Flight of the B2Bs

W ith last year’s string of new e-commerce sites widely rumored to be suffering financial woes, one might think the jewelry industry would be skittish about the Internet. But the jewelry dot-com explosion shows no sign of fizzling out. This year has seen the launches of a number of jewelry-related sites in two of the hottest Internet categories-“B2B” (business-to-business) and “clicks-and-bricks” (e-commerce sites with traditional retail components). A few sites cover both sectors.

But analysts say the new sites face an uphill battle. Some are creating new models or trying to resurrect extinct links in the distribution chain. Moreover, Internet trends have a notoriously short shelf life, and the track record of jewelry-related Web sites is less than stellar. But for retail jewelers, the new sites represent an interesting reversal of fortune. Last year, Web entrepreneurs were talking about going direct to the consumer and cutting jewelers out. This year, everyone wants to count them in.

Clicks-and-bricks. “Clicks-and-bricks” became a hot Internet buzzword after the mixed results last year from “pure” e-commerce sites. Analysts decided that traditional retailers (or “brick-and-mortar” stores) have the advantage in setting up online outlets, since they have established brands as well as distribution systems.

But the new clicks-and-bricks jewelry models do more than put retailers online. They are independent entities, meant to compete for e-commerce without hurting the established structure of the industry-and without undergoing elaborate contortions.

Consider Enjewel.com (formerly DJOL-Designer Jewelry Online), set to launch this month. It was founded by a virtual Who’s Who of retailers (including Tivol’s and the Johnson Family Diamond Cellar) and manufacturers (including M. Fabrikant and Son, Scott Kay, and Honora), most of whom have equity in the company.

On one level, Enjewel is a standard e-commerce site, selling products directly to consumers, including brands unavailable elsewhere on the ‘Net. But the site also gives retailers a piece of the action. Every customer who makes a purchase over Enjewel picks a local jeweler for repairs and service. And the jeweler receives a commission-even if the customer never sets foot inside the store. In return, participating retailers provide links to Enjewel on their Web sites and tout it in their marketing materials. “Enjewel replicates what exists on the ground,” says the president of the new venture, Sheldon Ginsberg, an alumnus of Lazare Kaplan, one of the project’s backers. He acknowledges that the company, which has signed up nearly 200 retail and manufacturing members, hasn’t been able to find a site like it for any other sector but adds that “we feel getting some of the biggest names in the industry behind this helps validate the model.”

There’s a similarly Byzantine business plan behind dreamjewels.com, an affiliate of the New York-based “portal” hugeclick.com. The site targets manufacturers who want to build their brands online. It offers jewelry for sale, but when a consumer buys a piece, Dreamjewels bumps the order to the manufacturer, who is responsible for shipping. The consumer selects a local retailer from a list provided by the manufacturers, and the retailer gets the profit from the sale, minus Hugeclick’s commission.

Vivamoda.com, based in Boston, is a multilingual online luxury “life-style” magazine. Like Dreamjewels, it will sell jewelry online but won’t fulfill the orders, which are handled by members of its retail network. Retailers pay to join the network, and Vivamoda gets a commission from every sale. CEO Deborah Lira, a veteran of Gordon Brothers, notes there are similar successful sites for art (artnet.com) and home design (homeportfolio.com). She says her model avoids what she calls the “two killers” in e-commerce: inventory and distribution cost. “We are not a store ourselves, but we are essentially helping retailers run their e-strategy, which isn’t easy to do,” she says.

Not to be outdone, price guru Martin Rapaport recently announced that he would begin selling diamonds and jewelry to the public over his Web site, diamonds.com. He also announced the formation of a retail network, and a note on his Web page proclaims, “We believe the role of the Internet is not to replace jewelers.” When Rapaport, who’s been pilloried for selling to consumers in the past, announced his plan during a speech at The JCK Show, hardly anyone blinked, an indication of just how pervasive the Internet has become.

“B2B.” The popularity of “business-to-business” sites-like the current vogue for clicks-and-bricks-is partly attributable to the recent string of Internet flameouts. “The game used to be about building a virtual Roman Empire, all glorious acquisitions and land grabs,” Time magazine wrote recently. “Now it’s about building a Monaco, a tiny but incredibly profitable niche nation.”

