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Applied Marketing 101: The Chocolates are coming!

George Prout by George Prout
October 3, 2011
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Reading Time: 10 minutes

One of my favorite aspects of my job at Gems One is directing our global product development team. In this role, it’s my task to try to guess what consumers will be asking for, months in advance, so that we can make it, shelf stock it, and produce advertising materials for our customers to help them connect with the trend, at exactly the right time. In this context, I thought you might be interested to see an analysis of what’s likely to happen for the upcoming Holiday Season.

Let me start by pointing out that this Fall, you should expect to see intense advertising pressure on colored diamonds, particularly in medium browns, as the majors – especially Kay and Jared – ramp up their Christmas campaigns. This trend will be sufficiently important that as you make your final plans for the Christmas Season, I urge you to position a portion of your inventory, as well as your advertising, to take advantage of it.

In much the same way that store owners who properly anticipated the impact of three stone, circle, and journey advertising were able to cash in when male gift-givers suddenly appeared looking for these fad items (that initially were in short supply), I see a coming wave of demand for browns that will be the key for retailers’ success this December.

The bulk of the advertising will start in mid-November, and by the time we get to the start of the Holiday rush (around Dec 13), I suspect that your phone will start ringing, and your door will start swinging, with a steady stream of consumers looking for these “Chocolate” diamonds.

Yes, much of this advertising will be about Le Vian in Kay and Jared, but the rest of the majors also see this coming, so you can expect to see a huge push from all sides for “Mocha”, “Cognac”, “Café au Lait”… just about every name imaginable to describe brown diamonds, since Le Vian actually owns the name “chocolate” in the context of diamond jewelry. And as the advertising reaches a crescendo in December, so will the consumer demand.

For much of the past year, I’ve been studying this category, in order to understand styling and pricing. Take, for example, the one carat total weight double row “chocolate” diamond band from Le Vian, which retails for $1999, compared with the exceedingly similar one carat total weight “cognac” diamond band from Helzberg. The diamonds in each are actually quite alike in color. Many manufacturing aspects of the Helzberg band are superior – for example, it has a waffle back, whereas the Le Vian band’s back is open – yet to my eye, the Le Vian piece has been styled with a bit more finesse. The difference in price may well be justified by the higher perceived value of the advertised Le Vian piece, as well as some pretty cool added bells and whistles (e.g., a lifetime trade-in guaranteed by Le Vian at any Le Vian dealer).

The problem for Le Vian – and the opportunity for the rest of us – lies in their fairly high entry level price point. There just isn’t much they offer at less than $1400. So here’s how the peak season scenario will play out:

Bill, whose wife Eileen wants chocolate diamond jewelry for Christmas, will visit Jared in search of just the right item (motivated by the fact that he will have seen the Jared/Kay/Le Vian ad about 25 times). Unfortunately, he’ll likely discover that his price range, which might only be $700, won’t get him into a Le Vian. The Jared staff will probably then attempt to move him to black diamonds, and they may succeed, but not likely, because he knows that Eileen wants ‘chocolate’. This will produce a series of phone calls or stops to other jewelry stores, which may include yours, especially if Bill or Eileen already shop with you.

Fortunately, the global price for natural brown melee roughly corresponds with the price for white I1s, so you can easily merchandise a 1⁄4-1/3 ctw piece, mounted in 14KT gold, in Bill’s price range. In fact, it’s possible to have a pretty good assortment of products in the $299 to $999 price range (and I’ve even built a sterling silver heart featuring a single brown diamond retailing at $99 dollars). So, as long as you’re prepared, you can be ready to help Bill – and his buddies – from December 12-24 get what their wives and girlfriends want, at prices that fit their (recessionary adjusted) budgets.

But you’re going to have to react in a timely manner, because I’m guessing there won’t be much brown diamond jewelry left on your vendors’ shelves when the rush starts (and avoid the orangy-tinted treated brown diamonds… I’m not at all sure that consumers will find them to be an acceptable alternative).

Let me add, as an aside, that I’m really impressed with what Le Vian is doing. You have to remember that DeBeers (who have closed DPS and are now sitting-pouting? on the sidelines, no doubt still licking their wounds over Everlon) is now out of the generic diamond jewelry advertising business, leaving a 50 million dollar fourth quarter hole. This means that Sterling (the parent for Kay and Jared) now has far and away the largest “share of voice” in the American jewelry economy. And of the various “house brands” that Sterling is using to obtain a competitive selling advantage over the undifferentiated commodity products that their competitors are trying to sell, Le Vian will now soar to the top. I even think I detect a long term strategy to position Eddie LeVian as a legacy brand, like Cartier and David Yurman. Whether they can ultimately succeed in morphing the consumer’s perception from “Chocolatier” to “Designer” remains to be seen, but so far, they’re doing a terrific job.

In fact, Le Vian has done such a good job wrapping up terms like “Chocolate” diamonds and “Strawberry” gold that I’m compelled to make an important point. No one can stop you from selling brown diamonds. But you really must be careful not to tread on Le Vian’s intellectual property. You can’t use these terms in your advertising, since only they can advertise ‘Chocolate’ diamonds. And when I ask mall store employees if they have any “chocolate diamonds” (and I’m probably in mall stores shopping for jewelry more than any other person on the planet), I notice that if I’m not in a Jared or a Kay, the store personnel have generally been trained to say something like, “No, we don’t sell chocolate diamonds, since that term is a registered trademark of Le Vian corporation, but we do sell a variety of beautiful, fancy colored diamonds, including luscious, deep rich ones. May I show them to you?”

So… with this knowledge of what’s likely to happen in the coming months, what should you do? Here’s how I look at this: neither you nor I can reasonably make the investment that’s required to create a “consumption wave”. What you and I can – and should – do, is build a surfboard. The Wave is coming, funded by an extraordinary amount of advertising by Le Vian, and supported by ancillary advertising from the rest of the majors who want to join in on the fun. Whether it’s huge, like three stone, or more modest, like Journey, remains to be seen. But the way to bet is that something good is going to happen in this category, and it will likely last for 18 -30 months. You’re also very likely to get a nice “echo bounce” in demand for the next two Valentine’s days… just be sure to feature it late (say Feb 10-14) in your advertising, and in lower price points.

So go get some jewelry this month that meets the likely brown diamond criteria of the mid-December male gift-giver, and be prepared to advertise it fairly intensively from Dec. 5 through Dec. 18. I see a wave coming on the horizon, and I think it’s going to give us a pretty good ride.

Class dismissed!

George Prout is Vice President of Sales and Marketing for Gems One Corporation, and can be reached via e-mail at info@gemsone.com, or at Gems One’s New York office at 800-436-7787.

George Prout

George Prout

George Prout is about to celebrate his 50th year in the jewelry business, having sold his first engagement ring as a 17 year-old sales associate working at Kay Jewelers in 1974. In each of the past 4 decades, he has worked for companies that rose to top three status nationally in sales volume to Independent Jewelry stores. Currently he is President of JB Bhanderi, the world's largest CVD grower and maker of the Surreal Diamond brand. He can be reached at george@surrealdiamond.com.

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