MORRISVILLE – Charles & Colvard Ltd., the original and leading worldwide source of lab-created moissanite, has challenged the notion that a diamond is the only stone that can be “forever” for the past 23 years.
The company aims to lead a revolution in the jewelry industry – delivering a brilliant product at extraordinary value balanced with environmental and social responsibility. But this revolution isn’t in full-swing quite yet.
Charles & Colvard believes that most consumers are not generally aware of the existence and attributes of moissanite jewels. Historically, total moissanite jewelry retail sales have made up less than 1 percent of the total jewelry market. As a result, the company’s success is dependent upon innovative marketing efforts to spread the word about these unique stones.
The jewelry retailer spent nearly $7.48 million on sales and marketing in 2017, an increase of 6 percent from the preceding fiscal year. At over 27 percent of total costs and expenses, this is a substantial amount for a company with a net loss of $453,477.
In the emerging moissanite market, “We absolutely have to expand our marketing,” said Vice President of Marketing John Lane. “In a climate like this, it’s the only way you can grow.”
“I don’t like fake diamond”
A diamond is pure, crystallized carbon with trace levels of impurities while moissanite is a compound of silicon and carbon, UNC-Chapel Hill gemologist Michael Shore explained.
Nobel Prize-winning chemist Henri Moissan first discovered silicon carbide, or SiC, in a meteorite crater over 120 years ago. After years of experimentation, scientists from Research Triangle Park developed and patented a process to create pure SiC crystals in a controlled laboratory environment.
Charles & Colvard’s premiere product, the first colorless moissanite, Forever One, grades from colorless (D-E-F) to near colorless (G-H-I) using the Gemological Institute of America’s color grading scale.
The famous slogan “a diamond is forever” put the marketing of any clear gemstone at a disadvantage due to the natural tendency of people to compare, according to Charles & Colvard’s most recent annual report.
The company believes this notion is one of the greatest marketing achievements ever, and it has altered the way consumers view some of the most personal aspects of their lives, marriage and romantic gestures.
“Not only did the idea spread that a diamond ring the purest expression of love and that you should absolutely buy it as an engagement ring,” Lane said. “But also, that you should spend three months’ salary on it.”
The company has faced the common critique of this clear gemstone as a “fake diamond” heads on.
“Fake diamonds and diamond alternatives are neither fake diamonds nor diamond alternatives, rather, they are each their own unique gemstone,” the company posted in a blog post on March 8, 2017. “In the jewelry industry, the ‘diamond standard’ reigns supreme, but other gemstones such as Forever One moissanite, white sapphires and white topaz are becoming more and more popular.”
Analysts from Pantho Investments said it’s important to remember the diamond industry was successfully built by powerful marketing campaigns, and it’s possible for Charles & Colvard to follow a similar model for the moissanite industry.
“I don’t like fake diamond,” Lane said. “I don’t like diamond simulants. I don’t like it when people say ‘with as much fire and brilliance as a real diamond.’ It is real moissanite.”
“Moissanites and Millennials: A Perfect Match”
Executives have identified three primary motivators for people who are currently buying from Charles & Colvard — beauty, value and social responsibility.
“Our marketing programs are driven by this understanding of our audience and their motivating factors,” the company disclosed in its 2017 annual report. “Their mindset drives the segmented messages we deliver, defines the partners and kindred brands we select and co-promote with, and determines the channels in which we engage with our audience.”
In this case, Charles & Colvard aims to curate the quality of opulence in a luxury product while providing consumers with a greater value. The marketing vice president said he wants more than luxury, but he hopes Charles & Colvard’s products defy expectations on multiple levels.
“I want people to find our product and say, ‘Holy crap! I can get something that looks great for that value and it’s better in an ethical way,’” Lane said.
One couple from Colorado feels this way.
“We chose Charles & Colvard because they seemed most knowledgeable about moissanite stones and I don’t feel comfortable wearing a ring worth more than a house down payment,” Hanna Norstedt said in an Instagram post. “Sparkly in any light with an incredible fire. I can’t stop staring and probably never will.”
The company has had a lot of success with engagement and wedding ring customers. But unfortunately for Charles & Colvard, most people only get married once or twice. “Which means if you’re only selling engagement or wedding rings, you’re only engaging a customer once or twice in their lifetime,” Lane said.
In 2017, the company expanded the finished jewelry line to build the Charles & Colvard footprint beyond bridal and work toward building a relationship that transcends a lifetime of commemorative moments.
Given that the average age for marriage in the U.S. is approximately 28 years old, it makes sense that Charles & Colvard’s target audience is millennials, who comprise about 50 percent of buyers. In a conference call on March 8, CEO Suzanne Miglucci said, “They appear to proactively seek out goods and services that align with their core principles and have become devoted and vocal advocates of brands that embody green practices.”
Millennials prefer spending money on experiences, rather than material goods, and compared with past generations, Millennials are far more concerned about corporate transparency and social responsibility, the company said in a June 2015 blog post.
The annual buying power of millennials is estimated to reach $200 billion. According to The Wall Street Journal, 80 percent of millennials gravitate toward brands that prioritize making the world a better place.
Charles & Colvard believes moissanite is primed to take advantage of the market in which people are actively looking for an alternative to diamond.
“Putting Our Money Where Our Mouth Is”
Given millennials’ tendency to gravitate toward goods that “do good,” Charles & Colvard wants its environmental and socially responsible efforts to go beyond consumer expectation. Of course, the company prioritizes environmental and ethical responsibility in the creation of moissanite.
But Charles & Colvard doesn’t stop there.
“We do things like give money to The Nature Conservancy with different purchases and partner with organizations so that it’s not just us saying we are socially responsible, but we’re actually putting our money where our mouth is and doing something good for the environment,” Lane said.
In December, Charles & Colvard released limited natural green moissanite jewelry as a part of the Love Green, Live Green initiative to raise awareness for global sustainability.
“For those who share our concern for the world around us, our green moissanite embodies their devotion to live green,” said Don O’Connell, chief operations officer and senior vice president, supply chain.
In another case, Charles & Colvard announced in April that it is donating 10 percent of its net proceeds from a 10-piece jewelry collection to She Should Run, a nonprofit organization that seeks to expand the talent pool of women running for public office.
“This is actually a revolutionary idea that you can change an industry and bring a product to market that removes all the nastiness from it and still has value and beauty that can go along with it and do it in a way that people can feel good about,” Lane said.
The company has learned to quickly adapt to consumer trends, whether it be connecting to core values or following online shopping trends.
“Every individual shopping journey is different”
Miglucci said the company’s channel expansion has been effective in providing broad product availability to a wide range of customers in both traditional outlets and through online marketplaces, in a conference call on March 8.
“Every individual shopping journey is different,” Miglucci said. “So, it’s important they can find Charles & Colvard on their specific path.”
Today, Charles & Colvard markets directly to consumers, and its finished jewelry items are available on Amazon, eBay, Jet and other outlets.
Following an initial pilot test of 50 stores, Charles & Colvard jewelry is now available in nearly every Helzberg Diamonds store, where it can reach consumers who want to touch and see moissanite to validate their purchase.
The stones can also be bought on the company’s website. Charles & Colvard was relaunched as a premium gemstone brand with the charlesandcolvard.com website as the primary storefront in October 2016.
Simple engagement rings start at only $79, but the most expensive options reach $4,559. This is about one-tenth the cost of a traditionally mined diamond.
In the 12 months since rebranding in the fourth quarter of 2016, the company gained exposure to over 25 million consumers in the 12 months following the relaunch. Charles & Colvard saw a 181 percent growth in its Facebook network, grew its Instagram followers by 248 percent and had nearly 1.5 million views of its YouTube videos.
“We have a good product, and we’ve been marketing the product well. We have not yet built the brand the way it needs to be built,” Lane said.
