Online Might Be Taking Over Retail. But Not Necessarily Jewelry (for Now)

Business Insider just came out with a slide show featuring a bunch of scary-sounding charts demonstrating the growth of e-commerce. “Let’s face it, the old retail model is dying fast,” it begins. “Hundreds of stores are closing, because sales are tanking.” It declares that e-commerce is driving nearly all U.S. retail growth.

But how about jewelry? While e-commerce has clearly roiled our industry—particularly by hurting retail margins for engagement rings—and many jewelers have indeed closed, our category is better positioned than most to withstand the ongoing e-onslaught. BI notes that e-tail now accounts for 13 percent of clothing and accessories sales. It doesn’t break out jewelry—but the recent McKinsey & Co. study on our industry estimates that online sales comprise 4 to 5 percent of total jewelry sales and predicts that won’t top 10 percent in the next five years. Similarly, according to BI, only 6 percent of shoppers purchased a luxury item online in 2013, compared to 63 percent who purchased clothing. 

In the end, the factors that make jewelry an intimidating purchase for many consumers—it’s an expensive, complicated, infrequently purchased, “blind” item with security implications—also make it not easy to buy online. Shoppers may know their favorite clothing brand’s style and sizing and don’t necessarily need to try items on every time. (Think about Zappos; once you have a favorite shoe brand, you can keep ordering it again and again.) But most jewelry is visual, as well as non-branded and unique, and most shoppers still want to see and try it on before they buy. Plus, there is the education element. Shoppers don’t buy jewelry regularly and typically need assistance. Plenty of sites teach customers the basics and offer phone and online support. But there is nothing like a genuinely helpful person standing in front of you walking you through it.

Jewelry e-tailers are trying a variety of approaches to fight this: Both Blue Nile and BaubleBar are experimenting with displaying their wares at Nordstrom; just launched an intriguing program where it sends customers free samples so they can size their ring; and Ritani has embraced a clicks-and-bricks model, recruiting a network of retailers to service and sell its products. (It shows how unique the jewelry business is that there is no comparable model in other industries.) And this isn’t even limited to jewelry—recently, e-tailers Warby Parker and Bonobos opened offline stores, demonstrating, as one blogger put it, “stores still contribute unique value to brands and continue to play an important role in the purchase process.”

But there may be a limit to how far online jewelry companies can move offline. To start seriously venturing beyond clicks—by, for instance, opening retail stores—could hurt their low-cost structures and would involve having to collect sales tax. 

Speaking of which, if anything hampers the growth of jewelry e-tail, it will be passage of legislation mandating online sellers collect sales tax. (This seems iffy in the next year, but I wouldn’t count it out in the next decade.) A recent study showed that Amazon sales took a hit in states where it had to collect sales tax, particularly for more expensive items. (Blue Nile’s growing embrace of fashion jewelry makes sense on its own. But it could also be smart long-term planning for a business that, up until now, has been built mostly on competitive prices.)

All this doesn’t mean non-cyber jewelers should be complacent—just the opposite. While it’s good to be protected from a rampaging cyclone, in the end, you are still facing a cyclone. Online jewelry sales may not top 10 percent of the overall total anytime soon. But if they reach 8 or 9 percent, that would still be double what they are now. And clearly, online will grow. Not only will e-tail models and marketing grow sharper and better, but the up-and-coming generation is a lot more comfortable shopping online than their predecessors. 

The good news for jewelers is that they are better positioned than other retailers to fight this. (You don’t want to be in the book or electronic business.) But they do have to fight it, by continually emphasizing service, value, and giving the customer a great experience every time they walk in the door. There are plenty of reasons why it’s better to buy jewelry at an off-line store. But brick-and-mortar retailers still have to prove them true every single time.

Follow JCK on Instagram: @jckmagazine
Follow JCK on Twitter: @jckmagazine
Follow JCK on Facebook: @jckmagazine

JCK News Director