Martin Rapaport’s annual “State of the Diamond Industry” breakfast at this year’s JCK Las Vegas was bullish on America — and the success that American retailers can find if they promote diamond jewelry with intelligence and passion.
Following a year of record retail store closings, the chairman of the Rapaport Group delivered a rousing presentation during the annual morning event, urging an audience of retailers, manufacturers and wholesalers to identify and creatively promote their businesses’ core values to keep and attract consumers. His message: Despite political and retailing tumult, diamonds still matter. If your business is rooted in passion and values, you will survive whatever disruption may come your way.
Disruption was one of the key words used to describe the current state of American jewelry retailing — this despite a U.S. diamond market that outranks every other. With 51 percent of the world’s diamond jewelry sold in the U.S., it’s important, said Rapaport, not to lose sight of the fact that we are still the largest market in the world for a $50 billion industry.
Yet despite the U.S.’s number one market position, traditional selling channels are being challenged as never before. Online vendors are formidable opponents, despite their recent propensity for opening brick-and-mortar showrooms. They disrupt traditional distribution channels and cut out profit centers, contributing to the recent rash of store closings, mergers and bankruptcies.
Looking to the future, it is crucial that retailers maintain their share of the engagement ring market. “Engagement diamonds are the ‘feeder stock’ to future sales,” Rapaport said. “And retailer profitability is our number one concern.”
Brand Promise
Now, with profit so dependent upon value creation, branding has never been more vital to a business’ success. “Branding is a ‘legal monopoly,’” said Rapaport. “A brand is a promise to the customer that begins with consistency of message. Now the question is, ‘what is your promise?’”
With research showing that younger customers are more willing to spend their dollars on experiences rather than things, understanding — and catering to — the aspirations, goals and desires of the new “Millennial” consumer must also be a part of every jeweler’s branding repertoire. “This customer wants something that’s unique,” said Rapaport. “They want something custom. They want the engagement ring sales experience to be fun. They want extreme customer service. Do you offer these to your customers? If not, it’s time to change.”
Jewelers disregard this customer at their own peril. Rapaport urged his audience to understand that “life is about memories, not diamonds,” retailers must remain relevant — and on the internet — to thrive. “We may be rejected by a generation that doesn’t have the value of their parents,” he said, comparing Millennials to Baby Boomers and Generation X — two previous generations who remained loyal to the diamond message.
Calling the internet, “the rocket ship of change,” Rapaport said the jewelry industry can learn from other industries that have adapted and been overwhelmingly successful online. Payless Shoes has closed 512 stores while Zappos expanded, using its reputation for zany customer service to make buying shoes online fun and convenient.
Jewelers need to determine their “Q” or “quality,” the essence of their businesses’ identity that, when combined with value and pricing, leads to profitability. “What does the Main Street jeweler have that the online stores don’t? Expertise!” Rapaport recommends that retailers take some immediate advice to bolster their business today: Identify your value creation opportunities; segment your markets and curate products; hire and empower young people — especially women with a passion for fine jewelry and lastly, evolve from competing on price and product alone to communicating directly with consumers online. “You are the internet,” he said, recommending that jewelers use social media to build a store’s image and personality.
The Politics of Polished
From disruption in the jewelry industry to disruption in the White House, Rapaport said the immense changes in today’s political climate are focusing world attention on the U.S., where radical political and social changes have and will continue to challenge traditional retailing models.
There is room for optimism, according to Rapaport. The Trump administration has promised trade policies that can benefit small business, including changes to the tax code and increased spending on infrastructure to create well-paying jobs. The administration is also proposing significant changes in international trade policy including a Border Adjustment Tax or “BAT,” which would combine a 20 percent tax on imports to the U.S. with a 20 percent credit on exports. Although passage of any legislation remains to be seen, Rapaport calls this new era a time of “unprecedented change.” To retailers, he recommends buying American, hiring military veterans and thinking “nationalistically.”
As far as diamond trading is concerned, Rapaport called on the industry to give increased scrutiny to diamond sourcing and compliance with USA Patriot Act regulations. “We are under a microscope,” said Rapaport. “And we must be ethical because we are responsible.” Increased demand for supply chain transparency is coming not only from the government. It’s also coming from younger consumers who want to make certain their diamonds do not fuel bloody civil wars.
Will a lack of transparency or expanded consumer interest in diamonds “that do no harm” ignite market share for synthetic diamonds? Rapaport said it would defeat the symbolic meaning of a diamond. “When you combine emotional security and financial security in a gift, that’s called a diamond. It’s what we do.”
Article from the Rapaport Magazine - July 2017. To subscribe click here.