De Beers and Trade Still Split on Branding

The first formal meeting between representatives of the world diamond industry and De Beers on the issue of diamond branding was cordial enough, but it changed no minds.

Eli Haas, chairman of the World Federation of Diamond Bourses/International Diamond Manufacturers Association branding committee, says the diamond industry continues to have “serious reservations” over De Beers’ plans to brand diamond jewelry with its logo. His committee reported these concerns to a group of De Beers executives headed by vice chaiman Gary Ralfe at a January meeting in London. Ralfe updated the WFDB delegation on the trials under way at the British retail chain Boodle & Dunthorne. But he stressed that the test results were still preliminary and that De Beers has made no plans beyond the retail tests.

The paucity of information likely increased the delegates’ opposition to De Beers’ plan, says Haas. “There are a whole raft of issues that haven’t been addressed,” he says. One of those concerns, for example, is De Beers’ antitrust problems in the United States.

“It’s difficult to believe that anyone – diamond dealers, wholesalers, and retailers – who may be adversely affected by De Beers’ branding wouldn’t mount a legal challenge,” says Haas. One “major firm” is already preparing such a case, he says.

The delegates brought up other concerns over branding. Says Haas, “A number of retailers we spoke with were horrified because they believe De Beers’ brand could ultimately supersede their own name, further commoditizing diamonds and lowering their markups. What retailers told us was that anyone, even upstairs people with no shop, no anything, can get the same branded goods as anyone else and have instant credibility.” They also worried that De Beers could extend its reach into the U.S. retail market. “By deciding which retailers get branded goods and which can’t, they can control the U.S. retail market to a degree,” Haas says.

Managing throughput of branded diamonds is another thorny issue. “It required a massive adjustment within the industry in getting goods certified,” says Haas. “Can we further adjust to getting the goods branded?”

The delegates remained skeptical over De Beers’ contention that the main purpose for its branding initiative is to guard against synthetic and treated diamonds. “If that were the case, why is the program limited to only a small part of De Beers’ production?” says Haas.

De Beers executives say their reticence on these issues stems not from a lack of concern but rather from a dearth of information. “Some solutions to these concerns may only become clear after the project is completed this autumn,” says a De Beers statement.

Haas says the industry sympathizes with De Beers’ frustration over other diamond producers “riding on the coattails of its expensive diamond advertising programs without paying a dime.” But, he adds, “We still don’t believe branding is the way to go.” (For more discussion of branding, see the Editor’s Page.) – Russell Shor

Michael Anthony Pays $30 Million for Town & Country Fine Jewelry

Michael Anthony Jewelers Inc. of Mount Vernon, N.Y., one of the largest U.S. jewelry manufacturers and marketers, has agreed to pay about $30 million for the Town & Country Fine Jewelry Group Inc. of Chelsea, Mass. A definitive agreement was signed Feb. 5.

Town & Country Fine Jewelry had been in bankruptcy since Jan. 13, and the transaction is subject to bankruptcy court approval. The sale was due to be completed Feb. 22. Michael Anthony planned to start shipping Town & Country jewelry on the same day.

The sale covers “substantially all assets” of Town & Country Fine Jewelry Group, including all equipment, inventory, and licenses for Town & Country jewelry. It doesn’t include its real estate or its parent firm, Town & Country Corp. An agreement signed in early January between Town & Country and OroAmerica for OroAmerica to sell Town & Country jewelry was put on hold by the bankruptcy court on Jan. 31 and is voided by the sale.

The bankruptcy filing came after the jewelry group fired 260 of its 350 workers in Chelsea, New York, and Dallas, citing “sales shortfalls” from the 1998 holiday season. At press time, there were only about 20 people left.

Although the parent company was not involved in the January bankruptcy petition, it too has had financial difficulties in recent years. Faced with declining sales in the mid-’90s, Town & Country streamlined its operations, sold much of its Balfour and Gold Lance subsidiaries, and made top management changes. Even so, it posted large losses for fiscal 1996, 1997, and 1998. In late 1997 it filed for bankruptcy, from which it emerged last May.– William George Shuster

‘Designer Day’ Set for MJSA Expo

If you’re interested in how the designer jewelry business works, then the second Designer Day, taking place at the Manufacturing Jewelers and Suppliers Association’s Expo New York, is for you.

Scheduled for March 26 at New York’s Fashion Institute of Technology, the eight-hour program will address such topics as the importance of establishing a cohesive business presence, the ins and outs of running a designer manufacturing business, and how to turn the best design ideas into a collection. Speakers will include Jose Hess, Paul Klecka, Lisa Jenks, and Robert Lee Morris. In addition, a panel of fashion editors will discuss how they choose what jewelry will appear in the pages of their publications.

The first Designer Day, held during MJSA’s Expo New York in 1997, attracted more attendees than expected, according to Cindy Edelstein, program moderator and president of the Jeweler’s Resource Bureau.

For information, contact Heather Clarke at MJSA at (800) 444-MJSA, Ext. 3040; e-mail: hclarke@mjsainc.com, or the

Jeweler’s Resource Bureau at (914) 738-8485; email: franklycin@aol.com.

Diamond Researchers Probe Color Treatments

The world’s top diamond researchers are closely examining colored diamonds this year, hoping to foster a better understanding of color grades and protect consumers from new treatments and synthetics. Both the Gemological Institute of America and the Diamond High Council of Antwerp plan major colored-diamond reports.

