The marriage of Antwerp sightholder D.D. Manufacturing and New York jewelry house Daniel K has cut the supply chain, adding value, margin, and, most importantly, control.

 

Daniel Koren has a diamond he wants me to see. And then a few others.

 

He unveils the first, a 4.84 DVVS2 Ascher, a stone big enough to have left a slight crimp in its diamond paper. Then he reaches into the huge, dark safe beside his handsome, busy desk for a handful of envelopes of similar heft. With quick hands (Koren is a designer, but also very much a diamond man), he riffles the papers for four more jaw-droppers—another Ascher, two cushion cuts, and a multi-carat Vivid yellow—all of similarly awesome clarities, colors, and/or weights.

 

And cuts. When the AGS arrives at Triple 0 grades for fancy shapes, these diamonds would serve as perfect masters. That’s manifest to the naked eye, but also to a thorough examination. I know, as I’m free to loupe the 4.84 Ascher at my leisure. Then the four others as well. Koren has to get back to the never-ending business of building a consumer brand, which the 10 minutes of our introduction and retreat to the relative quiet of his hugely busy 47th St office has put its own slight crimp in. A decision is urgently needed on the readjustment of the main-event cushion cuts of a unique pair of shoulder-dusters, a special order for a special customer. Then further pressing questions from Koren’s rapidly growing staff on the status and ETA of other special pieces for still other special customers.

 

The questions are all minute and detailed, though Koren answers so quickly and matter-of-factly it’s hard to credit. Daniel K, the consortium of fine jewelry lines Koren is busy branding, is now distributed at 250 points of sale, and every step toward fulfillment of every order of every line seems to be on file somewhere—somehow—in his mind. It helps that every piece he makes has a name, not a SKU or catalogue number: Koren seems allergic to any form of impersonal quantification. Other jewelers photograph lines as they’re run; Koren has a photo of every piece produced.

 

“What’s most crucial to me,” he says, “is control of production. Every step. From the smallest wire to diamond selection. Everything handmade.” He speaks glowingly of Tiffany, his awe evident less of its jewelry as of its control of the means and materials of production, from precious metals to virtual ownership (with the recent Aber partnership) of a diamond mine.

 

Which brings him back to the 4.84 Ascher and the four other stones. I’d wondered why these particular diamonds were unveiled. They are big and very beautiful, but they’re also what Koren calls his “bread and butter: 2-5 caraters of top quality.” Later today, he’ll show me far more expensive stones. All, he points out, are just below a magic size - 2-4 points per carat less on average. “Any other manufacturer,” he says, “would have made a five-carater out of that Ascher. More margin for them, less control for me.”

 

And it’s clear: Whoever cut these diamonds had access not only to very exclusive rough, but the ability to plan their added value downstream. It’s my introduction to sightholder-jeweler partnering at the highest level.

 

A Very Elite Marriage

Many sightholder-jeweler partnerships have grown out of the imperative to add value to diamonds, underscored and bold-faced so emphatically by the De Beers Supplier of Choice announcement four years ago. Downstream was a logical place to look. The historical divide between diamond people and producers of diamond jewelry was strong, however: Time passed before sightholder suppliers made the now inevitable-seeming calls to the big-name designers and/or manufacturers, and the chain began to shorten.

 

As the DTC ran through its famed stockpile over the next four years and rough got smaller, producers of pave- and channel-set pieces came into sightholder focus as well. Still further partnerships were announced, with value added to jewelry made now to order of the Zales and Sterlings of the world. A belt-tightening unthinkable a brief time ago, it now seems the way of the future for smaller goods: production-line efficiency, just in time for the inevitable automation of the chain:

 

“You put kimberlite in at one end of the floor,” a sightholder-jeweler wisecracked before a recent state-of-the-art factory tour. “2,500 pendants come out the other.”

 

“Now if we could just get the computers to buy from each other,” joked another.

 

The Antwerp mega-sightholder D.D. Manufacturing had a different nut to crack. Known as the source of the world’s finest stones, all 50 points and up (D.D. gets top goods from Rio Tinto and Billiton as well as De Beers), they made their real name, however, by cutting: GIA Double Excellent, every time, or AGS Triple 0 should a customer of rounds measure that way. Vendors to almost all of the great jewelers synonymous with the diamond’s luxury image, they were value-adders to begin with. So how to add more? Their path lay not only downstream but down the years, in a vision looking past the white waters of any given moment’s sourcing issues and styles.

