This article originally appeared in: http://www.ocregister.com/2016/10/18/250000-bauble-anyone-lugano-diamonds-business-still-shines-despite-industry-hurdles/

At Lugano Diamonds, a woman leaves the private store with a piece of jewelry she couldn’t live without. The item had been sitting on the shelf for months but she fell in love, according to President and Design Director Moti Ferder. That single piece of jewelry cost $250,000.

Ferder declined to reveal the name of the woman or which piece of jewelry she bought for privacy reasons, but he did confirm the purchase was not unlike many made at Lugano.

Since its first retail location opened in 2005, Lugano Diamonds has lured some of Orange County’s wealthiest residents through its doors by offering one-of-a-kind pieces studded with precious stones.

In the U.S., jewelry and watch sales reached $74.4 billion in 2014, according to the most recent numbers from the U.S. Department of Commerce. A market research report by IBIS World found the jewelry industry has struggled over the past five years, in part due to e-commerce sales.

This year, Tiffany & Co. began selling its jewelry and accessories through online retailer Net-A-Porter, making the brand’s items available in more than 170 countries. It was a first for the company that for 179 years had sold its diamonds and gems packaged in signature blue bags only via its retail stores.

EXCLUSIVITY

Despite mass marketing by some jewelry brands, Lugano has chosen to focus on smaller and more lucrative markets.

Even its inconspicuous showroom in Newport Beach has a secretive quality to it. Customers typically schedule appointments to view jewelry and must press a buzzer before being allowed inside.

“I had a recent conversation about Louis Vuitton and other places like that,” said Stuart Winston, the company’s new marketing chief. “It used to be that shoppers went to Paris because you could get all sorts of things that you’d never see here, but that’s really not true anymore.”

Ferder, who maintains Lugano has customers all over the world and only 15 employees, says he sees the brand’s lack of retail space as an economic advantage. “We can never rely on walk-in business,” said Ferder. “So for us, it’s really about the referral. That is how our business is, it’s one client at a time.”

Many of Lugano’s items are one of a kind. In its vaulted showroom, the store has an 18.32-carat green Paraiba tourmaline necklace. The rare, pear-shaped stone is in a setting of 9.6 carats of pave diamonds designed by Ferder.

According to Winston and Ferder, wearable jewelry is trending. In the past, buyers would select grandiose suites of jewelry to wear exclusively to galas, but today, shoppers are on the hunt for versatile and casual pieces, Winston said.

“Most of our pieces are not black tie only,” said Ferder. “Instead of having a piece sitting in a safe all year, you can wear something special every day. It makes more sense to get use out of it.”

While most of its jewelry is designed by Ferder, Lugano also offers other custom-designed jewelry. Recently, the design team created for a client a piece that replicated the face of their horse.

“Obviously a bangle is a bangle, and a hoop is a hoop. We don’t always reinvent the wheel, but we do create a lot of very unique pieces that have a lot of meaning,” Winston said.

Raised in a family of jewelers, Ferder previously founded Craft Diamonds, which specialized in large stones in the U.S. and Israel and had $10 million in annual sales. He declined to share Lugano’s annual sales figures.

Ferder started in the industry as a diamond cutter and also managed diamond mines in Siberia for a few years.

“Right after the Iron Curtain fell, I was one of the first people to get into Russia to mine for diamonds,” said Ferder.

Today, Lugano gets most of its diamonds from South Africa and Russia. Other precious stones are from all over the world.

When asked about the problem of conflict diamonds – gems used to fund civil wars in Africa – Ferder responded, “The whole problem of blood diamonds is not a huge problem to begin with. It’s a very small dot in a sea. Most diamonds are found in mines run by big corporations that, for most part, follow laws.”

In 2000, the United Nations General Assembly created an international certification process for diamonds. After negotiations between governments worldwide and the diamond industry, the Kimberly Process Certification Scheme went into effect in 2003. 

The Kimberly Process basically tracks diamonds from the mine to retail to eliminate conflict diamonds. Winston describes the process as a diamond “birth certificate.”

Both Winston and Ferder confirmed Lugano’s diamonds all are certified through the Kimberly Process.

As the luxury market continues to expand and globalize, local jewelry brands are likely to gain momentum, according to a report by McKinsey and Co., a global management consulting firm.

The 10 biggest jewelry groups in the world, which include Cartier and Tiffany & Co., have only 12 percent of the worldwide market. The remainder still belongs to smaller retailers like Lugano.

By 2020, the report concluded, branded jewelry is expected to grow to fill 30 percent to 40 percent of the total market. Along with luxury retailers like Van Cleef & Arpels and Piaget, Lugano’s competition includes newcomers such as David Yurman and Pandora.

In his report, the U.S. Jewelry State of the Market Report, researcher Edahn Golan Diamond found the average U.S. household spends $612 each year on fine jewelry and watches.

It’s fair to assume Orange County residents spend a bit more than the average American. The annual U.S. median income is $51,939, compared with $75,998 in Orange County, according to U.S. Census Bureau data.

As for the pricing of Lugano’s pieces, Winston and Ferder avoid specific numbers. “I would never say that we are the least expensive jeweler or the most expensive jeweler,” said Winston. “I would say that we are a great value.”

Pricing is based on a few things, according to the pair. The rarity of the gem, value, quality and time spent crafting the piece all play a role in how Lugano prices its jewelry.

“We have pieces from $500 all the way up to many, many millions,” said Ferder.

Lugano has a selection of rings for engagements.

“We are not only looking for clients who are spending a million dollars,” said Winston. “If somebody comes in with a $7,000 budget, we are going to make sure they are going to get the best ring possible.”

“We are not snobs,” added Ferder with a laugh.