On Fire design emerges from Boston, because we want a U.S. global brand. We have some small portion of jewelry designs that are tailored for local tastes. That is why the team of designers come from different countries and different cultures.
JCK: What differences have you noticed in the Chinese and U.S. markets?
Wong: In China, about 80 percent of the sales come from department stores. In the United States, most come from specialty jewelers. Yesterday I met some of the Hearts On Fire long-term partners. They are third- and fourth-generation stores. In China, jewelry has a short history, and we rarely hear of people who are in business for 100 years.
JCK: Any other thoughts about the business?
Wong: The industry needs to be more professional, we need to raise trust, we need to bring emotion back to the customer.