‘Customers are so much more demanding:’ A different type of jeweller on battling Brexit, the economy and millennials

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LONDON — “We had a guy come in from the Forbes list and he literally bought half of what we had,” Tobias Kormind, co-founder of diamond retailer 77Diamonds, says when asked his most unusual sale.

The buyer had only wanted coloured gems, rarer than white diamonds, and left with about 22 stones.

Kormind’s is an unusual shop, in an unusual industry.

77 Diamonds is an online and in store diamond retailer that aims to undercut conventional sellers by removing middlemen and streamlining its supply chain.

Prices are “close to wholesale,” says Kormind, and the company aims to provide the best possible quality for a range of budgets. Founded a decade ago in response to the rapid growth of technology and the internet, 77diamonds.com now boasts the biggest selection of diamonds of any website worldwide.

Traditionally, large mining companies extract diamonds, then sort and sell the rough to manufacturers who cut and polish the stones. Cutters then sell to international dealers, who sell to local dealers, who sell to retailers, who sell to customers. 77Diamonds, by comparison, goes direct to the cutters.

“We work with around 3,000 manufacturers, we spend a huge amount of time handling that,” says Kormind. This allows them to keep prices down, he says, and customers benefit from competition between mining companies.

The company also spends as little as possible on marketing and retail space, and, unlike most high street jewellers, has just a single Mayfair showroom.

“Third generation diamond”

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Cutters and polishers in 77Diamonds’ London workshop 77Diamonds

Most diamond retailers don’t have such close relationships with mining giants, and 77Diamonds’ unusual level of access is thanks in part to its co-founders’ personal connections.

Kormind’s sister married into a diamond-cutting family, while his business partner, Vadim Weinig, is “third generation diamond,” and “grew up polishing diamonds.”

“We were really fortunate,” says Kormind, “we had direct access into the diamond world, and it was very easy for people to find out who we were.”

“That gave us a tremendous helping hand,” he says, because trust still plays an important role in the diamond trade. It’s a relatively small world, he says, and much of the business is still “done with a handshake.”

Brexit uncertainty

Small mark-ups and tight profit margins mean the business is particularly sensitive to market changes. Although the company’s direct-to-source model means it bypasses Antwerp, the world’s biggest diamond trading hub, post-Brexit bilateral trade agreements could pose problems.

If agreements include new trading tariffs on jewellery and other goods, the company could be put at a significant disadvantage. If that happens, says Kormind, a portion of the business will move to mainland Europe, to avoid the problem.

Since diamonds are generally priced in dollars, like gold and platinum, the fall in the value of the pound has already made them around 20% more expensive. But despite this rising cost, higher inflation and the downturn in consumer confidence, 77Diamonds has not seen a drop in sales, nor in people’s spending habits: in general, says Kormind, people are buying slightly smaller diamonds for the same price.

This is welcome news for a company whose main client base is in the UK, although Kormind points out that higher-value UK-based sales are often made by foreign nationals, largely Chinese and Russian, either visiting or with second homes in London. But the company also ships substantial quantities to clients internationally, and a weaker pound has improved business from an exporting perspective.

As a result, Kormind is optimistic. “We’re looking to triple the size of the business over the next few years,” he says, “we’re in a rapid growth phase.” The business had a turnover of £18 million in 2015, according to an article in the Financial Times.

“The ultimate experience”

The received wisdom that millennials value experiences over the material has caused some to speculate that the diamond trade may slow down. But Kormind says this fear is misplaced.

Millennials married

“The whole point of luxury is to give people an experience,” he says.

He points to diamond company De Beers’ 2016 report, which suggests millennials still consider owning diamonds as one of their aspirational values.

While they tend to get married later than baby-boomers, it finds, millennials are still buying diamond engagement rings, as well as other items of diamond jewellery for themselves.

Although getting engaged is one of the “ultimate experiences,” says Kormind, buying diamonds is often a very emotional and personal purchase, and an increasing number of people are buying “relationship” rings rather than engagement rings per se.

Diamond buying

He acknowledges that the luxury goods industry had a tough year in 2016, in part due to a slowdown in luxury spending in China, European austerity measures and volatile oil prices. Russia’s annexation of Crimea, and the sanctions subsequently imposed on the country, also had a “huge impact” on Russian consumption, he says.

But according to a report by Bain & Company, the outlook for 2017 is better. It predicts the luxury market will grow between 2-4%, driven by renewed Chinese consumption and improving consumer confidence in Europe. The UK’s weaker pound, says the report, also means it stands out as a “bright spot” for market growth.

The changing marketplace

Although some customers visit 77Diamonds’ plush Mayfair store to design and buy jewellery, this can be done entirely online. Given the meaning often invested in diamond purchases, the brand is keen to ensure that the experience of buying online is as personal and considered as it would be in store.

Kormind points to the way retail has changed over the last decade, which means a combination of great customer service, low prices and bespoke design is now crucial for remaining competitive.

“Shops used to be able to dictate to consumers,” he says, but people can now buy almost anything online and tend to be much more informed and price savvy. “Customers are so much more demanding,” he says.

The company aims to match repeat customers with sales representatives who know their purchase history, and its sales team grows in line with sales to ensure customers get prompt and personal replies to enquiries.

Although most of 77 Diamonds’ clients buy diamonds for themselves or as gifts for loved ones, some also buy as an investment. Owning diamonds is a great way to preserve wealth, says Kormind, particularly in the current economic climate. If you sell at the right time, he says, you can make three or four times your money.

A case in point is one of Kormind’s friends, whose family moved to the UK from Iran when the Shah was deposed. Although they had been wealthy in Iran, they left almost everything behind them. But they smuggled out one particularly precious diamond, says Kormind, which they then sold in the UK and rebuilt their lives.

“That’s the power of diamonds.”