Tobias Kormind and Vadim Weinig on breaking the online diamond market.
The market for online diamond jewellery retail is a crowded place, but London-based 77 Diamonds hopes to steal the lion’s share with its personal approach to business. Founders Tobias Kormind and Vadim Weinig tell Professional Jeweller about their journey so far building an online diamond brand.
Love. That four letter word is arguably the basis for all purchases of diamond jewellery. But for 77 Diamonds it is the very foundation of what has become a burgeoning business.
Back in the early 2000s the acceptance of a marriage proposal between the sister of Vadim Weinig and a good friend of Tobias Kormind sealed what is today a business operating out of central London with a Mayfair showroom and team of staff including goldsmiths and diamond setters.
Weinig was born into a Belgian diamond family but, rather than follow the footsteps of his father and grandfather into the worlds of sourcing rough and cutting diamonds, he instead dreamed of a company that could use the internet to widen the reach of such precious stones.
In London, Morgan Stanley investment banker Kormind was working with companies floating on the stock market as well as those in the fallout of the dotcom boom and bust, helping to restructure and rebuild them. This period of careful business assessment stood him in good stead when it came to launching an online company. He too was dreaming big about an online venture, and joined forces with a group of friends and associates to create an online marketing agency, a business that still exists today.
“We started incubating ideas [for online businesses] and, though I had no experience, I put up my hand and said ‘how about diamonds’,” Kormind explains. After his sister also married into a diamond family, Kormind’s friends began to approach him for advice or contacts within the diamond industry. “I helped to source a stone for one friend who then said ‘Well how do I get it made into a ring?’ and having always had a bit of a creative streak, which I think you need in business, we worked to have it made up.”
After several more requests from friends to help source stones and have items made, Kormind realised that an online diamond business could work. Then, when the aforementioned proposal between his friend and Weinig’s sister gave the two men cause for conversation, they each recognised the opportunity that stood in their grasp.
“All of a sudden a diamond jewellery business became a reality,” Kormind says. “We launched at the end of 2005 but at that time it was being run more like a hobby than a business. Vadim said that if we were going to do this seriously we needed to push things, so I left the agency to join Vadim full time to revamp the business. So really, in my eyes, 77 Diamonds launched at the end of 2008.”
In the five years since, the two men have not rested on their laurels, instead putting time and energy into building a business structure for 77 Diamonds, each finding their groove. Weinig is focused on diamond sourcing, while Kormind is the creative visionary of the two.
With Kormind’s history in banking he found a customer base already established and at his disposal; the business launched at a time when many of his friends were getting engaged or were celebrating births and anniversaries. But how has the brand grown beyond this immediate faction? “When we started the internet was like the Wild West – it was a wide open space,” Kormind says. “[But] coming from the online marketing agency gave us the insight into the online environment.”
For Kormind, a business does not operate online, more that the web should be used as a tool to reach customers as effectively as possible.
“The internet allows you to reach people without having to invest in a huge infrastructure, a beautiful store and stock and then praying that enough footfall comes through from pushing a traditional PR route,” he explains. “Instead you create an online store like ours with the biggest number of diamonds in one place.”
With Weinig’s connections the company now holds physical stock of many stones, and has access to diamonds from dealers all over the world, as well as an array of semi-bespoke product. By being able to offer a variety of diamonds, from classic brilliants through to fancy cuts and, more recently, loose fancy coloured stones, 77 Diamonds has won itself a similarly varied audience.
However, the UK remains its main focus. As Weinig points out: “In relation to the size of the market versus the size of the country, the UK is more competitive [than other nations]. It accounts for less than 3% of the world global diamond demand but because it is English-speaking the US [diamond] players come here, too.”
Those US players are the likes of Blue Nile, companies that offer diamonds with margins so small that it is a wonder how the business makes any money. The same can be argued for 77 Diamonds. The company offers such competitive prices on its loose diamonds that Weinig receives several calls a week from jewellers telling him that 77 Diamonds’ prices are better than those offered by their actual diamond dealers.
