With e-commerce, mobile marketing, and social media becoming more ingrained in our everyday lives, my message has consistently been for jewelers to embrace some form of these new consumer-driven forces before loyal consumers leave them behind for good.
As someone who has grown up with advanced technology and Internet access, I sometimes forget how hard and, at times, terrifying, all of this change must be. I also realize that jewelry industry professionals should be listening and learning from peers who have navigated the online landscape.
In that spirit, Ira Weissman, a diamond dealer who runs a gem information and referral site and recently inspired Rob Bates’ blog post “Are Diamonds a Waste of Money?,” sent us some thoughts on how brick and mortar stores can improve online to compete in the Blue Nile age.
Eliminate the Negative
It’s no secret that brick and mortar jewelry stores are at a strategic disadvantage when compared to their online cousins. Whether it’s your significantly higher overhead, or your borrowing costs for carrying an inventory of diamonds, or your higher memo prices, there is simply no mathematical way you can compete with even the higher-end online dealers’ diamond prices.
These are the various ways I’ve seen this problem dealt with as relayed to me by my readers:
- This typically takes the form of selling diamonds with looser certificates and comparing prices to GIA or AGS certified diamonds. The problem with this approach is obviously that the end result will eventually be a ruined reputation and a loss of business. Consumers are more informed than ever and they will only continue to get more educated. To speak nothing of the immorality of this approach, I don’t believe it’s financially sustainable in the long term anyway.
Relying on the Uninformed
- Some of you just simply go on charging higher margins than the online stores hoping that you’ll continue to attract enough customers who are uninformed and don’t scour the internet before making a major purchase. This bunch is certainly more admirable than the first group, but this approach is likewise unsustainable.
- In theory, branding is a great solution to the problem. Make higher margins selling a (either real or perceived) better value proposition to your customers. While it sounds great on a superficial level, a closer look reveals a few insurmountable issues. With the vast majority of diamond brands, there is no real value added. It’s almost always a lot of fluff. This isn’t any better than those who fluff up their diamonds with loose certs. It’ll come back to haunt you. Eventually, you won’t be able to fool anyone anymore, and you’ll be known as the one who tried to.
Accentuate the Positive
I actually believe brick and mortar jewelry stores will always be around and many will continue to succeed.
With regard to loose diamonds, you will never be able to compete with the online vendors’ inventory size and prices. Yet, there are advantages brick and mortar stores have over the online world that are insurmountable.
With everything fashion jewelry, for the consumer there is simply no substitute for shopping a display case full of designs and trying on things to see how they look. I think Blue Nile made a serious strategic error when they announced they’re making a much strong push into fashion jewelry. The single largest advantage of online jewelers, namely the ability to list a huge inventory with no money invested in it, disappears when they have to invest in an inventory of fashion jewelry. Without that advantage, and with the major disadvantage of their customers not being able to try on their pieces, Blue Nile trails brick and mortar jewelers in value offered.
That’s also the case with engagement ring settings. Sure, most of the better online vendors have a huge array of options when it comes to the settings, but again since this is something so utterly personal, nothing compares to seeing the designs up close. It’s becoming increasingly more common for customers to buy their diamonds online and have them set by their local jeweler where they can choose the setting of their dreams in person.
This leads me to my novel conclusion: brick and mortar jewelry stores should stop trying to sell their own diamonds. Your local competition can be vicious, but competition among online vendors is much more so because the stakes are that much higher. Because of this fact, online vendors will do almost anything to land a sale, including paying people like me a majority of their profit on a sale. Most affiliate programs with the better online dealers range from 5 percent to 7 percent. Some are capped at around $500, others are not.
You should take advantage of this fact just as I have. In today’s market, a clean 5 percent on a diamond sale without having been invested in it at all should be very welcome. Once you make that cut, Blue Nile will almost certainly be left with less than that. Their margins are lower than ever, and they have to pay processing fees, shipping, packaging, etc.
Set up computers, or equip your salespeople with iPads. Have them gain the trust of your customers by saying, “Listen, we have learned that we can’t compete with these online guys when it comes to the loose diamond. Their selection and pricing is simply something we can’t touch. But we can help you make the best decision possible for you. Lets find the best diamond possible for you right now together. =We actually make a small commission from them for the service, and afterwards when the stone arrives we’ll help you find the setting of your dreams.”
This way, instead of using misinformation to maintain your margins, you’ll be able to drastically reduce your inventory while becoming a store that honestly has its customers’ best interests at heart, while at the same time still making a healthy profit from diamond sales that you won’t have to dirty your hands with.
Ira Weissman is a diamond industry veteran with experience at one of the world’s largest diamond polishers. He has traveled the world buying and selling diamonds and now dedicates his time to helping consumers make the most of their diamond buying decisions. He has been featured on Anderson Cooper, CNBC, The Huffington Post, and has been quoted by MarketWatch, The Village Voice, and BankRate. Visit his website, Truth About Diamonds.
Also check out: