Arnaud Bastien: Graff’s presence in Asia is a long story because everything started 50 years ago when Laurence Graff left the UK to sell his first pieces throughout Singapore, Malaysia, and Hong Kong, starting, at that time, what was really a one-man business. He built the company through the years and in the 1980s he sold a lot in the Middle East, then it was Europe again, and finally in the 1990s, the company moved back into real retail again.
ET: How about recent expansion?
AB: What’s funny is that Graff only had one store until 2000. We opened the second store in Monaco in 2001 and now we have 42 stores, 14 of which are in Asia. We started in Asia in 2006 with our first store in Tokyo, Hong Kong in 2007, and then Shanghai. In 2010 we rolled out our expansion plan and now we are planning to open three or four shops a year in Asia. We have six stores in China and four stores in Japan, as well as locations in Macau, Taiwan, and Korea.
Now we are looking into Singapore and other key areas. We believe the brand remains at the pinnacle of the Asia market. We strive to expand in all the key places and, even though the Asian market has slowed, it is only temporary and we feel that the brand is positioned well. We are even looking at a second or third store in Macau.
ET: How has Graff changed over the years?
AB: Ten years ago Graff was just a house selling treasure. Today it’s a brand selling extremely valuable goods. The branding has really grown. Now people come to us not because of the reputation, but because they want a specific Graff design. I believe we can remain at the pinnacle of the market because beneath our retail component is a fully vertical, integrated company.
To my knowledge, we are the only brand that have mastered everything involved with diamond production—cutting, polishing, setting, designing, and retailing. Most of our competitors only engage in the last two steps. Some are interested in the mining, but not in the same category of diamonds that they are selling.
We have been fortunate to invest in some mines in Lesotho and Botswana and those mines, for the past ten years, have been producing very large diamonds. It might be chance, but I think Mr. Graff understood that business. So today we have developed real expertise in cutting and purchasing real rough diamonds. Not everybody can take the risk and buy $20 million rough stones where if you cut it perfect you make a tremendous profit but if you cut it incorrectly you lose everything.
So we master all those steps and it gives us amazing competitive advantage because we know what we sell and we know how we make it. We also get offered the best terms and conditions for each big piece because we have been in the business since the beginning.
ET: And how is the Asia business evolving?
AB: As far as Asia is concerned, we have established the brand and are recognized where we want to be. China is still a big market and it’s an everyday effort to educate and recruit new people and that’s what makes the job exciting. We do a lot of small, private events and presentations and if you explain to people that you are what you sell they begin to understand that, at the end of the day, they trust what they can see. So a lot of people are very impressed and choose to engage with our brand. We are not necessarily the most famous jeweler in the world but that’s not what we want either. We want to cater to the level of people who can afford to buy not just jewelry, but also exceptional gems.
ET: What is your background?
AB: I came to the job by chance. I thought I would be staying in China for a couple of months and now I have been here for the past 15 years. I’m originally from France but I’m more Chinese on the inside now. I worked for other jewelers for a long time but when I met Mr. Graff in India in 2006 it presented a nice challenge for me. I
ET: Where do you see future potential?
AB: I’m sure you’ve noticed that the watch market, since 2001, has started to boom. That expansion we have seen globally is amazing. In ten years the volume and prices we have reached within the market are amazing. I’m not saying it’s saturated but going forward the growth will not be what it used to be.
The next big thing is the branded jewelry, and we have no idea how big it can go because the retail model is still very much “your local jeweler.” The share of branded jewelry is still minimal but the fact you see major players like Cartier, Van Cleef & Arpels, and Richemont, as well brands like Louis Vuitton, Salvatore Ferragamo, and Gucci, launching their own jewelry, is evidence enough. All this is going to break up the market and the cake is going to get bigger and bigger.
Ten years ago, existing at the pinnacle of the market, we knew that we had to grow with the market. It’s necessary to exist tomorrow, but we are also confident we will maintain our position in a market that is only going to get bigger.
ET: And how does this effect the expansion plans of Graff?
AB: You can expand your business with a certain number of stores. We have forty, and will probably expand to fifty, but you have brands opening 400-500. I doubt we will ever be 100 stores. The truth is large diamonds, anything above two or three carats, are really rare, so the gap between ourselves and other jewelers is only getting larger as the market expands. We are naturally being pushed to the pinnacle of the market. And because we control our supply, we can select what we want to produce. The brand is changing, the market is changing, but I think it’s exciting for the industry.
ET: How has the growth in the watch sector been for Graff?
AB: What I didn’t expect when we launched the watches in 2008—beyond the volume, because we have 30 or 40 stores around the world—was the average price they would sell for. I was looking a couple weeks ago and we sold an amazing number of watches for over $3 million. We have a tourbillon and so on but where we are most legitimate is our diamond watches, where we bring diamonds of sizes never before seen in watches. We have watches that have GIA certificates. We do a lot of special orders as well, where people want their face on the watch or everything in ruby. A lot of those can reach $3 million. It’s actually become difficult to use larger diamonds because we are limited by the size of the watch.
ET: How does this translate to your business here?
AB: This is telling us that not only is Asia a big market for watches but that it’s only the beginning. Watches convey brand. It’s written on it, the shape is recognizable, and so on. It’s difficult to brand a five-carat diamond, however, so what this is telling us is that our brand is growing more appealing to the wealthy Chinese market who are approaching the brand through our watches and becoming, later on, jewelry clients. We are a very feminine brand but we have been able to recruit Chinese men, who are spending a lot of money, through our watches. Still, we are just scratching the surface compared to actual market worth.
ET: And serving elite travelers means constantly being on call?
AB: Business here is day and night, we’ve done some of our biggest deals at 11pm. Customers will walk in wearing a 40 carat diamond and ask me if I have anything nice. And I always have something bigger but it’s amazing what these customers want.
ET: Are the clients Asia-based or global?
AB: Hong Kong is a special place because about 45% are Mainland Chinese, then a good 25% locals, and the rest are rich Americans, British and Japanese. It’s a very international clientele.
ET: Anything else you would like to add?
AB: Our top clients are purchasing when they are traveling. That type of clientele is busy all the time. The only time they have time to shop is when they are travelling. I’m sure people from Hong Kong are buying in America and Britain while they are travelling, but I’m selling to Americans and the international rich when they travel here because it is the only time they can really enjoy themselves. These customers are private jet owners. In the end we attract this clientele because we are doing things a normal jeweler wouldn’t do.
A jeweler is a bit like a doctor. You have a trust in your jeweler that you don’t have in your shoemaker and the girl selling you dresses. But you keep your jeweler, you have a trusting relationship with them. Over the years, Laurence Graff built that relationship with many of those wealthy individuals and today they have become friends. They have lunch, they go on holiday together, they have a club of jet owners who know each other’s yachts, and that’s how Graff understands how his clientele travels.