Taking A Chance On Success

During a downturn in the economy, there is no doubt that experience can make the difference between just getting along and taking advantage of the situation to build a better business for the future.

And that is just what some companies are managing to do, despite the difficulties being thrown their way by the slowing economy and the tight margins inherent in the diamond and jewelry business.

IDEX Magazine spoke with a range of companies involved in the trade to find out how they are coping with the current situation, and to find out just where they are finding opportunities in the recession. The answers are as varied as the companies profiled. Some have had their core business beliefs validated, while others have seized certain business opportunities to expand their market share. Still others have consolidated their businesses to focus on the core concerns of their companies. And, despite the fact that many businesses are simply hunkering down in the hope of surviving the turmoil, many are making moves guaranteeing the opening of new markets.

The Avi Paz Group is one such example. The company recently announced a joint venture with fine jewelry designer, Sasha Primak to launch the PrinceCut® Diamond by Sasha Primak. “It is precisely during times of economic crisis that the opportunities that arise for international collaboration between diamond manufacturers and jewelers constitute an opportunity for both companies,” says Paz, who serves as the president of the Israel Diamond Exchange and of the World Federation of Diamond Bourses.

As well as embarking on this new venture, Paz also says that the way the business is doing business has undergone a positive change. “Companies are being meticulous about expenses; within our company, different teams talk more frequently with each other, and we see greater efficiency.” Externally, he says, there’s a change in the way the company operates, as it is a lot more careful with delinquent payments. In addition, he says that the amount of stocked goods has gone down substantially.

Echoing Paz is Anil Shah, partner in Venus Jewel, a large Indian manufacturer and DTC Sightholder, who describes the changes he sees in company management, “People will have a perfect finance management system where they will concentrate on doing a value-based business rather than volume based [business], he asserts. In addition, Venus Jewel, which prides itself on corporate social responsibility, sees a connection between corporate governance and the recession. “Companies are moving towards a transparency based and ethically sound business practices, less dependency on third party certificates and more efforts to deliver qualitative product.”

Dimexon is another Indian Sightholder that has taken advantage of the recent slowdown to examine the group as a whole and to adapt to the new reality.

Rajiv P. Mehta, CEO for Diamonds Business, points out that this is a moment to move beyond the financials and focus on people. “We are taking steps today to ensure we remain a strong organization, not only financially but also from a talent point of view.”

“The current times are times to consolidate our business, fine-tune business practices, making our product offerings much more attractive, with a prime focus on understanding who our committed set of buyers are and the markets that they operate in.” Furthermore, he posits, “the overall emphasis is to present Dimexon as an ‘integrated partner,’ which offers a better value to the entire diamond jewelry pipeline, with an ultimate focus on offering ‘quick responses’ to [the] volatile industry dynamic.”

Yakubov Group, a Ramat Gan-based manufacturer, is also focusing on group operations and functions. Chairman Itzhak Yakubov contends that the “current economic situation forced us to take a closer look at our company’s overall functions and improve our working habits, to increase the company’s efficiency. As part of the process, we found new ways to use our own strengths to increase profits.”

One of the ways that the company is looking to increase its market share came with the opening of a retail store in the Israel Diamond Exchange complex in January 2009, at a time when stores were closing rather than opening. “Having the store inside the bourse, close to our main business – diamond manufacturing – enables us to monitor the business and keep a close look at the store activity, client needs, market feedback and make changes in real-time, with minimum risks,” says Yakubov.

Although the downturn hit hard and fast, Yakubov sees a constructive outcome from the situation, both at a macro and micro level. When it comes to the industry as a whole, “it cleaned the market of unstable companies; it created better investment opportunities for stable companies.” For the company specifically, “the actions we are taking during the present recession will serve us in the future when the economy gets better,” he claims.

While some companies are embarking on joint ventures, international manufacturing giant Rosy Blue recently launched a business-to-business e-commerce site offering certified polished diamonds. “We have to change with the time and environment,” says Russell Mehta, COO of Rosy Blue India. “We all know that we shall be happy if we achieve half the turnover of 2007. Therefore, we need to focus on costs, leaner inventor y and more margins in this storm.” One of the ways the company hopes the new site will do this is to offer certified stones directly to smaller customers more efficiently and economically than the present system.

When it comes to seeing through the clouds, Mehta believes that the recent upheaval has created a great reality check that will make the industry even stronger. “In the past years, there has been tremendous euphoria in all aspects of economy and therefore in our behavior.

The economic meltdown has brought everybody back to earth. People had lost sight of reality which is now beginning to sink in. This has allowed everybody to rethink their business model and the risk appetite. All in all [this is a] great time for introspection for every business across the diamond distribution pipeline, be it mining, polishing, trading or retailing.”

In the case of Hasenfeld-Stein, which manufactures the FireMark™ Princess Cut Diamond – used mainly for engagement rings – Alexander Hasenfeld, president of the company, believes in one business philosophy above all others – “Don’t buy more than your balance in the bank. A very large percentage of the problems came from banks that suddenly pulled the credit line from retailers,” he says.

Steve Feldman, director of Sales and Marketing at Hasenfeld-Stein, points out a clear way that the company has benefited from the recession. “Because of our zero debt and strong cash position, Hasenfeld- Stein has been able to take advantage of a significant number of special buying opportunities in the cutting centers in both rough and polished.” As a result, he says, the company has been able to pass on these savings to its customers, which has led to the opening of many new doors.

When it comes to planning ahead, Yakubov says, “no one can predict the future but one doesn’t start thinking of rainy days only when it’s raining.” As a focus he suggests that “we always have the future on our mind and try to maintain our success in good times, remaining stable during bad times.”

Looking to the future, Paz believes, “As a result of this crisis, diamantaires will avoid two afflictions in the industry; long-term credit extension and handing over- commissioned goods over a long period of time.”

His thoughts are echoed by Mehta who concludes, “I think the diamond pipeline will have to become leaner and [more] efficient, forward moving, and more and more innovative. Efficient distribution channels like e-commerce will have to be explored. The days of large credit are gone. It will have to change to “cash and carry.”