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The jewelry industry has traditionally been dominated by small family owned jewelry stores spread out across the United States. Today, there are over 35,000 listed retail jewelers making the jewelry industry one of the most fragmented industries in the United States. This fragmentation has usually worked to the benefit of consumers as family owned and operated jewelry stores were known for providing exceptional service to their customers. These independent retail jewelers typically have very well established businesses dating back many years and in some cases generations in the same town. They are typically highly respected members of their community and have built their businesses on their service, trust and reputation.
However, this fragmentation within the jewelry industry has also worked to its detriment in some situations, and most significantly in the arena of the internet and online diamond sales. The emergence of the World Wide Web and online diamond and jewelry e-tailers is causing independent, brick and mortar retailers, wholesalers and manufacturers to rethink the way they do business. Because of the inherent barriers to entry for small family owned jewelry retailers to effectively compete online(financial, technical, personnel and time management), the door was opened for e-tailors who had no physical store to come into the retail diamond market without the overhead carried by the traditional family owned jewelers. As such, these e-tailors operate on an overall gross margin structure which is about 1/2 of that of jewelers with traditional storefront and inventory overhead. So when a traditional storefront retailer is forced to match the online diamond price it is often simply not worth the many hours of his time to hunt for and close a diamond sale. The result is that a lot of traditional retail jewelers are choosing to forego the diamond sale to an e-tailer, and instead are settling for a full mark-up on the sale of the engagement ring mounting.
With revenues of $319 million in 2007, 70 percent of which were from sales of engagement rings, Blue Nile is now the biggest online specialist jeweler . . . in the United States. It is also gaining sales momentum in Britain and Canada, where it has operated for a few years, and in February it opened in 12 countries including Singapore and Japan. Blue Nile adopted a virtual model, in which it provides a shop window for suppliers yet does not put any of its own capital at risk. It carries little inventory and simply takes a cut when a transaction occurs. This model has enabled Blue Nile to sell at 30 to 40 percent below the price of traditional jewelry stores, and 50 percent below premium retailers.
A look at the industry sales figures clearly show that the jewelry industry is undergoing a paradigm shift in the way diamonds and jewelry are being sold. The jewelry industry is roughly on the order of $40 billion and today a little over 4% of all sales happen online. Based on trend, internet sales will keep growing every year at a growth rate of around 17% per year until overall online sales eventually cap out in about 10 years somewhere around 20% of all industry sales. This means that jewelry e-commerce sales will grow at least 500% over the next decade! As younger generations grow up buying anything and everything online, it is undeniable that the internet is here to stay and that online diamond sales will continue to erode in-store diamond sales. (See IDEX Magazine, September 2007, Vol. 22, No. 209, "Where is Online Jewelry Commerce Heading").
On the other side of the equation, it must be noted that most e-tailers do not engender the same level of confidence with consumers as their brick and mortar counterparts nor do they offer the same level of service. By simply passing diamonds through the supply chain from wholesaler to consumer, there is a lot of room for inadequacies such as characterizing the type and quality of diamonds being sold, the procedures for correcting those errors, and their ability to properly service the items that they sell. For example, in the event a consumer wants to return a diamond purchased from an e-tailer he is often instructed to go the post office and follow a set procedure for insuring and sending the diamond back to the fulfillment house. Failure to insure and/or ship properly may result in liability to the consumer. If a ring is not sized properly the consumer must send it back to the e-tailer's fulfillment house. In addition to the potential shipping liability, the consumer usually has to wait several weeks for the size to be adjusted and for the ring to be returned. Because there is no physical store associated with e-tailors, there is no place for the consumer to go to have the ring and diamond periodically checked, cleaned and tightened.
In short, the large e-tailers are not going to put store-based jewelers out of business, but they are going to make life more and more difficult for those who do not learn how to adapt to the internet and make it a part of their overall business strategy.
Ideal Diamond Solutions, Inc (IDS), with headquarters in the jewelry district of New York, was created to empower independent retail jewelers across America to cost effectively compete selling diamonds and jewelry online through their own, customized web site. The goal of IDS is to establish a nationwide network of brick and mortar retail jewelers who, by acting together, can individually take back their respective share of the jewelry commerce that they have been losing to the big e-tailers who presently dominate the online arena.
1) Providing state-of-the-art, fully customized, e-commerce web site solutions to brick and mortar retail jewelers to help them cost efficiently compete in the online arena;
2) Acting as a centralized buying organization with the combined buying power of its entire nationwide network, thereby enabling it to secure diamonds on the world markets at the best possible prices;
3) functioning as a centralized fulfillment house to minimize overhead costs and create the same economies of scale and vertical integration between the marketplace and consumers that currently advantages the large e-tailers like Blue Nile;
4) Providing state of the art Search Engine Optimization (SEO) and online marketing which is guaranteed to drive traffic to the web sites we service; and
5) Establishing the Verified Internet Diamond Purchaser's Affiliation (VIDPA) to address the ethics, safety and customer service issues associated with selling diamonds online - VIDPA certification is provided exclusively in association with IDS fulfillment and web site services for the benefit on instilling confidence with the online diamond purchaser.
Through the services that IDS provides to independent retailers, and through the confidence that VIDPA aspires to instill in consumers, it is our goal to bring the independent retail jeweler to the top of the online arena for diamonds and jewelry e-commerce. We welcome you to join us in this mission.