The Debate on Online Jewelers

When Blue Nile’s CEO resigned after the company’s disappointing third-quarter profit numbers this past November, JCK senior editor Rob Bates posed the question: “Should Blue Nile Have the Blues?

As someone who is still learning the ins and outs of the industry, I looked back on these stories and started thinking about what impact online jewelers have had in the jewelry business, and what role will they serve in the future. I’ve heard grumblings about companies like Blue Nile, but I’ve never quite understood where the animosity came from.

As always, several industry veterans had some pretty passionate opinions regarding the issue.

Michael Schechter, Honora’s director of digital marketing and JCK‘s Jewelry 2.0 columnist, says that online jewelers developed a bad reputation among some jewelers because the early online jewelers were “just really bad,” and took the “luxury out of a luxury industry.

“I’d also be lying or just avoiding the elephant in the room if I didn’t address the fear of a lower-cost competitor,” he says. “Even when run well, it is far less expensive to run a Web store than a physical location, so there is always a fear of a lower-cost competitor.”

Dan Gordon, president of Samuel Gordon Jewelers, tells me the industry’s resistance to change is one of the reasons for the angst directed at online jewelers. “I believe the nature of our industry’s refusal to accept fundamental shifts in global technology and therefore distribution channels is the main result people form negative opinions whilst they really should be embracing it.”

He does make a distinction between online companies who are “winging it” and those companies like Blue Nile and Gemvara who have a business model grounded in the principles of traditional jewelry stores.

Andrea Rosenfeld, founder of Open Studio, tells me out that the jewelry sold on online jewelry sites typically aren’t edgy. In her opinion, the pieces found online tend to be more conservative, and may be very similar to things that a client saw in a local retailer for more money. She also believes that online jewelers have a much larger reach than brick-and-mortar retailers. She thinks that jewelry stores can reach their neighborhood and outlying areas—or if they are successful on social networking they can extend beyond their town—but they still have the difficult task of selling expensive jewelry online.

“The amount of people who can afford to shop in a jewelry store is dwindling as well,” she says. “If you want to propose and you’re a construction worker, you’re going to shop on Blue Nile after checking the local stores.” 

Barbara Palumbo, senior vice president of Union Diamond, works for two men who started the online jewelry store after working in the industry for many years and who both realized that the brick-and-mortar way of selling was broken, that technology was changing how the world shopped, and that outstanding service could still be given without ever being face-to-face.

Any brick-and-mortar retailer could easily adopt Union Diamond’s business model: quality product, knowledgeable staff, exceptional service, and certified diamonds at reasonable prices. Palumbo tells me is that the difference is consumers can be educated about jewelry issues and trends—as well as get products “faster than they can say, ‘Do you accept Google Checkout?’”—all from the comfort of their own homes.

“We’re not going anywhere, and neither is Web retail. And I don’t know if that makes us the enemy, or if it just means that the independents need to change their game a bit,” says Palumbo. “Either way, it’s the consumer that will benefit from the outcome, which is good because without them, none of us would be here.”

She also points out that her company has employed and still employs a multitude of GIA graduates and GIA students, metalsmiths on staff, its own CAD design team, a full team of in-house jewelers and setters, and a showroom for local or out-of-town customers who still need to see before they buy.

“I believe at some point we will need to all come together are create solutions to real problems that hold us back in the luxury sector at large,” says Gordon. “Online jewelers having a bad rap is a poor excuse for the industry not to address the real issues that are fundamentally changing the way consumers are buying products.”

Schechter states that traditional jewelers have certain advantages that online jewelers don’t. “Rather than putting a negative spin on online jewelers, explain the differences,” he says. “Explain the added value services of your store, show off your expertise—something that is much harder to execute online, even in the age of live chat—and build a face-to-face relationship with that customer.”

Jim Schultz of online jeweler also sent me some sage advice both sides of the debate should keep in mind. “Just like stores, the vast majority of online retailers are honest individuals/companies trying to help customers make one of the most important decisions of their lives,” he says. “‘Offline’ jewelers may badmouth ‘online’ jewelers simply because they see them as competition, outsiders, or are responding to criticism coming from the other direction.”

Schultz believes that negativity from either side is “unfounded, unnecessary, and creates mistrust among consumers that isn’t helpful for anyone.”

I couldn’t agree more and I hope that any comments this post generates will be respectful and in good taste.

Enjoy the weekend, everyone!