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Japan’s Economy Recovering

Sep 2, 2004 4:35 PM   By Kazuko Ito
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Recent reports indicate that Japan’s economy is finally recovering. Department stores reported increased sales for the past four consecutive months. Diamond dealers confirmed that demand for larger high-quality stones is strong and four publicly traded jewelry companies on the Japan stock exchange (JASDAQ) predicted that they would report better results on the next fiscal closing.

While many in the jewelry industry are getting ready for the Christmas season with new lines, inventory building and marketing strategies, a small, little known new player, Hohoemi Brains Inc., is also gearing up with a bold strategy. The company, which found the formula for cut proportions that defies the conventional grading criteria, has registered their findings in the international patent office, and now is ready to capitalize on it.

Not only is Hohoemi unique in defying the conventions, but it is also unique in bringing its over excellent (OE) cuts into the market. Despite inquiries from interested parties, the company has been reluctant to wholesale OE cuts as loose stones like commodities to dealers and jewelry manufacturers, but chose to synergize its marketing with the hippest marketers in the marketplace — Vendome Yamada Corp. and F.D.C. Products Inc., for the creation of lines and marketing and using Isetan and Hankyu Department Stores for selling venues.

Marketing OE Cuts

On August 25, OE cuts debuted at the main store of Isetan Department Stores under Isetan’s brand name Uzri. “As Isetan wishes to carry the line at their 30 or so stores and affiliates throughout the country, we hope to make 3.5 billion yen (about $31,963,958) annual sales within three to five years,” said Yoshinori Kawabuchi, president of the company. Vendome Yamada, which is in charge of designing and marketing the lines, has a long history of collaborating with Isetan, in addition to extensive experience with licensing businesses with major brand houses from around the world. The brand name Uzri belongs to Isetan and is licensed to Vendome Yamada for creation, of which Hohoemi holds a 50 percent stake.

On September 1, F.D.C. Products Inc., one of the fastest-growing jewelry and fashion marketers, launched its high-end brand Rugiada, with 25 models featuring OE cuts, at the Hankyu Department Stores main store in Osaka. The timing of the launch was planned with the fall season, keeping the Christmas season in mind. Christmas shopping in Japan generally targets younger consumers, but the new brands do not exactly fall into this category. “These lines are for women in their 30s, 40s and 50s. They are serious customers,” said Kawabuchi. The lines are priced between $913 and $3,654.

Challenging the 4Cs

As OE cuts deviate widely from conventional grading criteria, no grading certificates will accompany the products. Instead, Hohoemi issues quality guarantees. But they do not mention color, clarity or cut grades.

In the marketer’s view, Masayuki Tomita of F.D.C. Products admitted that the OE cut is one of the most perfected materials, as they look brighter and shinier compared to regular round brilliants. While prices of OE cuts are slightly higher than regular round brilliants, by weight they come out about even, as OEs are cut somewhat flat. Tomita understands the cost factors involved in OE cuts. Precision is far superior to “Excellent” and the work of manufacturing them is far more tedious. “They do not come cheap,” said Tomita.

There are challenges too, however. “If we promote OE cuts in a big way, then we will be denying the old 4C values that we have sold to our customers.” It makes for a dilemma — a customer may say, “So, you say this is the best. Then what was it that you sold to me before?”

Another challenge is the reality that the marketplace is dominated by the 4Cs. A dealer in Okachimachi is quoted as saying, “I am not sure if the market is ready to accept them,” although he is aware that the Gemological Institute of America (GIA) has been studying cut proportions and that the new findings may very well substantiate OE’s theory. F.D.C.’s success is largely attributed to its sharp observation of the marketplace. “We are nimble and tackle with new materials that please the market,” said Tomita.

“OEs are pretty and different. People will talk about them,” said Kuniko Konomi of Vendome Yamada. The company sells engagement rings under Vendome Aoyama with the conventional 4C valuations. Designing is the strength of the company. “We have many in-house designers who incorporate beautiful materials into the designs,” explained Konomi. “The Uzuris are not high-end jewelry sold on the higher floors. But they are high-fashion jewelry that working women would love to purchase for themselves come bonus season in December,” said Konomi.

Yet another discussion is going on with another giant department store, Mitsukoshi. “But with Isetan in Tokyo and Hankyu in Osaka, we are well positioned,” stated Kawabuchi.

Hohoemi is receiving rough diamonds from Diamdel. Currently, the contract is for $1.35 million a year. As with the case of sightholders, the contract is reviewed every six months, and Kawabuchi hopes to receive a bigger allocation for the coming years.
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Tags: Consumers, Diamdel, Economy, GIA, Japan, Jewelry, Manufacturing, Sightholders
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