GIA has already completed an extensive survey of blue diamonds, which will appear in the Spring issue of Gems & Gemology. “Because we modified our colored-diamond grading system three years ago, we’ve seen many more blue diamonds coming through the labs for origin-of-color reports and grading,” says James Shigley, Ph.D., who heads GIA’s research department. “This gave us an opportunity to study the range and appearance of blue diamond color.”

Later this year the journal will publish the results of a decade-long study of green diamonds. That research will help the industry identify treated stones, though Shigley acknowledges the report is not the last word on the subject. “Determining color origin for green diamonds is a very complicated puzzle and we don’t have all the pieces yet,” he says.

The green color results from exposure to radiation. There’s still no sure way to determine whether that exposure happened millions of years ago underground or a few months ago in a lab. But GIA is getting closer. “We’ve looked at a combination of factors including color, color distribution, and ultraviolet fluorescence,” reports Shigley.

In Antwerp, meanwhile, the Diamond High Council is tracking Russian developments in turning drab-colored diamonds into sparkling beauties. “The Russians are always working on new treatments to enhance or change colors of diamonds,” says Mark van Bockstael, director of the Diamond High Council’s Institute of Gemology. “They’re trying to make them as undetectable as possible, so we have to keep up with them.”

One of the Russians’ experimental processes transforms ugly brown diamonds into lovely pinks by adding heat and pressure in a system called BARS, which they also use to create synthetic gems. Thus far, van Bockstael says, Russian efforts have left telltale clues – inclusions that become enlarged in the process, creating a distinctive “cauliflower” gletz (fissure) – but the researchers keep trying.

Rumors persist that Russian researchers have succeeded in whitening diamonds. Van Bockstael concedes that it’s possible to improve a white diamond “by one or two color grades,” but at the expense of clarity. For all their efforts, the Russians have yet to find the holy grail of undetectable color treatments or commercially viable “whitened” diamonds, according to van Bockstael.– Russell Shor

Revised FTC Guides May Come Soon

The Federal Trade Commission’s Guides for the Jewelry Industry will probably be revised this year to require disclosure of laser-drilling in diamonds, an FTC representative said at the recent Jewelers of America trade show in New York.

FTC is “favorably inclined” to accept a Jewelers Vigilance Committee recommendation for the change, said Elaine Kolish, associate director of the Division of Enforcement. The change will be expedited so it can be announced later this year at a major trade show.

Kolish also revealed the results of an FTC investigation of 100 jewelry retailer and auction Web sites. Most sites violated FTC advertising guidelines. For example, only a third of the retailer sites mentioned that their pearls were cultured, possibly leading consumers to believe that the pearls were natural. And nearly every site failed to disclose either that emeralds, rubies, and tanzanite are routinely treated or that the treatments are impermanent and require special care.

Any jewelry Web site should make sure consumers see important information before they decide to make a purchase, Kolish warned. Sites can use links to lead consumers to additional information as long as the required information is stated up front. Disclosures must be conspicuously located in a readable type size.

Kolish spoke at a JA Show seminar sponsored by JVC. The show, held in January at the Jacob Javits Center, drew 7,700 attendees, up from 7,400 in 1998, organizers reported. New to this year’s show were Jewelry 101, a series of training sessions for sales associates that was launched last October in Dallas (JCK, December 1998, p. 92), and Jewelry 501, a parallel series geared to store owners and managers.– Larry Frederick

Online Jewelry Sales Take Off

Online jewelry spending leaped more than five-fold in 1998, reaching $207 million. Though Internet jewelry sales are dwarfed by purchases at traditional storefront jewelers ($22.4 billion in 1997), last year’s jump in this new arena far outpaced sales growth at jewelry stores. Store-based sales grew 7.7% through November ’98, according to the U.S. Commerce Department.

Helping fuel the growth is QVC, which sells jewelry through its iQVC.com and gemsandjewels.com Web sites. QVC declines to reveal dollar amounts but claims its online jewelry sales more than doubled from ’97 to ’98. “Acceptance of jewelry online for us has been quite consistent,” says Stuart Spiegel, vice president and general manager of iQVC, the West Chester, Pa., firm’s online division.

The ’98 holiday season was QVC’s third online. “The lesson that we’ve learned is that you need to work the medium so there’s an added-value experience for a customer,” says Spiegel. The firm has focused on helping shoppers find specific jewelry items quickly, compare them with like pieces side-by-side, and pull up more detailed information.

Spiegel believes QVC’s online jewelry sales shouldn’t pose a threat to store-based retailers. “We’re perhaps augmenting the whole category. We end up with more spontaneous activity that might not occur if someone had to make the decision to drive to a jewelry store.”

The growth in online jewelry sales last year points to even stronger gains in the future. “We think that less-expensive jewelry is viewed as a convenience item – a low-risk, low-cost discretionary purchase similar to books, apparel, and flowers,” says Evie Black Dykema of Forrester Research Inc., a Boston firm specializing in Internet retail trends.

Dykema expects high-end jewelry purchases to become more common as consumers “advance more quickly from making convenience-oriented purchases to research-oriented purchases.” That’s what’s happening at Costco Wholesale Inc. of Issaquah, Wash., which experimented with high-priced, one-of-a-kind jewelry on its Internet site (www.Costco.com). Costco is beefing up its online selection of diamond and colored stone jewelry even as it expands its offerings of jewelry at lower price points. –Jessica Stein Diamond