The upper level of this year’s JCK Show in Las Vegas featured a parade of booths for recently launched B2B sites, where terms like “venture capital” and “IPO” were bandied about. B2B sites aren’t new to the industry-diamond-trading networks Polygon and RapNet have been around for at least a decade. DiamondFloor.com, the newest network, premiered last year and recently added a feature that lets people negotiate online.

But new networks are proliferating faster than episodes of Who Wants to Be a Millionaire? There’s Santa Monica, Calif.-based Gemconnect.com, which boasts “powerful personalization features” as well as credit, shipping, and insurance. Miami diamond dealer Derek Parsons recently introduced usadiamondfloor.com, a trading network designed to let jewelers show their virtual inventory to consumers. Its interface lets jewelers build markups into their presentations and buy stones exclusively from dealers they know. “Polygon and RapNet only have a very small number of jewelers in the industry,” Parsons says. “I think that’s sad. We want to make it user-friendly to use the power of the Internet.”

One of the more ambitious attempts to ride the B2B bandwagon comes from New York-based GemKey, which began four years ago as an online trading forum and industry news service. The site is trying to revive the now-extinct wholesale sector, by selling products to retailers via the Web. “Our model is Stuller [Settings],” says CEO Mike Cunningham. “Retailers don’t have time to meet with sales reps from different companies. Those are hours lost, and they can be gained back so jewelers can do what they do best: sell.” The site is also launching a credit arm-GK Capital-that will underwrite retailers’ purchases from the site. The firm is also developing a credit guarantee service to finance purchases off the site as well.

Enjewel’s Ginsberg, who notes that his site will have a warehouse of consigned inventory, hopes retailers will see it as a one-stop shop. “Once retailers learn that Enjewel can offer in one phone call what they would have to make 50 phone calls to get, they will find it a tremendous time saver,” he says.

Enjewel is not the only site that combines both models. JA/MJSA.net is a new “e-commerce enabling service” from Jewelers of America, Manufacturing Jewelers and Silversmiths of America, and BrandMatrix, a division of Polygon. The venture provides technology to retailers to build their own e-commerce “clicks-and-bricks” Web sites. These sites feature the retailer’s name and inventory but content from the groups. Unlike some other sites, the JA/MJSA site leaves nearly everything to its member retailers, who will pay to become part of the network. “We are providing a starting point so our members can learn about this new thing called e-commerce,” says JA’s Bev Hori, president of the new venture, which, she stresses, is not for profit.

JA/MJSA.net also has a B2B trading network, similar to Polygon’s, where member retailers can buy from member manufacturers online. “We will not get involved in any of the transactions-just enable them,” Hori says. “It gives retailers a broader array of merchandise to choose from and a more efficient way in some instances. We want retailers to see the Internet as a more efficient way to communicate, rather than this big scary thing or the enemy.”

Need a Web Site? Call a Jewelry Manufacturer

More manufacturers are wondering how to sell their products on the Web without cutting out the retailer. Now two think they have the answer: Build Web sites for them.

Two manufacturers, Verigold and Eugene Biro, both based in New York, are independently offering jewelers free, complete e-commerce Web sites that they can customize. The one stipulation is that, while jewelers can sell any products they want on the site, they also have to include products from the companies.

Sumit Shah, CEO of Verigold, notes this offer takes the legwork out of establishing a Web presence. “A lot of retailers have Web sites that are just pages, without any e-commerce,” he says. “This is a no-brainer for them. The retailers can customize what we’ve done instead of building it from scratch. They can change things very easily without having to go through a separate Web designer.”

Judy Singband, Eugene Biro’s director of Internet marketing, also argues it’s a money saver. “If a retailer tries to build a site of this caliber with e-commerce capability, it could cost in the tens of thousands of dollars,” she says. She notes that the site is easy to personalize. “Two stores could use it and be down the street from each other and no one would know,” she says.

Both companies portray the situation as a “win-win.” The retailer gets the site, and the company gets a guaranteed outlet. “It’s like having an extra salesman out there,” says Singband.

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