 

Their answer came a bit more than two years ago, in the form of their client Daniel Koren. An emerging New York designer of unique, fashion-forward pieces, Koren was a man of vision as well. His business then was 90% loose goods, but his focus—and budget—was always toward his name as a designer: In 1999, his first year as an independent, he spent $700,000 on top-shelf ads, while selling only $300K of top-flight jewelry. That second number would have been significantly higher, but for one factor: Koren didn’t have steady access to top-quality diamonds.

 

The mere supply-meets-demand strategic advantage was enough in itself to bring the two parties together in the value-added climate. Financing enabled Koren to pursue his brand name not only in a phenomenal diamond source but also in all aspects of brand building. Infrastructure, added office staff and factory space (in late June, Koren and a partner opened a deluxe 4,000-square-foot 46th St plant to complement his existing factory on 48th St). And of course, the marketers, advertising and PR professionals, architects, and, crucially for Koren, an exclusive distribution network:

 

“When I began as a designer/manufacturer, my goal was to make one ring for $20,000 rather than 20 for $1,000. It wasn’t only a question of what I wanted to make, though my vision in designing is always to be able to see the piece 50 years from now, up for auction, or at some estate sale. But it was also a business decision, and an issue of identity. To the chains, you’ll always be an account number, chasing business instead of leading it. Relationships for the long-term, and I mean 20-30 years, is the only way to lead business.”

 

The Partnership: How Value Is Added

It was those emphases on the long-term and on control that led D.D.’s Erez Daleyot and Koren to the U.S.P. (Unique Selling Proposition) that any brand must promise: High-fashion diamond-jewelry pieces suitable for everyday wear.

Translation: One-of-a-kind pieces, at volume.

 

“The need for Daniel K to upgrade with an abundant supply of finest cuts was a clear strategic advantage for D.D.,” Gemdax President Anish Aggarwal, the Antwerp marketing consultant to the venture, explains the U.S.P.’s genesis. “So was a scaleable platform to maximize polished prices, shorter credit terms, and a wider consumer market—all clear advantages to a business run on a five-weeks basis. For Erez, however, the opportunity not only to drive demand but to shape it by means of high-end fashion, both in a catalytic manner and at volume, was the true appeal.”

 

Why would such downstream control be important to a manufacturer so high on the supply chain? The key word is shape. Anyone who has seen a sightholder open his box onto his desk realizes the fundamental difficulty: In five weeks’ time, he must cut this supply of a stone that comes in some 60,000 different categories to meet demand that takes months, even years, to stimulate, anticipate, or at best, create. On a corner of his desk is a stack of fashion magazines; on another is a red sheet with the word Rap on top. On still another corner might be order sheets indicating that goods from last sight are still in his clients’ inventories, and possibly coming back. And in the last corner? Let’s put a message that his banker is calling, urgently. How to harmonize them all? First, let’s compound the difficulty. He now has to create added value, at risk a year hence of facing a desk without these rocks.

 

“Erez loved Daniel’s pieces,” says Aggarwal, “but also his ability to introduce fashion in a smooth, easy way. To sell that to the fashion-forward buyers on the U.S. East and West coasts is one thing. To be able to sell to an increasingly aspirational mid-America is quite another.” That requires the ability to design something that invokes what critics of art and fashion call “the shock of the new,” while at the same time selling to a market that doesn’t terribly want to be shocked. Back one last time to that 4.84 Ascher.

 

In recent years, the shape, along with cushion cuts and various new square brilliants, has gathered a niche following among second- or third-time diamond buyers. They’re drawn by the novelty and beauty, but also to the finished goods these shapes typically come in, for the newer cuts invite new designs. That’s half the supply-demand equation. The other half is the increasingly large share of squarish rough in higher sizes/qualities that have been coming of late in the boxes. Where to target those diamonds?

 

How does that work? It works like all fashion does: from the high-end down, i.e., originally in top-made pieces with highest-cut diamonds, and though it doesn’t begin in bridal, it gets there. If the pieces are scaleable. A highest-end designer like Graf, even if it has opened a Chicago store, will never be able to reach the price points and consciousness of the everyday-wearing mid-America buyer. On the lower ends, you’re looking at Rap -20.

 

“Put into Daniel K jewelry,” says Aggarwal, “they are much higher prices, across the board. And it’s moving, quickly and smoothly, from something that was popular only on the Coasts to a credible bridal alternative in Mid-America.” Because imitation is the sincerest form of jewelry design, the Ascher and accompanying pieces are now a significant bridal trend, joining other square cuts forming an increasingly large part of the bridal pie.

 

Koren has seen the recent introductions, and knows that his share of this market, which he had such a large part in creating, is secure. Why? He is leading it, not chasing it. He’s a consumer brand-national, for time being, though with international markets now moving quickly into his focus as well. And into D.D. Manufacturing’s as well.