Professional Jeweler Archive: Letters

June 2004

Letters


JA's Call to Action

As you may have heard, the non-governmental organization Global Witness recently released to the world press a report, “Broken Vows,” characterizing the efforts of U.S. jewelry retailers to help stop the trade in conflict diamonds as an “abysmal failure” that is “little more than a public relations gesture” with no real commitment behind it. This characterization is a reference to the self-regulation measures (the system of warranties) the industry pledged to undertake in support of the Kimberley Process controls on cross-border trade in rough diamonds instituted by governments of some 50 countries in the summer of 2003.

Jewelers of America strongly urges all retail jewelers to review the report’s contents carefully. (The complete text of the report, including a listing of the stores contacted and their responses, can be found on the Web site of Global Witness at www.globalwitness.org.)

The report draws its conclusions from research carried out by Global Witness, which sent its representatives into stores in four key markets across the country to test the awareness of sales associates in various types of retail outlets on steps in place to halt the trade in conflict diamonds. They also contacted key executives of these same businesses inquiring about the store’s policies, procedures and practices regarding use of the warranty system in all transactions with diamond and diamond jewelry vendors.

Associates’ responses were, with certain exceptions, uniformly unconvincing and/or uninformed. Worse still, only four of 33 businesses contacted chose even to respond to the letter, fax and phone call from Global Witness.

The message generated by this report is that consumers really can’t have confidence in the industry’s claims that it is doing everything possible to stop conflict diamonds. Obviously, if the integrity of the industry is in question, then what can be said for the integrity of the product? And if brand-name jewelers – independents, chains and department stores – can’t be trusted, then how can any jeweler be believed?

While JA has publicly taken strong exception to the report’s characterization of industry efforts to date, nonetheless we recognize significant damage has been done to our industry’s credibility and reputation. For example, besides stories appearing in the world press, representatives of governments participating in the Kimberley Process have said they view these charges as potentially damaging to the Kimberley Process itself and have pointed out it is the industry’s responsibility to set the record straight.

We also recognize it is vital that we each undertake steps immediately to contain the damage already done and begin to rebuild credibility together as an industry. JA, therefore, urges all diamond and diamond jewelry retailers to take the following steps:

1. If your company was named in the report and either did not respond or was portrayed unfavorably, if you have not already done so you should contact Global Witness to clarify your position – including your policies, procedures and practices in place regarding use of the system of warranty. (A suggested outline of a response is available for your convenience on the JA Web site, www.jewelers.org.)

2. Even if your company was not contacted this time, please review your existing policies, procedures and practices in connection with use of the system of warranties. Verify that you require a binding warranty from your diamond and diamond jewelry suppliers in connection with all purchases and memo goods obtained by your store(s). JA recommends that retailers require either that vendors print the language that appears below on their invoices or, as an alternative, have the language incorporated into vendor agreements. The language is as follows:

“The diamonds herein invoiced have been purchased from legitimate sources not involved in funding conflict and in compliance with United Nations Resolutions. The seller hereby guarantees that these diamonds are conflict-free, based on personal knowledge and/or written guarantees provided by the supplier of these diamonds.”

3. Regardless of whether you were contacted previously, please review with your associates and staff trainer the information you want available at the counter when and if a question is asked. (Suggested response points for use by your staff are also available on the JA Web site.)

You also should know that Global Witness, likely in alliance with U.S. faith-based and human rights groups, has said they will be back to conduct more systematic research in U.S. retail stores. In addition, Global Witness has opened an office in Washington, DC, where the lead campaigner on this issue is to be posted. They are not going to go away.

Remember that while it is entirely your choice how you wish to position your business on this issue from a merchandising standpoint (e.g., by offering certified non-conflict stones of particular national origin to any customers who might inquire), we as retailers still bear a considerable portion of the overall responsibility for reassuring consumers of the legitimacy of diamonds. With the Kimberley Process now in place, backed by retailers securing warranties from their diamond and diamond jewelry suppliers, the image of diamonds can remain positive.

It is our job to help secure the future of the diamond dream. Your store policies – use of the warranty system – and your store practices – how your associates respond to questions and how your corporation responds to public inquiry by organizations like Global Witness – can have enormous positive impact not only on the health of your business, but also of our entire industry. Conversely, continued failure to acknowledge our responsibilities in this area will almost certainly spell trouble for the industry on this issue once again.

