Romancing the Stone
“Hearts on Fire!” screams Glenn Rothman, reclining with his feet up on his desk in his office on Washington Street. Right outside his door, on what he calls “the trading floor,” a dozen people are hard at work on the phone with jewelry retailers in 15 countries, and someone has just made a sale. The lucky salesperson rings a bell the size of a Chivas bottle. Fists pump the air. Chairs are pushed aside. Pelvises shimmy. For a second, the office turns into an MTV beach party, and Rothman's voice rings out:
“Hearts on Fire!”
Sound strange? It gets weirder. Across the ceiling, tinted glass balls emerge in a pattern Â— robot eyes, electric cameras that are rigged to the Internet. “I can watch what's going on in here from anywhere in the world,” Rothman says. “At any given moment, I know what's happening at any one of these desks.” What's going on at these desks is a lot of selling. There are diamonds everywhere, getting sorted, inspected, polished, and shipped off to retailers all over the world. This is the busy season Â— before Valentine's Day, that 24-hour period this month during which nearly a quarter of a million couples will get engaged.
None of this is what makes Rothman's story particularly groundbreaking. In an $8-billion-a-year industry Â— a fiercely competitive game that, until now, hasn't changed much in the past four centuries Â— insiders are calling Glenn Rothman a “visionary,” a “maverick.” The 52-year-old entrepreneur started his company, Hearts on Fire, only half a dozen years ago, and already annual revenues are hitting $50 million and climbing. And, strangely enough, analysts and the competition have nothing but good things to say about him. Why? They have all followed his lead. They are all making money.
“He's quite possibly a revolutionary,” says Marty Hurwitz, CEO of MVI Marketing, consultants to the jewelry industry. “The entire industry is in major transition, and Glenn's leading the charge.”
Adds Hazel Kay, head of global programs at the London-based Diamond Trading Company (which is owned by De Beers, the behemoth that controls two-thirds of the world's uncut diamond market): “What Glenn has done with Hearts on Fire is a great example of how the future of marketing in the diamond industry should be.”
So what's the secret? There are two. One is the Hearts on Fire business plan, an almost shockingly simple approach that took one of the world's most lucrative industries by surprise. Rothman patented a specific diamond cut, slapped his company's name on each stone (literally), and hurled millions into marketing it, the way Nike would with a new pair of Air Whatevers. In other words, he branded a diamond. In an industry that until recently spent less than one percent of income on promotion and advertising, Hearts on Fire spends up to 8 percent. It had been done before, by a company called Lazare. But never with the success that Rothman has had. “There's been an explosion of branding in the industry in the past couple of years,” says Peggy Jo Donahue, editor in chief of Professional Jeweler magazine. “Glenn is the trailblazer.”
The other secret to this success lies inside the Hearts on Fire stone itself. Perched over his desk, Rothman picks up one of his round gems with tweezers. He strips off his wire-rim glasses and stares into a jeweler's loupe, which magnifies the stone 10 times. The diamond is a full carat, a stone of pure carbon born of the earth and shaped by a man. But like the guy holding it, this gem is far from ordinary. As Rothman stares at it, his bearded face contorts. He nods. He smiles. He looks like a guy whose kid is delivering a home run or a valedictory speech. When he opens his mouth, a single word drops out, replete with a quarter century's worth of gemstone wisdom:
Unlike most magnates in the diamond trade, who are born into century-old family businesses in New York, New Delhi, Antwerp, or Cape Town, Rothman got his start in business as a street peddler in Harvard Square.
The son of a New Jersey shop owner, he was a graduate student at Boston University in the early 1970s when he fell into his first venture. Though he had planned to go to med school, this venture Â— bizarre as it was Â— shifted the course of his future, eventually landing him in the diamond trade. A friend offered Rothman a suitcase full of Moroccan wallets to sell on consignment. So he set up a folding stand on the street and started selling. In no time, to his surprise, he'd sold the whole cache at $4 apiece. In order to make a real profit, he realized, he'd need to sell at a higher volume. He needed a loan.
Rothman visited the U.S. Trust branch in Allston and met with a mustachioed, 28-year-old loan officer named Bill King. Neither man could have had any idea that the relationship they began that day would last for years, and that their deals would creep from the thousands into the many millions.
“Back then, lending wasn't a science. It was an art,” King now remembers. “You made judgments based on the person sitting in front of you.”
