Revisiting the Internet

By Frank Dallahan -- JCK Online, 10/1/2006 2:00:00 AM

Recently, I was invited to speak at the Atlanta Jewelry Show on the topic of the Internet and the retail jeweler. My remarks reflected a somewhat contrarian view, because I believe retail jewelers can effectively compete despite apparent inroads by Internet jewelry sellers. Today, you cannot pick up a jewelry trade magazine or general business publication without reading something on how the Internet is taking more and more business away from retail. But the sky isn't falling. The retail environment is simply going through another change.

We need to understand that the Internet is—or can be—a valuable tool. It is, however, essentially a device to gather information. It also can be an efficient but impersonal method to purchase a wide variety of products. However, logic should tell you that selling consumer products on the Internet requires a brand name. How many brand names in jewelry do consumers recognize? Very few. The growth of businesses like Blue Nile and developments like Amazon's entry into the jewelry business, though significant, still represent a small portion of the $60 billion U.S. market. The projections by various data sources, while conflicting, tend to support the impression that the retail jewelry business will soon be gobbled up by the Internet. The reality is that your brand needs to be the leader in your marketplace. Blue Nile and Amazon are not yet jewelry brands to the consumer.

A member of the audience asked how to deal with a customer who's considering, or who already has purchased, a diamond via the Internet. Others voiced agreement that this is becoming more common. The good news is that a consumer coming to your store indicates that he or she is seeking validation for a possible or actual Internet purchase. They come to your store because they recognize they are unable to judge the value of what's available on the Internet, even though a diamond grading report is part of the product.

Jewelers have several options in dealing with this situation. One is to put your head in the sand and refuse to face reality. Confronting the problem directly is the smarter choice. First, address the perception that jewelry carries high markups. That's the principal positioning point of Internet sellers. According to Jewelers of America, on average, retail jewelers have a net profit of 4 percent to 5 percent of sales. You need to establish your quality/value competitive pricing policy to the customer.

Then, look at the diamond and determine whether or not you would buy it for your store. One effective comment voiced was: “What's available on the Internet is the product professional jewelers didn't buy.” A comparison of the Internet diamond with those you have in the same quality range is next. Presuming your own stock reflects a better-quality diamond from a cut perspective, the comparison should be to your advantage.

If all else fails, it's better to get the sale and a customer with some margin than lose to the Internet. If the customer cannot be converted, ask for a credit card and offer to get the same type of diamond sight unseen with a certificate at the same price.

frankdallahan@comcast.net