Executive Strategies for the Americas: A gem of a company: Hans Stern built his jewelry empire from the ground up by targeting tourists and marketing Brazil’s unique offerings

A gem of a company: Hans Stern built his jewelry empire from the ground up by targeting tourists and marketing Brazil’s unique offerings – Strategies

Larry Luxner

In 1951, Hans Stern was a struggling jeweler in Rio de Janeiro when his big break arrived. It came in the form of a big-ticket order from a big-name customer: Nicaraguan dictator Anastasio Somoza, who paid Stem US$20,000 for an elaborate aquamarine necklace.

Since then, Stern has grown his Rio de Janeiro-based company H. Stem Comercio e Industria SA, into Latin America’s leading jewelry conglomerate. It now has 180 stores in luxury hotels, shopping malls and airports from Belo Horizonte to Bogota. His company is one of the most recognized names in the business, rivaling the likes of De Beers and Cartier.

“Brazil, being so rich in gems, should be as known to the world for gemstones as France is for perfumes, and as Scotland is for whiskey” says Stern, whose success has helped bolster the popularity of such stones.

Despite the glittering beauty that is the foundation of his business, however, Stern’s story began in a very ugly place in history. In 1939, on the eve of World War II, Stern was a penniless German Jewish teenager who fled the Nazis to Brazil. He and his parents were clueless as to how they’d make a living.

“I got a job as a typist in a company exporting and cutting gems. This is how I learned the business,” recalls Stern, who speaks Portuguese, English, Spanish, French and a little Yiddish in addition to German. “At that time, the export business was all in the hands of non-Jewish Poles. This is when I learned my only sentence in Polish, which translates as ‘We don’t need any calibrated aquamarines.”‘

Six years later, as the war was winding down, the enterprising refugee inaugurated a jewelry business with US$200 in savings. Today H. Stern employs 3,500 people–about 2,800 in Brazil — who fabricate intricate jewelry from gold, diamonds and a dazzling array of local gemstones ranging from aquamarines and amethysts to tourmaline and tanzanite.

Stern’s basic strategy has been to locate his stores in high-traffic locations where there are lots of tourists and business people. Part of the reason is to reduce advertising costs, but also to access a high net-worth clientele and make his stores more convenient to visit. “We are not trying to sell diamonds to tourists, because they can buy that anywhere else in the world. We push local gems like aquamarines, emeralds and citrines.

“The reason we opened stores in all Latin American capitals is so tourists can become familiar with our stones and our name,” Stern says. “We have become better known than any other jewelry company in Brazil.” In 1998, the average tourist who bought at an H. Stern store spent US$1,300.

Even so, tourists represent only 20 percent of H. Stern’s total sales. The remaining 80 percent come from the local market, which Stern says has grown “tremendously” in recent years thanks to a decision by the company to pay closer attention to global fashion trends. Stern says business was humming along nicely until 1999, when the company’s Brazilian revenues suddenly tumbled 30 percent due to the currency devaluation.

At least two years will pass before H. Stern returns to normal sales levels, says the company’s founder. “Our target is to increase sales by 10 percent this year. If it’s more than 10 percent, we’ll be very happy.”

The chain has plenty of cache. Somoza wasn’t Stern’s most famous client. Others have included Henry Kissinger, John F. Kennedy and the Shah of Iran. “Practically every big shot who’s come to South America has bought from us,” Stern says. “But we don’t only cater to the upper crast. Times have changed …. traveling has become cheaper, and you get more quantity than quality.”

Stern, an affable and personable 77-year-old, still works five days a week, from 8:30 a.m. to 7 p.m., and half a day on Saturdays. “Being semi-retired means coming into the office half an hour late,” he jokes. “I’m on the road two or three months a year, visiting our stores.”

Day-to-day operations are now headed by Stern’s 40-year-old son Roberto, along with help from Roberto’s two brothers, Ricardo and Ronaldo. A fourth sibling, Rafael, recently graduated college and, unlike his siblings, has launched his own Internet venture. Stern’s wife, Ruth–to whom he’s been married for 41 years–also helps out whenever possible. But Hans Stern remains president of the company.

Asked to explain his own success story, the jewelry magnate attributes it to “a combination of luck, grabbing the opportunity and ethics.” Fair play has been one of the keys, says Stern. “In our business, where you depend on people trusting you, to give fair value is absolutely essential. If you keep yourself and your employees to a high ethical standard, it pays off. We have an 800 number where people can record their complaints. I personally get a copy of each and every complaint.”

Stern, who never discusses annual sales or earnings because “we don’t want our competitors to know” such details, did say he and his sons may take the company public. “We thought about it before the devaluation,” he says. “But it takes time to prepare. The idea is to become stronger in markets where we already are, and go where we’re not.”

Sounds like the semi-retired Stern has plenty of work still ahead.

COPYRIGHT 2000 Americas Publishing Group

COPYRIGHT 2003 Gale Group