In 1972, Rothman was a longhair with a beard. He had no written sales plan, no business card. But there was something about him Â— the banker could feel it. “Come back tomorrow,” King said. When Rothman returned, a certified check for $2,500 was waiting for him.
Before long, department stores all over Boston and New York were hawking Moroccan wallets. And Rothman himself was in Morocco, hunting for a deal on volume. “I was scared,” he says. “A 22-year-old kid, wandering around Casablanca alone in 1973? But it worked out.” A month later, he returned with $15,000 worth of wallets, which he sold out of his Brighton apartment at a huge markup. “The fabric was cured in camel urine,” he remembers. “It smelled funny.”
That year, Rothman found a partner, a woman named Susan Back. They started doing everything together Â— “like a two-headed monster,” he says. Most notably, they expanded their business to include African garments and leather goods. The business took off. In one month alone, April 1976, they made a $30,000 profit. The two were married in June of that year, and in August they moved into a big house in the suburbs west of the city, the same house they live in today.
As an entrepreneur, however, Rothman couldn't sit still. “I was addicted to change,” he says. “I was always looking for the next thing.”
Today, when Glenn Rothman remembers how he started selling diamonds, he flashes a cynic's grin, as if to say, You're not gonna believe this one. He and his wife were in Birmingham, Alabama, visiting her parents in 1978. A relative from South Africa was also visiting Â— Hymie Hersowitz, an accountant for diamond manufacturers and hair salons. Over dinner one night, Hersowitz sat weaving exotic tales about the diamond trade, a cutthroat industry in which insiders were making salaries with as many digits as the international phone numbers they dialed all day. The wallet salesman was seduced.
“What does it take to get into the business?” Rothman asked Hersowitz.
“A lot of money.”
Back in Boston, Rothman went to see Bill King. He asked for $100,000. King loaned him $125,000. “At first, it was a low-risk venture,” King says. “If the worst happened, we could get rid of the diamonds and make the principal back.” Rothman rented an office in the jewelry district on Washington Street above bustling Downtown Crossing, bought a safe, and built a mantrap (a double-door entrance that could automatically ensnare a would-be thief). Then he started buying diamonds.
There was ample competition in Boston. Though hardly on a par with Manhattan's 47th Street diamond district, the Hub has had its big hitters: Town & Country out of Chelsea, for example, which was dubbed the “jewelry king” in the '80s, and Gordon Bros., the largest jewelry liquidators in the world during the same decade. The Rothmans went into business as wholesalers, calling their venture Di-Star.
Little by little, year by year, Rothman and his wife built the company. “I'm the dreamer,” he says. “She's the doer.” As with any business in the '80s, there were good times and bad times. But in 1991 catastrophe struck. Loan officer Bill King had since moved on. The Rothmans had been financing business with loans from the Bank of New England, the region's second-largest bank. When the bank spectacularly collapsed on January 6 of that year in New England's own little Enron scenario, it called in Rothman's loans.
“We couldn't maintain business,” Rothman says. “We liquidated all our assets and shrank 60 percent in weeks. We got down to four people, including Susan and me.”
To hunt for new opportunities, Rothman started traveling to business seminars around the country. Everywhere he turned, the experts were pushing the same new trend: branding. In the mid-1990s, new businesses were using marketing to make their names wield as much power as the products and services they were selling. Amazon.com. Yahoo! AOL. Huge promotional campaigns, the gurus said, would trigger a Pavlovian impulse in consumers.
At first, Rothman figured that this strategy wouldn't play well in the diamond game, where business had been conducted the same way for centuries. The industry “is an anachronism, a 17th-century industry smack in the middle of the 21st century,” as the New York Times described it less than two years ago.
But Rothman knew there was something to this strategy. One by one, the retailers he was wholesaling to began to say the same thing: “'Glenn,' they would say, 'can you make us a diamond that differentiates us? All the stuff in the mall is the same,'” Rothman recalls. “They didn't say brand. They said special diamond.”
One day while traveling through Europe, Rothman discovered what he was looking for Â— the stone he would call Hearts on Fire.
July 1996. Antwerp. In a tiny office with a big window and an even bigger safe, the Rothmans were standing with a renowned diamond cutter named Von Blerk.
“I want to show you something I've been making for the Japanese,” Von Blerk said. He pulled a diamond from his pocket along with a proportion scope, which would magnify the stone while filtering out white light. Rothman put the monocle to his eye, looked into the gem's heart, and said the word that has become the cornerstone of his advertising campaign.
