B. Diamond IV
                                          Staff Attorney

1/30/16

VIA CERTIFIED MAIL

CubicZirconia.com
Bedford, KY 40006

RE: Have you considered letting us have some of that money?

I write to you in the spirit of collegiality, and with all due respect for your company in the jewelry industry, from the law offices of Dewey, Cheatem, & Howe on behalf of my clients, the Transatlantic United Retail Diamond Sellers. As the world's largest association of retail store jewelers, my client objects to your omission of such retailers from your low-price, quality jewelry sales business plan, and doubly objects to the use in your company’s man-made stone marketing of terms “diamond-quality”, “visually indistinguishable from diamond to the naked eye”, or “diamond-equivalent” (terms which have not been approved for use by the self-elected governing body of this association, of which you have refused to become a member despite our repeated invitations).

My client hereby orders you to cease and desist! Or just cease. Or desist. We can discuss the options. See, that's a situation known as "negotiating." Something you apparently wouldn't know much about, CubicZirconia.com. Since you have not responded to our repeated previous inquiries about becoming a member of our august association, let me attempt to reason with you. Allow me first to explain the great number of ways in which my clients feel that your e-commerce business model offering diamond simulant cubic zirconia jewelry at so-called “fair” prices is not only misguided and short-sighted, having blindsided my client’s member jewelry companies, but even potentially un-American.

First of all, the prices offered on your website are a problem because they are simply too low to allow retail jewelers to resell your products and pay the considerable overhead costs of running brick-and-mortar jewelry stores, employing salespeople jewelry consultants that have families and timeshare vacations to think about, and building in-stock jewelry inventories so customers can walk in the door to browse and walk out the door with a financing agreement for jewelry they couldn’t quite afford to buy with cash in an arrangement that will earn the jewelry retailer a healthy interest over the next 12, 24, 36, 48, 60 or 72 months in addition to a the healthy profit on jewelry sold a diamond ring they’ll cherish until the time comes that we fervently wish for when they can trade in the diamond for a bigger more expensive one to start off their next marriage, doubling or tripling the store’s original profit while they think they got a deal because it’s our gimmick to “buy back” their traded diamond forever.

Secondly, the prices offered on your website are a problem also because, as you know, by including the center stone for all engagement rings offered as a single purchase at a single price listed right on your website, you have violated the 100+ year-old secret jeweler agreement adhered to since the founders of our association took the first of sacred annual blood-oaths jeweler code of ethics not to publish pricing for diamond center stones because therein lies the greatest opportunity to maximize engagement ring sale profit by marking up the price on allowing unsuspecting inexperienced first-time customers the exciting opportunity to negotiate their own center stone price to be the best they can. I'm telling you, people love negotiating. Consumers hate having a clear, fixed price that everyone understands and you get everything you need and want to buy all for that one price. The retail jewelry store with fixed ring mounting prices and diamond prices revealed only during a customer’s intimidation by indoctrination by personal conversation with the store’s friendly salespeople jewelry consultants as a model lets customers feel as if they got a deal, while not really getting a deal. Everyone wins. Plus, to wit, everyone knows that haggling over prices is deeply ingrained in American culture so what you’re doing is un-American.

Thirdly, the prices offered on your website are a problem also because the prices should not change so frequently. We said “fixed prices” that included the center stone cost for an engagement ring built right into the listed price were bad, and that is very bad. However, I must now call your attention to a business practice that is even worse in our educated and experienced opinion wisdom from having done this jewelry business many decades and even a century before there was an “internet” for you to disrupt the retail jewelry store business model offer your jewelry with a 60 day money-back guarantee worldwide to customers browsing on their computer or other device, and fulfill orders via made-to-order manufacturing and insured shipping carriers. My clients are of course referring to your misguided policy of decreasing the price for products you sell when your cost to purchase the gold, silver, palladium, or platinum precious metals used to manufacture the product(s) decreases.

Note: This practice is noted in Exhibit 43 here http://www.cubiczirconia.com/pages/faq-custom-designed-cz-jewelry#q5 (Q: What variables make up your price for a custom cubic zirconia jewelry piece?), and Exhibit 44 here http://www.cubiczirconia.com/pages/faq-custom-designed-cz-jewelry#q15 (Q: How long is the custom CZ jewelry price quote you’ll give me good for?).

If the cost of gold goes down after you set your gold jewelry sales price, in the jewelry business that’s supposed to just be extra profit for you! Hello, the rich get richer, and we in the jewelry industry have manipulated paid close attention to gold and other precious metal prices for centuries, and we deserve to keep that money! You’re leaving money on the table by educating customers about fluctuating metal markets costs, and making a huge mistake by discounting your customers’ jewelry prices to reflect your wholesale hard costs savings to manufacture the jewelry in their order. My client is deeply concerned that this practice is just not smart for the long-term viability of your business ,and besides none of its member retail jewelry companies wish to invest the money needed to create an e-commerce website or lose money by being forced to create digital-price in-store display cases capable of competing with such an absurd service anyway.

