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Diamond Manufacturers Must Drive Jewelry Aspirations
Q&A with Jignesh Mehta, Managing Director of Divine Solitaire
Feb 13, 2015 8:00 AM
By Avi Krawitz
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RAPAPORT... Divine Solitaires is an India-based diamond brand that was launched in 2006 and recently partnered with its 100th jewelry retailer. Rapaport News spoke with Jignesh Mehta (pictured on the right), the co-founder and managing director of Divine Solitaire, about the challenges of creating a diamond brand and its growth in the Indian market:
Rapaport News: How did you start in the diamond industry?
JM: Our parents worked in the textile industry in Ahmedabad so we’re first-generation diamantaires.
My brother, Shailen Mehta (pictured left), moved ‘to Mumbai where he learned skills in the diamond industry and he eventually set up a very basic diamond cutting and polishing factory in the early 1990s. I was doing my MBA in Sydney, Australia at the time and started to sell the goods that Shailen was manufacturing to a few jewelers in Australia.
The problem that I faced in Australia at the time was that many people would say that they did not use Indian goods. This upset me and we tried to understand it. We found that India was well known for its mass production but the perception of quality in the high-end was missing. So we aimed to get into the high-end production of bigger stones in the 0.50-carat to 2-carat range, which were not so popular in India at the time. Today those larger pointer sizes are mainly polished in India, but in 1995 to 2000, manufacturing in India was focused on stars and melee.
We concentrated heavily on our cutting standards and eventually developed our own niche, supplying some of the most select jewelers in Australia, Canada and South Africa.
Rapaport News: How has your strategy shifted since then?
JM: We started out focused on cutting and polishing diamonds for export markets. In 2005, we recognized that India was a growing market and aimed to understand it better. We researched the Indian market for two years to understand how it operates and what the consumer really wants when it comes to jewelry, especially diamond jewelry and solitaires.
We found that it was very disorganized and fragmented. We also found that the problems were very similar across the country. There were very specific concerns among Indian consumers that we didn’t find overseas. For example, we found that in India everyone was concerned about the investment or asset value of the diamond. People buy a diamond solitaire with the mindset that they’re creating a family asset. But they also found it difficult to know the current value of the diamond. They were also always concerned with the pricing of the diamond and the fact that it is very difficult to know the price of the diamond.
The other problem was that there was a lot of ambiguity in the quality of the diamond. People always felt that they were being cheated and there was a complete lack of confidence in the industry from the consumer's point of view.
There were some smaller concerns and as we listed them we started thinking of a solution to each of them. That's how my brother and I created the Divine Solitaires brand.
As a brand we could introduce some interesting new features, such as presenting our own certification. We came up with the very first guarantee certificate. The laboratory certificates provide an analysis of the diamond, but we found that consumers are not interested in analysis; what they want is confidence.
Rapaport News: What is the guarantee that your certificates give them?
JM: We came up with 123 parameters that influence both the beauty and value of the diamond. Most laboratories grade a diamond using 25 to maybe 40 parameters. There are a lot more parameters to consider, such as measuring overtones or the luster of a diamond.
So the first problem we recognized was that the laboratories were not covering all the parameters to grade the beauty and value of the diamond. They often left out things that are very important in the Indian culture.
Secondly, at the end of the day their reports are analysis-based. If it's excellent, it says excellent. If it's poor, it says poor, and so on. But the consumer doesn’t understand this and really needs a quality guarantee. So we set up our own standards. A diamond can only qualify as a Divine Solitaires diamond if it passes each of those 123 parameters. The brand therefore provides a guarantee of quality by 123 different parameters.
All of our diamonds have a Gemological Institute of America (GIA) certificate but we don’t believe that laboratory reports should be given to the consumer. The additional guarantee comes from Divine Solitaires. The GIA report is for internal use, while the consumer buys based on our report.
Rapaport News: How do you work with retailers given that they are the ones presenting Divine Solitaires to consumers?
JM: Initially, we had our own store in Ahmedabad. We only sold Divine Solitaires there for one-and-a-half years while we were trying to understand whether the brand was working and if consumers would accept it.
