INTERVIEW : Vin Lee

” From the feedback I am getting the middle market pricing has leveled off between $5,000-9,000/ct for natural diamonds”, says a confident Vin Lee !

Vin Lee’s Beverly Hills’ family office Grand Metropolitan $7 billion AUM is a privately-held luxury goods holding company with a 60 -brand portfolio. The Group specializes in distressed debt assets of luxury brands.

Fine Jewelers is one of the largest private jeweler groups in North America. Heilig-Meyers is also one of the largest private furniture retailers in the United States.

The Group also owns Boulmiche, Strottarga Caviar, Gallery Rodeo, The Beverly Hills Cigar Club, and Beverly Hills Sports Car. We participate in charity auctions, celebrity events, and red carpet functions including the Cannes Film Festival, Oscars, Grammys, Emmys, and Independent Spirit Awards.

Vin Lee spends his time between the Gulf Coast, Florida & Southern California.

Here, in an Interview with PRECIOUS WORLD, Vin Lee expresses his opinions on varied topics with great elan !

Some excerpts:

How is the jewellery sales progress now in the USA on the whole? And how is your own company’s growth progressing? Any expansion plans in the offing? Please, give a full – blown report of your businesses right now. This is our readers’ request.

I think the global diamond/jewelry industry as a whole is fractured from an identity crisis.  Many independent jewelers and regional chain stores were strongly armed into embracing LGDs as part of their inventory mix.  They feared losing sales in a hyper competitive landscape amidst uncertain politically affected economies the last several years.  In the USA we have been under a cloud of pseudo recession for years with many market segments seeing a spike in production and distribution costs. As hard as it is to believe, a small family-owned fine jeweler in a little town, USA is being adversely affected by the long drawn out conflict between Ukraine and Russia.  The sanctions and pressure being put on the Russian diamond trade by the United States government in an attempt to facilitate an end to the war is having a ripple-effect throughout the entire globe and trickling down to Main Street America.  There are many factors straining our industry including conflicting messaging, wavering infrastructure and an absence of global leadership.

Finlay Fine Jewelers has roots reaching back to 1787.  But many of the brands are much younger, being founded in 1832.  Originally, the brand was the largest leased jewelry company in the world.  It leased the fine jewelry counters in thousands of department stores all over the world including over 200 in France. This scale allows for inventory control management that reacts to local, regional, and global diamond trends.  We shift product mix all over the planet to affect those demands.  Earning over $1 billion a year carries a tremendous amount of influence in the market and arms our independent brands with access to deep direct inventory, skipping wholesalers and crippling carrying costs.

In a recent conference we discussed the struggles that industry leader Signet was having with its identity, product mix, marketing, and management changes.  Like Signet, Finlay Fine Jewelers has grown primarily through acquisition both before and after my tenure.  Since taking the reins in 2012, we have grown our portfolio to 20 of the TOP 50 American jewelry brands of the last century.  Reconstructing the prominence the company held throughout the 1980s-1990s.  Signet under its previous CEO made $2 billion in acquisitions which included Zales, Blue Nile, and James Allen websites.  Those deals valued the rest of the enterprise at a paltry few hundred million as it fought to arrest the debt assumed to make those deals and that came with those deals.  Finlay patiently waited in the wings as our targets were cleansed through bankruptcy courts, shedding overhead and debt, rebranding them all on our digital platform for the world market.

When American diamond sales are sluggish as we have been experiencing year over year, it ignites our M&A operations and creates higher returns in our wholesale business.  We offer between 1 to 1.5% interest in merchandise put on memo each month depending on volume and your account standing.   I absolutely refuse to borrow or carry any debt on acquisitions so we negotiate from a cash position only.  It takes longer but it ensures growth from the date of signing. Our enterprise value is comparable to Signets even with their larger brick & mortar foot print.  We have talked extensively about taking a stake in Signet as well as DeBeers in the future.  This would require about $6-7 billion in free capital and is currently beyond our capabilities without risking our existing model.

What is the current position of the natural diamonds in general in the US market with shortages reported in the world markets? How is the Natural diamond price behaving; and how is the sales of natural diamond jewellery faring now? Your expert comments?

Just this week Botswana’s Debswana is said to cut production by 27%.  This along with sanctions on Alrosa continues to send chills throughout the trade.  The fake (LGD) stone push has not helped.  Back when DeBeers launched Lightbox in 2018 and chains like Pandora, Helzberg and Signet started pushing them into their product mix and marketing, I was very adamant that we would not participate in this fad.  But it would take a full cycle of 5 years to play out.  Factoring in engagements, both successful and failed as well as marriages, successful and failed, the average time it takes for a product to filter through to the tertiary markets.  When people started trying to unload their stones to either pawn shops or back to fine jewelers, they would discover they hold absolutely no value as there is no demand.

I spend a lot of time on social media and the arguments are nonstop about price/value and investment/ROI.  Regardless of the headlines, diamond prices are dictated on the showroom floor and have a lot more factors than just the 4Cs.  Today’s seasoned salespeople and brokers are much better equipped to demonstrate the value of natural diamonds over synthetics.  From the feedback I am getting the middle market pricing has leveled off between $5,000-9,000/ct for natural diamonds.  The synthetic pricing that once held up at the bottom of that scale has sunk to as low as $800/ct with successful offerings reaching as high as $2,000/ct.  The irony now in the jewelry industry is that with commodities outpacing the economy, gold has elevated to $3,500 making it as vital of a consideration as the stones.

I learnt that LGDs diamonds & Jewellery are doing pretty well globally, especially because of their acceptance by Gen Z and even other buyers? Why can’t both categories survive amicably, providing buyers liberty to choose? Your thoughts please?

