Why is it that you ask a local jewelry store owner about buying diamonds on the net and he/she will often curse a blue streak and bash the heck out of the Internet?
What is it about buying diamonds and engagement rings Online in 2007, that has become such a threat to traditional “brick and mortar” jewelers across the country?
Why do the traditional jewelry store owners fear the net so much and what is it specifically that bothers them?
Why are the savvy jewelry store owners learning to embrace the Internet and looking to build out a website for their company in cyberspace?
There is one answer to all of these questions and it has everything to do with two variables: Quality and Price.
Let us first examine the facts:
Online jewelry sales since 2005 is up 3.5% in contrast to all other retail categories which are up 2.3%.
Online diamond and jewelry sales have been surging and were up about 3.5 percent of total fine jewelry sales in the U.S. in 2005. Since that time, the number has steadily gone up. Clearly, online jewelry merchants have captured substantial market share and are stealing business from the local jewelry stores.
The obvious question is why?
Internet retailers operate with much lower gross margins than store-based jewelers. This allows them to sell diamonds and jewelry at much lower prices than the retail stores. In fact, retail stores will often charge several thousand dollars more for similar quality merchandise being sold on the net.
Diamonds sold on the Internet are much less expensive than in the stores.
Furthermore, online jewelers have very high inventory turns as a result of their ability to operate of much lower profit margins. Because of the favorable terms online retailers have negotiated with their suppliers, they have negative working capital needs.
Online jewelry retailers have slashed prices and sales have soared as a result. They are willing and able to make fewer percentage points on every individual sale and to make up for it in volume.
They also cannot afford to charge the same kind of hugely inflated premiums you find in the typical jewelry stores.
Competition on the Internet is fierce and everyone is just “one click away” from the consumer.
Consumers who shop on the Internet are also by definition, extremely savvy and knowledgeable.
They demand accurate and scientific proof and information on every diamond or engagement ring they are contemplating.
Just to have a nice sales person behind the counter say the diamond is “the best thing since sliced bread” (with a smile…;-) will simply not do.
Jewelry stores who operate off a completely different business model of limited diamond information and maximum markups, simply cannot compete.
Statistics show that they are losing significant sales and market share to the Internet.
Indeed, a customer who completes a satisfactory purchase on the internet for any product is highly unlikely to ever buy locally again. The lure of maximum value, quality of merchandise and lowest prices, all without having to leave the comfort of your home or work is certainly formidable.
Those store based diamond and jewelry retailers who have seen the writing on the wall and witnessed the Internet revolution, have sought to embrace and accept the “age of the net” by creating their own web stores where they can compete for some of this market share.
Unfortunately, many of these traditional “bricks and mortar” jewelers remain in denial; completely bitter and upset.
Once you taste the joys of huge profits and have made a literal “killing” on the sale of every loose diamond, it is extremely difficult to accept the idea of embracing the net where diamonds are sold at razor thin profit margins.
It is for this reason (just as an example) that the incredibly expensive Hearts on Fire Diamonds Brand is the flagship diamond of choice for every store based jeweler (astronomical profits on every stone), but could never survive if it were marketed on the Internet.
It is also why those store based jewelers of the old school:
a. Hate the Internet
b. Fear the Internet
c. Mock the internet
d. Lose sales everyday to the Internet.
e. Have nightmares about the Internet.