A $75 million annual business with 1,200 retail clients, and an achievable goal of 3,000 doors in two years. Links with 50 Fortune 500 companies. Prominent, thriving booths at all major shows. The full catalog from melee to 10 carats, half-moons and bullets to kites and hexagons. About $5 million in annual fancy yellow sales. Branded jewelry to proprietary cuts. A solid, successful model, backed by a $2 million budget, for bringing Internet shoppers to local retail partners to buy diamonds. Cutting and setting facilities in Israel, Sri Lanka, and Russia. And a hard-earned claim, endorsed by competitors from New York to Los Angeles, as the fastest-growing U.S. diamond company. We're talking sightholder, yes?
On the second floor of 800 Chestnut Street in Philadelphia's diamond district, the walls are coming down, the view is temporarily obscured by industrial vinyl sheeting, and the place reeks of sheetrock as independent diamond dealer and jewelry manufacturer G.N. Diamond completes its sorely needed expansion. I'd seen G.N. at the shows and covered its 2005 announcement of a $1 million plan to enable retailers to fight the Internet, a budget since doubled. I live nearby, but wouldn't have driven down but for Darci Aselage, general manager of Troy, Ohio's Harris Jeweler.
"Make the trip!" she says. "We do, once a year, and spend the day with Asaf, and it's pretty much our diamond buying for the year." Sightholders worldwide are reeling from last week's announcement of a DTC price hike. On Chestnut Street, however, G.N. president Asaf Herskovitz, greeting me after a long morning with a large client, isn't taking it personally.
"I want things to be consistent," he says. "Margins may go down for us, and for our customers, but if that's the big issue, then the big picture has been lost. I believe in market share." It's a belief shared by the prominent dealers we interviewed. The key to growth is growth itself: customer base, product lines, catalogs, etc. What's most important, however, is learning how to help your clients' businesses grow.
The trade offered the independent dealer little but double digit discounting when Herskovitz came into the family business less than a decade ago. The "Spaghetti Junction" supply channel kept middle-men running in place for their share of the market. With technology limited to fax, phone, and the nascent Internet, and with globalization limited to overseas rough buying trips to South Africa and Russia, as well as polished buying visits from Belgian and Israeli players, G.N.'s edge lay solely in superior buying power, a function of its strong credit, cash flow, and top-shelf Israeli cutting.
"Coming up," he says, "I saw two things that could differentiate us as vendors: the strength of the retailer, which was growing, and technology." He linked the two, with his own inventory, and provided back-office support to his retail clients. Backed by a large, growing inventory, 100 percent replacement guarantees, and attractive price structures and credit terms, G.N.'s customer base grew.
With the independent U.S. dealer threatened in 2000 by Supplier of Choice, then shortly after by the Internet's commoditizing onslaught, Herskovitz again saw opportunity. "Supplier of Choice did cut into the ranks of the independent dealer, and I believe the next five years are going to see even further consolidation. But it also limited the sightholder list, putting more rough into fewer hands. That overextended credit and, with their added expense of learning to sell downstream, created a need to sell through. The Internet showed us three things as we headed downstreamóselection, pricing, and education. But there were also three things the Internet couldn't offeróromance, luxury, and the trust, comfort, and validation of the purchase only the jeweler can offer. We offer the first three, but we do it in alliance with the independent retailer who can offer the second three."