Light refracted inside the diamond, causing a fireburst of eight arrows to explode from the center. From the bottom, a pattern of eight perfect hearts in a circle emerged, shooting brilliant greens, reds, and yellows into the eye. The brilliance resulted from the diamond's high quality and, more important, from its perfect octagonal cut. The better the cut of a diamond, the better the “performance.”
“Can you sell it in America?” Von Blerk asked.
Glenn Rothman looked at his wife and said two words: “Moroccan wallets.”
By January 1997, the Rothmans had bet their whole wad on this new diamond. They borrowed as much as they could from their parents, from friends, from banks. Using the branding strategies they'd learned at all those seminars, they put together a new sales system.
To begin with, they marketed diamonds by appealing to a customer's sense of insecurity. Every stone would come with the brand name and a serial number etched on the girdle, or rim, where the diamond's circumference is largest, so small the naked eye couldn't detect it. (If you've ever had a diamond set by a jeweler, and wondered if the one you picked up was the same one you dropped off, you'll understand.) Each stone would also come with a certificate from the American Gem Society ensuring the highest grade of cut.
“They all get the society's Ideal Zero grade,” says the AGS's lab director, Peter Yantzer. “Hearts on Fire won't sell one with a lesser grade.”
Starting with retail stores in 26 cities, the company set up elaborate displays with a proportion scope, a large purple and gold instrument that looks like a dental torture tool, so that consumers could see the hearts and arrows inside the diamonds. They hired Von Blerk to cut the stones. (Fewer than one percent of raw diamonds purchased from companies like De Beers were of a quality high enough to create the unique cut.) They hurled money into television and radio ads, and hired trainers to teach retailers how to sell the diamonds. Sure, the gems would cost the consumer a little extra, up to $12,000 or more per carat. But, as the philosophy went, why would someone want to skimp on one of the most important purchases of a lifetime?
By the end of 1997, Hearts on Fire diamonds had sold out.
The following year, the company hired more cutters and went global. Taiwan. Singapore. Hong Kong. The Caribbean. Rothman started running a three-day “Hearts on Fire University” in Las Vegas, during which company affiliates “work hard and party hard.” (Rothman is a self-proclaimed tequila nut.) Later, he launched the Sabrina Jewelry Collection, with Hearts on Fire diamonds set in rings and earrings crafted out of different exotic metals, plus a square stone called the Dream diamond. Everything sold. When copycats started popping up all over, Glenn Rothman knew he'd made it.
“Everyone in the industry is jumping on the bandwagon, creating their own cuts,” says Barry Berg, vice president of William Goldberg Diamond Corporation in Manhattan. Since Hearts on Fire exploded on the scene, Berg's company has started marketing the Ashoka diamond. Tiffany & Co. launched the Lucida diamond. Asprey & Garrard debuted the Eternal diamond. Leo Schachter produced the Leo diamond. Fashion house Escada released the Escada diamond. De Beers and LVMH Moet Hennessy Louis Vuitton have jointly developed a branded stone. Even local powerhouse Shreve, Crump & Low is advertising its Astral Cut.
In 2001, Rothman sued Alexander Waldman, a Manhattan diamond seller, who launched a similarly cut Hearts for Eternity diamond. (Waldman countersued, saying that “there are between 150 and 200 companies that are selling hearts-and-arrows diamonds.” The two companies have since settled out of court on undisclosed terms.)
And the industry steeped in 17th-century tradition? “We don't talk as much about diamonds anymore,” says one William Goldberg Diamond executive. “We talk about marketing, advertising, and promotion. There's a whole new twist.”
In January 2001 the Rothmans sold 49 percent of their company to Antwerp-based Eurostar Diamond Traders. Though they wouldn't reveal any figures, they did say that the dollar amount “was enough so that we never have to work again.” But they do work. “It's just so exciting right now,” Susan Rothman says. “I can't think of anything else I'd rather be doing.”
These days, Rothman travels around giving motivational speeches and running the company with his wife. He's also cochairman of the Lenny Fund, named for Lenny Zakim, the popular late president of the Anti-Defamation League's New England chapter. (The fund has an endowment of more than $3 million.) In his office, legs propped up on a desk, Rothman smiles when asked about retirement. Not yet, is the answer. Not even close. “I have a new idea,” he says. “Wait and see.”