Adam Lowensteiner: I appreciate the color. Was the decline in wholesale revenue a surprise?
Don O’Connell: Well, we’ve kind of been diluting quarter-over-quarter that we’ve been pushing more direct-to-consumer. Now that’s not to say that the wholesale brick-and-mortar business is not top of mind for us. And the brick-and-mortar partners are very dear to our heart and part of our strategy moving forward and we support them. And as a matter of fact, we didn’t make the press announcement yet, but I can go ahead and make the statement that we did launch lab-grown diamonds Caydia in Helzberg stores. So we just launched that basically 1.5 weeks ago, so brick-and-mortar in our wholesale segment is still very, very strong. We’ll continue to support our brick-and-mortar partners. On the wholesale side, we’ve been talking about a declining market on the wholesale.
And that could be because of the downward pressure on the pricing. It starts from the top, right? So it’s no secret that everybody in the industry has been talking about the downward pressure of natural diamonds dropping nearly 40%, I believe the number is. I mean, we can get the actual facts on that into quotes. But I believe it’s a 40% drop on natural because lab-grown diamonds is pushing downward and becoming also a problem, as I alluded to in my prior remarks for moissanite pushing down and the moissanite pricing. So what we need to do is and what we have been doing is looking at that very closely over the quarters focusing more on direct-to-consumer, maintaining our brick-and-mortar presence and strength with our customers in brick-and-mortar, supporting them and our brand, all the while looking at our wholesale business and saying, okay, maybe we need to consolidate a little bit here.
Maybe we need to kind of key in on our strategic partners within the distribution model. And then also, we just spoke about Charles & Colvard Direct, so Charles & Colvard Direct, we just launched recently here, and that’s also in beta. So we have a select amount of independent retailers that we have direct relationships with and that basically we can be more competitive and give them better pricing on certain quality of goods that are outside the Forever One. So we believe this could be a solution to an automated process to be able to support the entire wholesale market. But right now, our focus is really pushing more direct-to-consumer becoming a brand that’s meaningful, that resonates with all consumers in all products, in all categories.
So how do we do that? We do that through this new streaming technology. We do it through analyzing where that customer is located and giving that customer what they’re looking for to purchase. So make no mistake, this could be something that’s very significant for us, and we believe that it’s really important to the business. And given the decline in the wholesale side, now again, it’s difficult because we have to report quarter-over-quarter and say, okay, wholesale is declining by x number of percent. But the reality is it’s going to continue to decline as long as we keep pushing more to direct-to-consumer. And then we anticipate some strength on the brick-and-mortar side, some strength in additional product brands that we’ll introduce to more brick-and-mortar partners as we expand more in the lab-grown diamond too as well.
So again, long-winded answer there, but hopefully, I covered it – what you were asking for.
Adam Lowensteiner: Given the move towards lab-grown diamonds, how should investors view the company’s inventory? Will you build more lab-grown diamonds and less moissanite going forward?