As it began to appear feasible, we came up with a complete franchise model through which we would work with the jewelers. We came up with a shop-in-shop concept, which dictated our arrangement with the jewelers.
We appointed the retailers of our choice because we realized that this was not something that anybody could do. From the beginning we made a list of the retailers we wanted to be associated with and step by step we convinced them that this is the right way to sell diamonds.
We convinced retailers by telling them that they could really differentiate themselves from the many other jewelers in their area. If you go to different cities in India, you will find that there are 200 or more retailers in one market. We presented them with something that is different and gives extra value to their customers.
The forward-looking retailers understand that this is a much better way to sell a diamond. Instead of destroying the product by constantly making it cheaper, they can sell the diamond with pride by raising the aspiration of a customer with the support of an entire brand. Today we are in 103 retail doors across 61 cities in India.
We still have our flagship store but our focus is on the franchise market with the shop-in-shop model because that is how we can expand. We recently partnered with some big chain stores, but our strategy has always been to concentrate on the strong independent stores in every city.
Rapaport News: What are you seeing among Indian consumers?
JM: India’s jewelry industry passed through one of its toughest times in the past year or two. The overall atmosphere was not great, especially before the elections, and there was a lot of global uncertainty. The more concerning issue was that even as general consumption was rising in India, people were moving into different products. Jewelry began to lose its importance. That’s an international challenge which if we don't understand properly we are all going to lose out.
Young consumers are bombarded with so many things and are attracted by the impressive marketing of products such as watches, phones and cars. When I see jewelry promotions it’s pathetic. Whatever promotion there is actually kills consumer aspiration rather than builds it because businesses keep telling consumers that the price of their diamond is cheaper than others.
With India’s economic growth, there are more consumers who can afford to buy diamond jewelry today than ever, and the amount of money they can spend is growing. But they also have less time to shop around. They are not attracted to a product by reducing prices. Consumers are looking for someone they can trust. That’s why you have to conclude that the brands will win.
Rapaport News: How does your price index work?
JM: As we developed our brand we came up with our own price list for the end consumer. It’s a uniform price list that is used for Divine Solitaires’ diamonds by all of our retailers. So wherever a customer buys, he pays the same price. We update our prices on the first of every month according to market movements.
The price that we publish is the final price for the consumers and the retailers get a commission on the sale. Therefore, we own the inventory in the store but we have different arrangements. We take a security deposit against which we give them a supply of goods on consignment. If they want more inventory then they would buy the extra goods. So we started with this consignment arrangement but now many jewelers are buying as well.
Whether they buy the goods or take on consignment, the prevailing pricelist still applies, simply because consumers are aware of it. Consumers can check our prices on our website or mobile application. But, we are very clear that we don’t want to be an industry benchmark on prices. The index is about our diamonds and our prices.
Rapaport News: What are the biggest challenges that you're facing this year?
JM: Our biggest challenge is operating in an unorganized market. But that also presents an opportunity as people gravitate toward brands they can trust.
For the industry, the most serious challenge is to drive consumers to keep buying jewelry and diamonds. The problem is that the diamond industry is extremely focused on mining and manufacturing. There is very little effort going into understanding consumer behavior and adding value for consumers.
From my viewpoint, the big diamond manufacturers are only interested in getting more rough, and growing their factory real estate and work force. Really it’s up to individual industry players – not the mining companies or industry bodies – to raise the aspirations of consumers to buy diamonds and jewelry. They have to position themselves to create the values for the consumers via their product.
Rapaport News: How do you envision Divine Solitaires growing in the next five to 10 years?
JM: We see Divine Solitaires as a compelling fully-developed brand with an international presence. We recently launched a pilot test in Dubai. Our focus will stay on India for another two years and from 2017 we will slowly spread into other markets.
We are not about mass expansion for its own sake. In India, we have an exclusivity clause and when we partner with a retailer we commit to limiting ourselves in their market. We have identified a possibility of 268 doors in India across 94 cities and towns for our expansion plan.
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Tags:
Avi Krawitz, diamonds, Divine Solitaires, Jewelry, Rapaport, Solitaires
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