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Fine Jewelry Market Sparkles Online

All signs point to the category slowing down but the opposite holds true for pure play e-tailers.

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Blue Nile.com's homepage.

Blue Nile.com's homepage.

Courtesy Photo

One of Blue Nile’s top-selling engagement-ring settings.

One of Blue Nile’s top-selling engagement-ring settings.

Courtesy Photo

A Monique?Péan necklace from the Bijou collection.

A Monique?Péan necklace from the Bijou collection.

Courtesy Photo

Fine Jewelry appears to be sparkling on the Web.

This story first appeared in the June 4, 2012 issue of WWD.  Subscribe Today.

All signs point to the fine jewelry market slowing down — Graff Diamonds Corp. pulled its initial public offering last week, and Tiffany & Co. reported a weaker outlook for the year — but the opposite holds true for pure play Web sites in the category. ComScore reported last month that online retail spending reached $44.3 billion for the quarter — a 17 percent increase from last year — with jewelry and watches among the top performers.

The growth is attracting a raft of pure-play e-tailers to the category — and more investment, driven by low overhead and vast selections.

For example, fine jewelry e-tailor Gemvara today revealed it is getting a $25 million injection of capital. The two-year-old site just closed the round of funding, led by Norwest Venture Partners (along with its current investors that include Highland Capital Partners, Canaan Partners and Balderton Capital).

“Consumers are becoming much more comfortable buying more meaningful, expensive and emotional types of products — jewelry being an obvious one, but also fashion and apparel. There’s a lot going on there, especially with the female customer. There’s some massive changes happening,” Gemvara founder Matt Lauzon told WWD, adding that all of Gemvara’s products are made domestically, with New York City being the biggest hub for production.

Launched by the-then 25-year-old Lauzon in March 2010, Gemvara.com exceeded its first-year goal of $2 million in sales by about 25 percent. From 2010 to 2011, this number tripled to about $8.5 million, and according to Lauzon, the site is on track to continue growing at a similar rate in 2012.

Focused on personalization (every piece on the site is customizable thanks to a patented technology on the front end) in up to nine types of precious metals and 26 gemstones that lead to endless permutations — Lauzon’s “macro picture” goal is for the site to grow into the Amazon of fine jewelry.

Lauzon said that 80 percent of the site’s current customers had never bought jewelry online before Gemvara, where the average sale is $1,000. The majority of products sold fall somewhere between the $200 to $500 and the $1,000 to $5,000 ranges, but a ring can go up to $80,000. Currently, the site counts rings, earrings and pendants among its offerings but in the next 12 to 18 months the company plans to introduce bracelets, charms and a more extensive earring selection.

A shift is occurring within the category as more shoppers are comfortable buying fine jewelry online. Lauzon compares the change to what happened with Netflix began to take off, eating into Blockbuster’s seemingly unassailable position as the way to rent movies.

Hana Ben-Shabat, a consultant and partner at global management firm A.T. Kearney who specializes in luxury retail, attributes this to two factors. The first is price, because even the not-so-savvy online shopper can find similar product to what’s available in-store for a better deal. Due to the nature of the medium, players in the sector like Gemvara and Blue Nile, as well as newcomers Plukka and Port-Au-Gem, can afford to charge less because they do not have the same overheads and costs of running brick-and-mortar stores.

Assortment is the other aspect.

“At the end of the day, it’s a category that has a significant number of sku’s, and there’s no way you can get everything in one place. It’s almost impossible,” Ben-Shabat said. “It’s a business run on a very large amount of inventory and there’s always a limit to what you can show in the stores — and online you have the flexibility of showing a wider selection that you can actually offer in-store.”

It’s because of these elements — and the fact that the channel is still relatively new — that the above e-tailers are likely not seeing the same softness in business that brick-and-mortar retailers such as Tiffany & Co. and Zale Corp. are experiencing in fine jewelry.

