What started as an in-store project at Lunns now has global plans.
Portfolio of Fine Diamonds was initially created by Belfast jeweller Lunns put up a fight against online diamond jewellery retailers. Now as the company prepares to exhibit as a brand at The Jewellery Show London, Rachael Taylor travels to Northern Ireland to find out more about the franchise-style business.
Diamond jewellery sales are the lifeblood of traditional retail jewellers, but competing against a new wave of online merchants with cut-throat prices has left many with sales that are less sparkling than they once were.
Diamond jewellery is a segment of the market that is becoming increasingly price sensitive and with consumers regularly doing their research online before entering into a store it can be disheartening when potential customers expect high street jewellers to price match online offers. How to deal with this problem has left many a retailer so uncertain of the correct path forward that they have stayed stagnant and business has suffered.
Eight years ago Peter Lunn of Belfast jewellers Lunns was facing this exact problem. He recognised the potential negative impact that the rise of online diamond retailers could have on his business, but at the same time he did not want to change his business model – that of a traditional, local market-leading fine jeweller – so radically that he would risk losing his steadfast customer base.
The solution he came up with for his store was Portfolio of Fine Diamonds. This branded diamond jewellery offer was originally only designed to be used at Lunns but as time has moved on the project is so successful that Lunn is now talking about taking it global, has already made a small dent in the UK market after signing up five retailer partners to date and is exhibiting at The Jewellery Show London as a brand this month, which is its first trade show.
WHAT IS PORTFOLIO?
After carrying out some consumer research Lunns identified that what their typical customer really wanted was to be able to access as much product information and imagery online in the research phase, but that the majority still wanted to be able to handle the pieces and enjoy the in-store experience before buying.
To cater for this the team at Lunns went about building a website that would offer a complete shopping experience at portfoliooffinediamonds.com but that would still tie in with the bricks-and-mortar store.
Lunns invested in advanced photographic equipment to allow it to shoot all of its own jewellery in house, therefore allowing it to keep the website up to date as and when new product came in to the store, and also to keep photography costs down. Each item of jewellery featured on the website is the actual piece that the customer will buy – there are no CAD renderings on the site and each item is individual so once it is sold it is removed from the site.
As well as enabling browsers to get lost in its selection of jewellery, having all the details up front on the website – the four Cs and the price – makes shoppers more at ease coming into the store as it blows away some of the mystery of the sale and obliterates the fear of getting into the store and finding that they don’t have the budget for the type of jewellery they want. “Being able to see all that online takes the pressure off in an enormous way,” says Lunn.
While a large selection of photographed product online is key to capturing the imagination of diamond jewellery shoppers, the other crucial element to the Portfoilio of Fine Diamonds offer is price. With so many companies slashing retail prices of diamond jewellery online the brand had to find a way to compete.
Lunns has a longstanding relationship with award-winning Irish jewellery manufacturer Sharman D. Neill, in fact Lunn has a stake in the business. It has worked with the supplier to set up an offer of quality diamond jewellery that fits its pricing structure.
Each piece of jewellery under the Portfolio of Fine Diamonds brand is a one-off design and all the diamonds are certified and are hand picked for quality by gemmologists, picked less for their four Cs than overall quality.
The quality of both the stones and the finished jewellery is incredibly high, but the price is about 50% lower than that of a high street jeweller and just 20% more than some of the cut-throat online sellers that have posed such a problem for traditional jewellers such as Lunns.
While Lunns says he has utilised his relationships with diamond dealers and Sharman D Neill to get good prices he says that it is impossible to achieve the strict price criteria set out by Portfolio of Fine Diamonds without reducing his margins to 39%, down from his previous retail margin of 49%.
Such a margin drop is something that diamond jewellery retailers have been hoping to avoid, but Lunn believes that with the advent of online competition it is a necessary step. “We had concluded that we wouldn’t be able to enjoy the margins that jewellers have in the past,” he says.
But while margins might have dropped, sales have rocketed since introducing the Portfolio of Fine Diamonds branding and website to the Lunns business.
Portfolio of Fine Diamonds was introduced to Lunns on September 1, 2006, halfway through its financial year, and by the close of that year it has accelerated its sales of diamond jewellery by 129%. “To be fair it coincided with things going really well in this part of the world,” admits Lunn. “But it made an impact.”
Initially Portfolio of Fine Diamonds was set up as a solution for sales of diamond jewellery priced at more than £10,000 at Lunns. “There were people we knew wearing nice diamonds but not buying them from us,” explains Lunn, who adds that such people were turning to brands, wholesale companies and the internet. “That’s why we created Portfolio of Fine Diamonds. It is about reorganising the product, strong marketing and display.”
A year into its launch Lunns decided to incorporate diamonds priced at less than £10,000 – a move that sparked controversy amongst the ranks. “The lower margins worried everybody,” admits Lunn. But despite initial reservations, the sales continued to climb.
BECOMING A BRAND
Marketing was a key element in building up Portfolio of Fine Diamonds as Lunns recognised that just as silver jewellery has been dominated by branding, it is completely relevant to diamond jewellery too.
The deployment of the marketing of Portfolio of Fine Diamonds is headed up by Lunn’s daughter Suzanne Lunn, who works full time for the business and commutes to Belfast for at least two days a week from her home with her husband and child in Edinburgh.
She says that while Lunns experimented with price-driven marketing in the early days of Portfolio of Fine Diamonds, and still references starting prices in its ads, it has been its slogan – Don’t even think about buying a diamond until you visit Portfolio of Fine Diamonds – that has been its most successful tool to date.
Portfolio of Fine Diamonds is in the process of running its third ad campaign and has worked with a variety of mediums to deliver its message – TV, radio, cinema and outdoor advertising. “We kept pumping marketing out five times a year,” she explains.
