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INTERVIEW - Cool Diamonds foresees lower spend at Christmas

LONDON, November 9, 2008 - “Keep your costs down, do not hold too much stock and try not to owe the banks too much money.”

This is the advice of Michel Einhorn, Managing Director of Cool Diamonds, a leading Hatton Garden-based online diamond jewellery retailer, on how to tackle the tough global economic climate. He tells JewelleryOutlook in an interview that he foresees a steady flow of customer interest but a fall in the average spend per Cool Diamonds customer as Christmas approaches.


Jewellery Outlook: How are customers responding to the economic crisis?

Michel: As we get closer to Christmas, we have just as many customers as before, but they spend less. They’re still buying presents for their wives. If last year they spent 20,000 pounds, then this year they might spend 10,000.

Our main clientele are middle and upper-middle income. The market for engagement rings will hold up better than anniversary gifts. Getting hits to our website is not a problem. The challenge is to convert the hits to sales.

Jewellery Outlook: How will you change your product range and marketing to respond to the tough economic climate?

Michel: We’ll have less flawless diamonds and more VS. We’re prudent in our marketing. We have a reduced marketing budget. We now have in-house PR rather than using an outside PR agency. The vast majority of our sales are in the UK, but we also sell jewellery in France. We’re doing better here (in the UK) than in France.

Michel Einhorn, Managing
Director, Cool Diamonds
Unemployment will be a bigger problem in France than here. Here people are more adaptable: many people – like the City bankers -- who lose their jobs will not remain unemployed for long. They will find other jobs.

Jewellery Outlook: Presumably the softening in diamond prices eases your cost base and will help you as a retailer?

Michel: That is not the case: We buy diamonds in dollars and sell in pounds. With the recent strengthening of the dollar and the softening of the pound, that can’t be good for us.

Jewellery Outlook: Expectations of lower interest rates may help?

Michel: The banks don’t seem to pass on the full interest rate cuts.



Jewellery Outlook:
What’s the outlook for the top end of the diamonds market?

Michel: Much of the demand came from (ultra-rich) Russians and Kazakhs. They were very big (keen) on large D flawless diamonds. They (top buyers) will disappear from the market.

Prices of the top diamonds have fallen a good 15 percent from their peak. The very top diamonds are the ones that had gone up a lot: they had space to go down.

In the 1-carat range, prices are holding steady. We may see a strengthening of VS prices as some buyers of flawless and VVS will downgrade to VS. There could be a softening of VVS prices.

Jewellery Outlook: Have you tried new products to tackle the economic crisis, such as palladium?

Michel: Palladium has not taken off for us. The Princess Cut (diamond) is one of the winners. It is relatively cheaper than a round diamond.

Jewellery Outlook: Is ethics taking a back seat now that people are so focused on the economic crisis?

Michel: Not at all. It’s important to have the answers on ethical questions. We have trained every member of our staff on the Kimberley Process.



Jewellery Outlook: Have you considered selling more colour diamonds? They seem more popular now.

Michel: We are thinking of selling more yellows. The problem is that they are so popular, and this is reflected in the price. To sell yellow diamond jewellery at 5,000 pounds would be one thing, but to sell it at 50,000 pounds is quite another! We sell the bulk of our diamonds in the 500-50,000 pounds range.