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Elegant Illusions glitters at upscale centers

By Faye Brookman

The created gems at Elegant Illusions are chemically identical to natural stones.

Although his stores sell created gems, Elegant Illusions’ CEO James Cardinal says he believes the format can exist right next to upscale jewelry retailers such as Tiffany & Co.

Elegant Illusions’ wares are, in fact, upscale. Created gems should not be confused with costume jewelry: Created gems are chemically identical to naturally found stones, but lab-grown. In fact, they are more perfect than the emeralds, sapphires, and tanzanites found in nature, and are set in 14k gold or sterling just as the "real" gems would be. But prices at Elegant Illusions are lower because the gems are manufactured. The stores also do sell a small amount of costume jewelry.

"You can really put Elegant Illusions into any locale. We’re most successful next to a place that sells upscale items like Patek Philippe and Rolex watches. Fine jewelry stores love us because we don’t threaten them," he added.

Many of the stores are located in upscale shopping centers - especially those frequented by vacationgoers. Among the sites: Lahaina Cannery Mall in Maui; Cannery Row in Monterey, Calif.; and the Royal Dane Mall on St. Thomas. Customers will also find Elegant Illusions in shopping hubs, such as The Mall of America in Bloomington, Minn., and The Falls Shopping Center in Branson, Mo.

According to Cardinal, any type of shopping center can house Elegant Illusions. "We have stores in almost every commercial presentation - tourist centers, regional centers, European-style and even outlet," he said.

Although the Pacific Grove, Calif.-based chain currently numbers only 30 stores - and growth is in a holding pattern due to some financial strains - Cardinal thinks the concept has tremendous expansion potential.

"We believe there’s a need for at least 3,000 to 5,000 stores. The country can support that comfortably," he added. Stores range from 600 square feet to 2,000 square feet, although Cardinal said he thinks the format can support 4,000 square feet in the right location.

While the robust economy might appear to favor the pricier natural gem category, the manufactured gem business also is thriving. Todd Slater, retail analyst at Lazard Freres & Co. in New York, said jewelry sales expanded at a 6% compounded rate annually throughout the 1990s. The manufactured portion of sales is growing at an even healthier rate of 12% to 16% per year, Cardinal said.

"There’s always a demand for what we do. People travel with created gems and keep the real ones at home. There are those who just can’t afford jewelry," he said. Additionally, he said, the availability of gems dwindles, making the "real" thing even more cost prohibitive.

"Someone who wants a [one carat] heat-treated Burmese ruby will pay $20,000 - and there aren’t even that many available. They can pay a fraction of the cost, about $1,000 at Elegant Illusions," he said.

Hot right now, Cardinal said, are white gold and larger, showier, pieces of jewelry. Cardinal believes that the economic health of the country is encouraging women to have the confidence to wear larger jewels with pride.

Elegant Illusions attracts shoppers of all ages, he added, who come for the variety of jewelry, including rings, bracelets, earrings and necklaces with created gems of diamonds, pearls, ubies, sapphires, emeralds and opals.

Consumers’ quest for manufactured gems has spawned an entire industry of copycats. Among Elegant Illusions’ competitors are frequent mall tenants such as costume jewelry vendors N. Landau Heyman and Impostors. "We offer classic, timeless, pieces," said Cardinal. The firm’s positioning, industry watchers said, helps it avoid litigation other impostor companies have faced.

Elegant Illusions’ roots date back to 1989, when Tamara and Gavin Gear first began selling their jewelry in a former hot dog stand on Cannery Row. Cardinal signed on in 1992 to help the Gears carve out a niche in the jewelry business.

Because of consumer demand, Elegant Illusions has branched into e-commerce. About 500 items are available on its Website . Cardinal said the site would help with demand for Elegant Illusions. "We have requests all the time and even Chambers of Commerce calling and asking how people can buy," he said.

For the time being, consumers looking for elegant copies of more expensive jewelry, have to be content with the existing stores or the Website. Plans to open 25 new stores have been scaled back as the company redirects funds into e-commerce. Seven new stores opened in 1998, with two new stores unveiled during 1999. One of the new stores is in Universal Studios Florida in Orlando -- a site Cardinal considers a real gem.

But like many fledgling retailers, the company is experiencing growing pains. According to Cardinal, Elegant Illusions’ infrastructure cannot support rapid growth.

The decision to slow down probably is a wise one: After being profitable since inception, Elegant Illusions reported a loss of $33,441 on revenues of $2,254,863 for the first quarter ended March 31, 1999. First-quarter revenues for 1999 reflect a 4.1% increase over the same quarter in 1998. Factors contributing to the loss were lower-than-expected sales in same store locations - off 10% from 1998 - and new stores that did not perform to expectations. Weather hampered results in some locations, according to Cardinal, especially tourist areas.

Cardinal expects the remainder of 1999 to produce a rosy financial picture thanks to actions taken to reduce selling, general and administrative expenses. Also, a store was closed in Ontario, Calif., that was not performing up to expectations. Already this year, inventory turnover rates are up from under one time per year to 1.3 times per year. Additional revenue should flow through the Internet sales. And, experts predicted the entire jewelry business would benefit from the impending millennium.

"It is going to be all about dressing up and having fun. You know people will want jewels - but not necessarily the real thing," said Allan Mottus, a retail consultant.