And it would seem that the marketing tour de force, and the catchy slogan is working. “There was a guy that came in to one of the stores and said ‘Right, I’ve not even to think about buying a diamond until I see you’,” she says with a satisfied laugh.
EXPANDING THE BUSINESS
With a proven method of selling diamonds that had transformed its business, thoughts at Lunns turned to the potential of taking Portfolio of Fine Diamonds beyond its own stores, and so the idea of a franchise-style business model emerged.
To kick things off Lunn turned to his long-term friend, and business partner at Houlden Group, Stuart Laing. The Laings of Glasgow business was ripe for the Portfolio of Fine Diamonds style of sales; a traditional jewellery business, a Rolex stockist like Lunns, and in need of a boost to its diamond jewellery sales.
“When we presented to Laings I remember making the point that there were 30 jewellers in the Argyll Arcade [where Laings is based] and 29 of them were selling diamonds,” says Lunn. “Laings had a USP as the only Patek Philippe stockist and a Rolex stockist but as far as diamonds were concerned they didn’t have a USP.”
Laing agreed and decided to take on the fledgling brand. Whilst Portfolio of Fine Diamonds wishes to keep exact figures about the sales performance of their stockists confidential, Professional Jeweller can confidently say that the figures after introducing Portfolio of Fine Diamonds to Laings of Glasgow were phenomenally exponential.
Next to sign up to the scheme were Philip Stoner in Leeds, Michael Jones Jeweller in Northampton and Banbury, Jamieson & Carry in Aberdeen and Rudell the Jewellers in Wolverhampton and Birmingham. Each has had a success story with Portfolio of Fine Diamonds according to figures shown to the magazine by the brand.
All of these retailers have something, other than a branded diamond offer; each is a member of the Houlden Group. It is easy to look at the list and come to the conclusion that perhaps Portfolio of Fine Diamonds is just a sales technique being adopted by members of the buying group, but in fact Lunn has plans to take it worldwide. “Tip-top retailers in the UK, Ireland, the US, even Asia, would give their eye teeth for this as they are all competing against the internet,” boasts Lunn.
But while the long-term plan might be to become a global brand, Portfolio of Fine Diamonds is starting out by targeting the UK and is hoping to work with retailers outside of the Houlden Group as well as within it, which is why it is exhibiting at The Jewelery Show London in June.
The company has hired former TAG Heuer head of UK sales Nick Callegari as head of development and he is tasked with building up the retail partnerships and also maintaining them by ensuring that stores have the right stock, the sales process is going smoothly and that all staff at the stores are trained proficiently to sell the brand.
Callegari says that the plan is to bring on another four stockists this year and then a further nine next year. His strategy for the brand is centred around working exclusively with one retailer per town.
To start off as a Portfolio of Fine Diamonds retailer is relatively cheap as retailers are allowed to sell existing diamond jewellery stock branded up as Portfolio of Fine Diamonds as long as it passes the brand’s quality check and pricing guidelines, which state that retailers must drop their margins to 39% to gain a price competitive edge, something that Lunn is aware will spark debate.
“A retailer is going to say ‘I could not suffer a drop in margins like that’,” he says. “They will need to increase sales by 25% to enjoy an overall profit increase but we have proved that can happen.”
After the initial stock rebranding retailers must sign an agreement to purchase a minimum of 75% of diamond jewellery stock for Portfolio of Fine Diamonds from an approved supplier; at present this is limited to Sharman D Neill, although the brand says it is on the verge of signing others. The remaining 25% can be sourced elsewhere, including antique jewellery, as long as it complies with quality and pricing guidelines.
Retailers must also pay an annual fee to be part of Portfolio of Fine Diamonds of about £6,000 for a main store, plus 3% of all sales on turnover up to £1.5 million and 2.5% of turnover of more than £1.5 million.
This money is fed back into the company and Lunn says that the annual fee covers things such as the creation the dedicated Portfolio of Fine Diamonds mini site that is set up for every retail partner, staff training and marketing materials, while the turnover fees go towards national PR and marketing campaigns, packaging and the upkeep of the mini sites.
A BRAND OR A SALES METHOD?
Lunn admits that Portfolio of Fine Diamonds is not a creator of jewellery but the orchestrator of a brand, so what exactly is stopping retailers from dealing direct with Sharman D Neill and then simply dropping margins?
Lunn says this is where the power of branding comes into play. He believes that many retailers have tried to create something similar but have failed. He also points out that for those thinking about doing something similar, working with Portfolio of Fine Diamonds instead means that they get to skip past the first eight years of the development process and benefit from the lessons that Lunns has had to learn the hard way.
There is also the power of being part of a group. The marketing costs for such a project are huge and Lunn says that as more retailers come on board, the cost per retailer of creating campaigns will become less as it will be shared by the network. Retailers can also tap into the relationships already built by the group such a pending deal with Hitatchi Finance that will set up an interest-free payment option for all Portfolio of Fine Diamonds shoppers available through the individual retail partners.
Portfolio of Fine Diamonds might have started out as Lunn’s personal plan of attack against the rise of web sales, but it is spinning out to become something much larger.
While many of the elements of Portfolio of Fine Diamonds are hardly revolutionary, it is perhaps the potential that it carries for traditional retailers that have resisted change to date that makes it most interesting.
Traditional jewellers are often wary of change but the pace of evolution in the market has made it clear that it is necessary, so buying into an idea such as Portfolio of Fine Diamonds will allow such retailers to embrace elements of modern retail, such as online sales, but keep hold of traditional practices of high-quality in-store service. And who better to lead them through this revolution than one of their own at the helm?
This article was taken from the June 2012 issue of Professional Jeweller magazine. To read a digital version of this issue click here.