Glenn Rothman was fed up with low diamond margins. He wrote letters to trade publications, but, except for some nice publicity for his company, Boston-based Di-Star, nothing changed.
He went to a marketing seminar in 1995 and sounded his complaint to one of the speakers. The speaker’s retort: “If you don’t differentiate yourself, you will be just making a living in a commodity industry.”
The solution, the man said, was a branded diamond. Rothman was so intrigued he took the man to dinner. The following year, Rothman went to Antwerp, where the Japanese were buying well-made Ideal Cuts and “branding” them in their home market. Rothman brought the concept back to the United States, and the Hearts on Fire brand-name diamond was born.
The Hearts on Fire diamond – and its sister diamond jewelry brand, Sabrina – is one of the more ambitious attempts to start a diamond brand, but it’s not the only one. Today’s fierce competition has diamond and jewelry manufacturers scouting for ways to differentiate themselves and earn higher margins. A growing number are turning to branding what used to be considered unbrandable – diamonds. “Branding as a concept has just exploded,” says Bob Speisman of Lazare Kaplan, which has offered a “Lazare” brand since 1985.
The manufacturing sector has become interested as well. New York-based jewelry manufacturer Frederick Goldman recently announced plans to resurrect one of the industry’s grand old brands, Keepsake. Goldman and its new merger partner, Israeli diamond powerhouse Schachter Namdar, also will launch a second brand, to be announced. And, of course, the world’s biggest diamond company, De Beers, has shown interest in the concept and is testing its own line of inscribed stones at a three-store jeweler in Manchester, England. De Beers, however, will not produce the stones but will simply offer the service.
The new branders say they are not simply slapping a label on a commodity.
“If you don’t differentiate yourself, the consumer won’t see added value,” Rothman says. Hearts on Fire is differentiated not only by its Ideal Cut – every stone gets an AGS zero, the top cut grade issued by the American Gem Society lab – but also by the “retail theater” that surrounds the brand. “Theatrical” elements include a “ProportionScope” to sell the diamond, special packaging to wrap it, and Mother’s Day and Valentine’s Day poems to celebrate it.
The Lazare stone, also Ideal Cut, is inscribed with the name “Lazare,” a serial number, and sometimes a message of love. Frederick Goldman’s CEO, Jonathan Goldman, won’t disclose his plans for Keepsake but vows the product will be differentiated. “A new concept is being developed that borrows from the past but adds something new,” he says.
Brand logic. On paper, the logic for a diamond brand is strong.
“Every other industry in the luxury goods field has branding, including watches,” Goldman says. “We are the last to really get into it.”
In addition, shaky consumer confidence plagues the jewelry industry, and brands build confidence. “A young couple is nervous when they buy a diamond,” says Marcee Feinberg, Lazare’s marketing manager. “We are letting them know that a company that has been in business since 1903 is standing behind their product.”
Brands can enhance a retailer’s image. “Everything in the jewelry store is a blind item, and if customers see a high-image product, it makes everything else in the store seem classy by association,” says Frank Dallahan, the former president of Keepsake who’s now JCK’s director of trade relations.
So why is the diamond jewelry industry basically brandless? For one thing, the product doesn’t lend itself to the idea. Accessory brands generally are built around labels, and, as Liz Chatelain of Beverly Hills, Calif.-based MVI Marketing notes, “It’s hard to put a label on a ring.” (The new breed of branders is looking for ways around this problem. Lazare has girdle inscriptions that function as a kind of label, and Goldman promises to display the new Keepsake logo prominently.)
Another deterrent has been expense. Brand ambitions come with a hefty price tag – Chatelain says it takes at least $15 million to mount a serious promotion for any brand, and even a token effort costs about $1 million. So while it has become fashionable for loose stone dealers – particularly those who offer new and different shapes – to proclaim their products “brands,” their marketing budgets pale next to that of the average consumer goods giant.
“To have a brand, you need margins,” Dallahan says. “And when you are operating on 25% to 30% gross profit margins, as you see in the jewelry industry, it’s hard to support a brand.”
The new branders say they’re willing to put the money down. Lazare Kaplan spent an estimated $5 million on its initial advertising, public relations, and research. The campaign included focus groups that discovered, for example, that consumers preferred the name “Lazare” to “Lazare Kaplan.” Rothman already has sunk $1 million into marketing Hearts on Fire and plans to spend another half-million this year. Goldman projects a “several-million-dollar” advertising campaign for Keepsake. “With branding,” he notes, “it takes a lot of seed money before you make a profit.”
No guarantees. Despite the high hopes – and despite strong initial reaction to the three brands discussed here – profits are not guaranteed. Many say that, aside from a few designer names, branding has yet to prove itself in the diamond jewelry sector. The last notable diamond brands were a trio of diamond jewelry products – Keepsake, ArtCarved, and Orange Blossom – that peaked in the late 1970s. (Keepsake, probably the best-known, eventually had a 90% recognition rate among consumers.) But a series of buy-outs hurt those names, and branding has languished ever since.
Even today, jewelers have mixed feelings toward brands. Many – especially upscale independents – say they already have a brand: their store. “In jewelry, it’s always been the retailer’s name, not the products,” says Chatelain.
And some makers of branded products have deserted the jewelry industry for the lure of high volume. Dallahan notes that independents have bad memories of selling branded silver, china, and crystal only to see the same brands wind up in the cases of mass merchants. Furthermore, retailers complain the big watch brands have become even more of a commodity than diamonds, with heavy comparison shopping and thin margins. Partly to ease retailers’ fears about selling another commoditized product, Hearts on Fire and Lazare are taking a cue from watch manufacturers and offering exclusives. The new Keepsake also plans selective distribution.
In the past, retailers’ mixed feelings about brands often led to mixed support from brand manufacturers. Dallahan remembers that when he was running Keepsake, “retailers would use the brand to build traffic, then switch customers to their own private-label product.”
Goldman vows to make his brand strong enough to avoid that pitfall. “If you come in for a Nike, you wouldn’t want something else,” he says.
Despite the current grandstanding over branding, the concept has a long way to go before it takes over the jewelry industry. Today’s branded products haven’t penetrated in huge numbers. Hearts on Fire is sold in 250 stores, the Lazare brand in 500.
Nevertheless, the new brand warriors have high hopes – but no one doubts the risks. As Rothman puts it, “To start a brand, you need a certain amount of courage.”