At present 77 Diamonds’ jewellery sells to customers in more than 70 countries, and while the UK is its main target market, its international sales contribute to a “significant portion” of the revenue and turnover of the business.
The challenge for 77 Diamonds has been for its jewellery to compete, in terms of quality, with fine jewellery sold on Bond Street and by other luxury jewellery brands.
In reaction, it recently opened its own workshop in central London and now, rather than working with several goldsmiths, its has a dedicated team of five working on setting, polishing and producing 77 Diamonds’ jewellery to order. The brand can now check the quality at all points, working with Birmingham manufacturers to make some of its mounts, with every item finished and quality controlled in London, overseen by a respected Bond Street goldsmith with decades of experience.
Through Weinig’s sources the company offers stones that are always certificated, mostly by the GIA and IGI. 77 Diamonds has also recently expanded into loose coloured diamonds, following growing demand from its customers, and plans to launch a coloured diamond collection within its jewellery offer.
“At present at least 10%, maybe more, of our sales are of loose diamonds,” Weinig explains. “Mostly customers buy them to propose or to have something designed, or people have their own jeweller overseas, so they buy the diamond here as it is better value for money.”
And are customers getting more confident with their diamonds purchases? According to 77 Diamonds, the choices men are making when it comes to proposing are not as daring as you might expect.
“When we started the business about 50% of the diamonds we were selling were rounds, with princess cuts the next biggest majority,” Weinig notes. “Today rounds make up about 70% of all the diamond shapes we sell, especially engagement ring sales.”
With its new, luxury showroom opened this summer, 77 Diamonds now inhabits a bright space overlooking Hanover Square in central London, with neighbours including high-end art galleries and private hedge funds. The two men say that being close to Vogue House, home of the legendary fashion magazine, has bought in a new set of customers, and its showroom can welcome 15 or more appointments a day, from happy couples to women shopping for themselves and customers seeking repairs.
Referrals have also helped to bolster sales, and returning customers are on the rise for anniversary gifts or those special birthdays. They also report an increase in same-sex couples seeking wedding bands or commitment rings.
“Another growing area is the bespoke service we offer,” Kormind notes. While the company does not promote the service through its website, demand is so great that its in-house Rhino expert is at capacity in terms of orders.
MARGINS VS GROWTH
77 Diamonds operates a growing team at its workshop and new HQ, so many might wonder how is it affording all of this while offering such good prices on it diamonds. Kormind explains, without giving exact figures, that the company is up “thousands of percent” in terms of revenue compared to its launch five years ago, adding that e-commerce progress in the UK puts the country strides ahead of the rest of Europe in terms of online retail. Innovative and cost-effective digital marketing has also been key.
“You have Bond Street jewellers that spend a lot of money on marketing but the truth is outside of a Tiffany box, for example, the value of an item is in the diamond, and that’s what consumers are wising up to,” Kormind explains.
The duo have tried and tested the quality of Bond Street jewellers and aim, through investment in their workshop, to bridge the value chain by going to straight to source and working with the people who are cutting and polishing the stones.
The period between 2010 and 2011 was all about growth for 77 Diamonds. “Now we’re trying to be more efficient with in-house teams of goldsmiths. It makes things faster and also more scalable,” Weinig notes. “We have been a lot more investment-focused in terms of building a brand with the right quality of product, rather than being focused on making as much money as possible.”
He concedes that fantastic online technology and the scalability of the business has allowed 77 Diamonds to become more profitable – and that as a result the business is moving in the right direction. Sitting back, Weinig weighs up the brand’s current position: “We took a long-term view to build very strong foundations and a unique offer that wasn’t there in the market already, and I believe we have managed to create that.”
This interview was taken from the October issue of Professional Jeweller. To read the issue online in full, click here.