– by Matthew Runci, President & CEO of Jewelers of America


Why Not Try Decommoditizing?

I just finished reading the article on the Couture Diamond Conference [to take place in October] that focused on jewelers’ frustrations with reduced margins on diamonds because of commoditization (“Fighting Internet Diamond Dominance,” April 2004, p. 24). I wrote my first letter to an industry publication about 15 years ago warning that if the industry persisted in commoditizing the diamond, profits would erode – and that was before the Internet, as we now know it, existed. The industry itself is at fault for promoting the diamond as a commodity, and it is better late than never to try to rectify this situation.

If you believe that every 60/60 stone looks the same, or every “ideal” (whatever that is) cut is the same, you can stop reading this letter now. The most important step to take here is altering consumers’ perception that a diamond is a commodity that can be purchased by statistics. The ultimate goal is to convince the consumer the uniqueness of each diamond creates so many variables that he would be unwise to purchase one without professional help. Here are some positive steps for the industry to take:

1. Develop a standard industry statement decommoditizing the diamond. This statement should be comparable to the warning AGS puts on its certificates stating that no two diamonds even of the same color, clarity and cut grade are the same; that prices can vary by as much as 50%; and that the consumer should consult a gemologist.

2. Have this statement used in every piece of industry advertising, put onto all certificates and, yes, even put on the Rapaport list.

3. Obtain the cooperation of the Gemological Institute of America, once it has finalized its proposed cut information, to have the information it will add to its certificates approved by the industry – wholesalers and retailers alike. Perhaps GIA should post the information on its Web site for industry comment before anything is finalized. If what GIA is doing here further commoditizes the diamond, the industry will be taking an irrevocable step backward.

4. Develop an industry-wide Web site so others can post their ideas on how to decommoditize the diamond. I am sure a lot of jewelers out there have some very good ideas.

This industry needs to start taking some positive action if it is to reclaim profitability. Otherwise, it can only look forward to a continuation of declining margins.

Steven R. Martin, G.G., MBA
President, M. Martin & Co.
Chicago, IL


An Accusation

This is the second issue in a row to have an article promoting LC International (also a paid advertiser in your magazine). It is in the article “Competing with Online Sellers” on page 25 of the April issue.

In the article, the owners of LCI recommend that retail jewelers get more into service and settings, etc. because “substantial diamond profits may never return thanks to unbeatable Internet prices.”

Of course, as everybody now knows, LCI also operates DiamondIdeals.com, an Internet diamond site selling to consumers.

There are many fine wholesalers that are not trying to have it both ways. Why not feature one of them? I am hoping that the two plugs for LCI are totally coincidental and that there was/is no connection or monetary arrangement with Professional Jeweler.

Or is there something else you are not telling us?

Brian Knox
Certified Diamond House
Minneapolis, MN


LCI Responds

There is no financial arrangement between LC International and Professional Jeweler. LCI has been an advertiser in Professional Jeweler since its inception, and this is the first time we have been featured in a story. (Thank you, Mr. Knox, for a third plug.)

This is an age of consolidation, strategic marketing alliances and partnerships forced upon the industry by increasing costs and also by De Beers’ Diamond Trading Co.’s Supplier of Choice initiative. Many diamond manufacturers now bypass wholesalers and market directly to retailers.

LCI, as a wholesale supplier, continues to have close working relationships with retail jewelers throughout the U.S., brick-and-mortar stores as well as online sellers. LCI has helped numerous brick-and-mortar retailers make the jump to e-tailing by providing materials and tools as well as online inventory.

Although the principals of LCI are personally vested (among others) in DiamondIdeals.com, LCI treats DiamondIdeals like any other good customer.

LCI spends many hours every day helping brick-and-mortar retail jewelers by giving them creative ideas on how to increase their sales. The Professional Jeweler report on “Competing with Online Sellers” holds true. The emergence of the Internet as a selling medium is a fact of life. Adaptation to this new venue is the only way to survive.

Laurent Landau and Stuart Skolnik
Principals, LC International
New York City

Editor’s Note: Professional Jeweler has no connection or monetary arrangement with LCI other than the open and obvious advertising in the magazine. Professional Jeweler editors cover important issues in the industry and, therefore, interview and quote non-advertisers and advertisers in their articles.

Copyright © 2004 by Bond Communications