Fourthly, the prices offered on your website are a problem also because the prices are on a website, and the retail jewelry store members of my client’s association do not have that e-commerce capability with their brochure-style website because they just started on the internet a little later than in 1999 when your company’s first website went online my client feels you should reconsider having a “website” for your jewelry business at all. After all, for over 100 years, jewelry retailers among my client’s members have been selling rings, pendants, earrings, bracelets and more without any need for that newfangled frivolity. Truly, we feel a responsibility as your jewelry industry brethren to share this obviously unknown business intelligence with you: our internal Academy for Diamond Studies (ADS) research shows that wholly 83.6 percent of jewelry shoppers in the U.S., Canada, Mexico, Europe, and Australia thoroughly love going to the local jewelry store, while 16.4 percent of these shoppers state in yes or no survey questioning that they love it so much that he/she would “live there if I could”. [Note: Respondents to ADS survey 8 years of age and under, jewelry store described as "Disney World" in a common metaphor we use in our marketing, said fact clearly disclosed in the fine print of Appendix 8c.] Surely you can understand that your CubicZirconia.com website, while it is functional and even kind of nice, simply cannot compare to the shopping experience of local jewelry stores where my client’s retail jeweler members provide an expensive-to-upkeep a wonderful atmosphere with gleaming gold-chased glass display cases, non-offensive soft Muzak, marble floors covered with elegant carpets, stylish wall coloring and functional décor accouterments. Seriously, online on a “website” how can you give your customers free cold water in paper cups or espresso available for 25 cents per Fabergé replica ceramic mug (drink as much as you like!)? You simply can’t.

Fifthly, my client’s member jewelry stores do in fact use your company’s cubic zirconia stones instead of actual diamonds as a cheaper alternative stone to set in store-displayed rings and other jewelry pieces (for insurance purposes). However, my client and its member retail jewelers feel it is slanderous in the extreme for your company to publicly disclose this fact to potential diamond jewelry buyers, when we don’t and have worked very hard never for them to know. After all, the super-friendly salespeople jewelry consultants at these stores have undergone extensive training to explain that cubic zirconia are in fact worthless, and these stores only use the cubic zirconia “diamond” rings and other jewelry pieces in the display cases as props to show customers before purchase. When they purchase the ring or other jewelry piece based on the model and the salesperson’s jewelry consultant’s expert guidance and knowledge about diamonds, of course before they leave the store our client’s member jewelry retailers would insist on the need to “give the jewelry a final polish before you take it home”. As you know, that’s when the salespeople jewelry consultant will send the piece in the back for a technician to un-set your cubic zirconia stones and switch to the real diamond the customer thought they already had bought now that money has changed hands. Again, we feel that you must stop educating disclosing these jewelry trade secrets to customers, who my clients have put so much time, money and effort into persuading that they don’t want ‘fake’ cubic zirconia and do want ‘real’ diamonds.

My clients know you see yourself as a disruptor, CubicZirconia.com, but I don't think you understand how many everyday people whose apple-carts you are upending. Jewelry stores are financial ecosystems in their own right, stimulating economic ­activity in a range of related sectors both in their local areas and throughout the region where they’re located. The black-velvet-padding industry depends on retail jewelers, as do the interior-glass-washing service providers, and for that matter the low-budget elder-statesman-voiceover radio-commercial business is absolutely co-dependent upon a thriving retail jewelry store landscape. Think about how you're missing out on that one by not working through retail stores like my client’s members to sell your jewelry. [Script: An obviously silver-haired older guy with a voice full of gravitas says, "Now you have a friend in the cubic zirconia business. Come on down to the store! Or go online to CubicZirconia.com"]. Seriously, talk about advertising that ROCKS!

Now, you may enjoy selling your cubic zirconia jewelry as a low-cost alternative “visually indistinguishable from diamond to the naked eye”-- with no middlemen and no haggling, offering dynamic prices that change as your hard fulfillment costs to ensure you keep only the same “fair” profit on each sale of each piece of jewelry in your catalog -- and keeping all the money. But I ask on behalf of my clients, have you considered letting us have some of that money? It is our position that we would like some of the money.

In return, we offer our beautiful buildings with glass display cases, highly trained sales staff that are already experienced in selling your cubic zirconia jewelry product (while calling the pieces in the display cases “diamond” jewelry of course…wink, wink :) ), and let’s not forget the luxurious ambience and free coffee urns super-affordable espresso machines so your customers can sip while they shop.

I'm telling you, CubicZirconia.com, your customers need us. What happens when they're wearing their new engagement ring and the center stone falls out? Okay, yes, you'll email them a lifetime warranty request form to send back along with their engagement ring to have the free replacement CZ stone set for like 25 bucks and mailed back to them. But I digress.

I’m telling you CubicZirconia.com, we need you, the timing is perfect for you to consider a change in how you do business. Our relationship with the diamond cartel the diamond mining companies is complicated. It has been ever since the public found out about “blood diamonds” began demanding to know where the diamond stones we sell in our jewelry came from and how they were mined and we didn’t know and couldn’t have cared because of how much profit we were making our answers weren’t good enough to satisfy them. That humbling realization prompted us to create a robust ethics certification process with Diamonds University Professional Education. Salespeople Jewelry consultants certified under this course are courteous, professional, trained to say “our diamond stones are from Belgium and Canada” educate customers about my client’s member jewelry stores’ responsible diamond sourcing practices buying from sellers in non-conflict countries, and plus each is required by law to disclose how many felonies they've committed. Now, my client’s member jewelry retailers have taken charge of the problem and as an entire industry organized itself based on the notion that the miners and sellers must be trusted to do the right thing, every time, so long as they tell us they did and put it in writing where the diamonds we sell actually originated!

However, it appears that despite DUPE’s efforts, customers aren’t buying it. Increasing numbers of what were once our customers are now buying from your company and a handful other diamond simulant jewelry makers.

Honestly, we really do need you each other, CubicZirconia.com

We just need you to increase the prices on your website.

A lot. Maybe double, maybe triple.

The accountants will have to crunch the numbers and think of how to make it work along those lines, so the wholesale prices you give us are closer to what your retail prices on the website are now, and we can keep the difference as our own profit.

Let’s talk.


B. Diamond IV
Staff Attorney
Dewey, Cheatem, & Howe

Representing Transatlantic United Retail Diamond Sellers