Both of these retailers also have vibrant online operations, as does everyone from Verdura to London Jewelers. Then there are companies like Saks Fifth Avenue, Neiman Marcus, Barneys New York and Bergdorf Goodman that sell fine jewelry as part of their online offerings, while pure-play fashion sites such as Net-a-porter also sell fine jewelry. Ben-Shabat even considers Amazon a player in the category. There are rings on the site that cost more than $120,000.

“If the price is what defines the [piece as] fine then you can go to those kinds of levels on Amazon. If you define it as the brand and exclusivity of design then you won’t want to buy on Amazon. So if it’s by price, then yes, Amazon is a player. That’s how we see the market,” Ben-Shabat said.

She contends that fine jewelry still remains a category where the consumer likes to go touch, feel and try on the merchandise prior to a purchase. However, she does believe that companies will start to use online to drive growth in geographical areas where there’s little to no brand presence. Instead of going into a new market and opening up a freestanding store, the retailer can advertise and use marketing to drive the local clientele to shop online on the brand’s digital flagship. E-commerce can be used as an entry mechanism to penetrate a market, instead of investing in a store, which can save a lot of money.

“I don’t see [stores] deciding to close stores and go online. Consumers buy in both places — it’s not that a consumer is just an online or just an in-store customer. The two channels complement each other and need to coexist,” Ben-Shabat said.

Blue Nile pioneered the category in the digital space in 1999 — and the e-tailer, which now has 200 employees and sells to more than 44 countries — likens itself to the online version of Tiffany & Co.

 

The company last year had $348 million in sales, with the average purchase for diamond engagement rings hovering around $6,000 and non-engagement purchases at $550 (although a $1.5 million transaction took place in 2007). According to Blue Nile, an average day sees six to 10 purchases in the $20,000 to $80,000 range (it’s common for a sale of a few hundred thousand dollars to happen about every month).

Offerings started with engagement rings 13 years ago, but the company — along with new chief executive officer Harvey Kanter and chief marketing officer Engle Saez — has reevaluated its point of view in the last year. Last summer saw the release of more fashion forward products, also part of a move toward designs that are more seasonal.

Six-month-old Plukka offers on-trend fine jewelry for 70 to 90 percent less than suggested retail prices from $190 to $3,000. The site operates via a “value proposition,” that, according to co-founder Joanna Ooi, contains a patented social shopping mechanism that vertically integrates manufacturing and marketing. Ooi projects between $1.5 million and $3 million in sales by the end of the year.

Like Plukka, Port-Au-Gem — which launched last month — offers “fashion fine” jewelry at up to 70 percent off retail prices. Founder Kaitlin Nelkin calls the $370 to $11,500 offerings “fine in materials but fashion in style.” “We want women to know that they can get the real thing for the same price they are paying for high-end costume jewelry. The real value for jewelry is in the quality of the materials, not the label it bares,” Nelkin said, projecting $250,000 in sales this year and $500,000 for 2013.

Unlike Plukka, though, all items featured on Port-Au-Gem are in-stock and ready to ship.

Port-Au-Gem started with an initial investment of $250,000 but according to Nelkin, that number doesn’t include any of the manufacturing the company does in-house. All in-house manufacturing is financially supported by the site’s partner until the product is sold.

Even individual designers want a piece of the online pie.

While she doesn’t have a brick and mortar store, designer Monique Péan sees so much value in the digital space that she’s unveiling an overhauled Web site with e-commerce capabilities on Wednesday in hopes of bolstering sales on moniquepean.com. She’s seen success with retail partners selling pieces that retail for more than $20,000 on their respective Web sites, and she is hopeful that e-commerce will become one third of the brand’s total sales over the next two years.

Péan — who’s become known for incorporating materials such as recycled gold, conflict free diamonds, repurposed diamonds and diamond slices, sustainable pearls, buffalo horn, fair trade precious stones and fossilized woolly mammoth ivory — will debut Bijou, a new collection that will launch in tandem with the site and retails from $1,500 to $4,200. The selection of understated necklaces is more accessible than her main line that has an average price of $7,500 (although this can go up to $300,000).

“Because our distribution is not widespread, launching e-commerce is an excellent way to showcase our entire collection to customers who do not live near our retailers,” Péan said.

 

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