He continued to explain that the company has mostly used passive traditional marketing efforts and he hopes consumers will start to see more influencer marketing, live events and even pop up stores. Consumers saw a glimpse of this interactive marketing strategy when the Forever One moissanite stud earrings were featured on NBC’s Megyn Kelly “Today” show.
“While I think that we are doing a great job of leaning in and trying more and more and more to learn more about our audience, I think we’re only now starting to truly scratch the surface of how modern marketing research actually works,” Lane said.
“I want to shift our competition”
Up until three years ago, Charles & Colvard held the patent on moissanite and was the only company creating and selling it. With the expiration, competitors have emerged like Moissanite International and Moissanite NEO.
But Charles & Colvard doesn’t seem worried.
Based on its experience, the veteran moissanite producer expects new providers to take significant time to evolve from producing low-end moissanite to high-quality gemstones in the near-colorless range.
Then there’s Wholesale Moissanite LLC, owned by Guy Stimpson, one of the first salespeople at Charles & Colvard. The product is sold under the name NEO. Stimpson said he had been waiting for the patent to end for years and feels like the product has enormous potential.
Although lab-curated diamonds are beginning to emerge with the some of the same marketing tactics as Charles & Colvard, offering a traceable and sustainable solution to a traditionally mined diamond, the lab-grown diamonds are still extremely expensive to make.
At Michaels Jewelers, the lab-grown diamonds are sold under a white-label brand, “Treasure Chest Grown.” These “grown” diamonds cost consumers 30 to 40 percent less than natural diamonds.
In terms of cost, moissanites are still much more competitive. “You’re not actually changing the value proposition of how much you have to pay for a diamond,” Lane said.
Despite decades of negative press about conflict diamonds, only 11 percent of brides are choosing jewels other than diamonds, according to Charles & Colvard’s fourth quarter investor fact sheet.
“I want to shift our competition. I would rather compete against the idea of us being a jewelry brand that allows for great value and moissanite and great style rather than trying to wait and go head to head against diamond for engagement rings,” Lane said. “If you can enter a different market at a slightly different point and price point, then you change who your competitors are.”
Despite intensified marketing efforts with the expansion of the senior sales team, Charles & Colvard remains unpopular on Wall Street.
Even with growth tactics and the new market tier, 2017 showed a net loss of $453,477 for the company. However, in comparison to 2016’s net losses surpassing $4.52 million, the results did show an improvement.
Earnings from the fourth quarter of 2017 were slightly more promising. Net sales surged 42 percent, led by strong online channels growth. Charlesandcolvard.com website net sales doubled over the year-ago quarter, generating a 117 percent increase.
“In Quarter Four, we achieved profitability and it represents the company’s tenth consecutive quarter of progressively improved bottom-line performance, and the first time we’ve produced a profit since 2013,” Miglucci said in the earnings press conference.
She attributed the year-over-year performance improvement to well executed strategic initiatives that took place over the year.
Revenue declined 7.5 percent from $29.2 million in 2016 to $27 million in 2017. The company attributed this decline to a single sale transaction that took place in the first quarter of 2016.
Finished jewelry sales increased 35 percent from over $7.7 million in 2016 to nearly $10.5 million in 2017.
Chief Financial Officer Clint Pete gave another big announcement during the March press conference.
“In January of this year our board of directors approved a change in the company’s calendar year reporting cycle from December 31 to fiscal year ending of June 30,” he said. “This change enables our executive team to ship the annual planning and budgeting process away from the holiday season.”
Lane said the newness of the market and demand allows for growth and decline to occur simultaneously. “People are looking for something as an alternative to diamond, but we don’t have a corner on the market of what alternative diamonds,” he said.
With a profitable fourth quarter and predictions from analysts McKinsey & Co. expecting the gemstone market to be valued at $8 billion by 2020, there’s hope for a strong future at Charles & Colvard.
In the meantime, shareholders and executives alike are left wondering when “forever” will come.
This story is from the North Carolina Business News Wire, a service of the UNC-Chapel Hill School of Media and Journalism