In 1992, I bought my first fine jeweler company.  I walked in to purchase a Rolex President and left with the keys to the business and entreEd into a whole new business.  My education started in the back office of that showroom with 50 years’ worth of trade magazines.  Synthetics have been around since the beginning of man.  From paste, to cut glass, to cz.  Moissanitte came on the scene ushered by Charles & Colvard, a company that today is worth less than the Patek I wear out to lunch.  Slocum stones were thought to destroy the opal industry in the 70s.  Tom Chatham was a genius at created-emeralds in the 1980s.  Then the industry introduced Clarity Enhanced or Fracture Filled Diamonds.  This was a method of taking inferior material and using lasers to cut out the imperfections and then back filling them with silicon.  None of these products made a significant dent in the $100 billion diamond trade.

The reason LGD came on like gangbusters was two fold.  Number 1 the barrier to entry was very low. Anyone with a credit card could buy into the business as a wholesaler or broker and start pushing the product to retailers and consumers.  It also had a high rate of return bringing in all sorts of characters into the marketplace and lots of fraud that damaged the industry and thousands of marriages.

Number 2, the “woke” economy drove this nonsense not just with Gen Z but their very intimidated parents.  It became very rigueur de jour to eat fake meat, wear fake fur, drive fake cars (Tesla), and of course buy fake diamonds.  We even have fake girl competing in sports.  The problem was in the marketing, LGD suppliers should have priced and marketed LGD as a superior product to natural diamonds.  Like Tesla and Beyond Meats did.   Instead, it positioned itself like Walmart Hermes, Fake Louis Vuitton handbags, and Rolex watches you buy off a street vendor for $100.  There is always room for these products, until there isn’t anymore. 

Heard that LGD jewellery is doing extremely well in the US as well. Knowing your stand on the LGDs, I wonder if you can accept the LGDs as just another category and not a competitor of Natural diamonds? Your views?

I think that in the next 5 years you will continue to see a sinking in the price/ct of LGD until, like moissanite, the next generation comes of age and pursues engagements and marriage.  Our friends at Signet spend significantly on television marketing, just as does Pandora, selling a product to a market that doesn’t watch television and using woke imagery that is a turn off to the generations that do and also have the most discretionary income.  When DeBeers announced the shuttering of Lightbox, that was the first nail in the coffin.  Fortunately, no one made a significant amount of money in that brief moment in history to perpetuate it in the marketplace.  Do you know any LGD Billionaires?  Because I know a dozen Diamantaire Billionaires. 

With shortage of natural rough diamonds, the Indian manufacturing sector has gone into LGD production and manufacturing on a huge scale, thanks to the Indian Government who supported the sector. Now there’s no looking back… LGDs are here to stay! Your views?

Honestly, we have no holdings in the Indian market.  I do work with Indian traders and brokers that over my 30 years in this business have retired from a position of success but a lack of hope for the future without new leadership.  The United States government made the same mistake under the Obama/Biden Administration when it created mandates to change the Automotive industry to EV, and blackmailed our manufacturers to either change or pay Tesla for carbon credits.  Government has no place in a capitalist economy. 

You may have noticed in the headlines that the new administration is pushing hard for a new economy based on oil production.  Even Elon Musk doesn’t care about EVs anymore.  He has cashed out and focused on AI and Mars.  I bet my personal inventory of 100,000 carats that LGD will not replace natural diamonds.  My jewelry companies’ slogan has been “From Mine to Yours” for 30 years.  I don’t expect I will be reprinting the brochures anytime soon.

Apparently, the scenario in the global retail jewellery market is changing with natural and LGD jewellery categories vying to catch the consumers’ eyes. Where do you see the global jewellery market in general and the US market in particular eventually?

I think that like any trend or fad in any part of the luxury market, it is constantly interrupted by the consumers’ whims and fancies.  There was a time when Beanie Babies (little plush toys) were all of the rage and people paid thousands to complete their collections.  Now you have to pay the landfill to take garbage bags full of them off your hands.  Today, Labubu is the new IT thing commanding as much as $800 for a similar plush toy sold in a blind box.  It turned Pop Mar into a $50 billion enterprise with over 300 boutiques worldwide.  You couldn’t have guessed it, planned for it, anticipated it, but it happened. 

Ironically, diamonds are only a $120 billion/year industry.  About 70 years ago, DeBeers dictated to the market what was hot and what was cool.  They started with the solitaire engagement ring and educated buyers about using two months’ salary as a guideline.  Then they created the three stone campaign on the other hand as a way to sell more weight.  Soon they were working their way through the body with tennis bracelets and their famous diamond pendant in the donut setting.  I believe that the “Diamond is Forever” campaign spent around $500 million a year keeping the industry together.  Until it didn’t any longer.

Bernard Arnault’s Louis Vuitton bought Tiffany & Co. for $16 billion in 2020 and limped along through COVID, taking that time to spend hundreds of millions renovating stores and has demonstrated new product lines.  Tiffany and Richmont’s Cartier both sell the dream to clients backed with a legacy in luxury.  I would like to think that we emulate them at Finlay Fine Jewelers as well.  But when the largest player in the market is distracted by chasing Walmart and Amazon and hiring people from the Pet Food industry to run their affairs that leaves the majority of the industry rudderless. 

I am hopeful that the new administration in the United States will be able to assist in bringing a peaceful resolution to the Ukraine/Russia as well as other parts of the world in conflict.  Thus untying the hands of Alrosa to compete evenly on the world stage again.  In addition, I hope that DeBeers will find new ownership and begin to lead the industry again.  Not only for the largest privately-held jewelry group in North America, but also for the modest family-owned jewelry store on Main Street, USA.