Making Your Transition to an Internet Economy

But with so many Americans logging on to the Web these days, that choice is becoming increasingly risky. Here’s how to turn the Internet stampede to your advantage.

Assessing the Internet’s impact on jewelry retailing is like guessing the size of the Grand Canyon when standing on the rim at night. There’s just no telling how large it is, and whether the prospect is inspiring or terrifying. One thing’s for sure, though. The Internet is here to stay, and it’s up to jewelers to make the most of it.

Online jewelry purchases are expected to reach $102 million this year and will nearly double in each of the next five years, according to Forrester Research, a Boston firm tracking Internet retail trends. Though this year’s figure amounts to less than 1% of a single month’s sales at U.S. jewelry stores, by 2003 online purchases will approach $1 billion, some 3% of total jewelry sales that year. It will only grow from there.

“It’s a race to see who will get the biggest chunk of that $1 billion,” says Forrester analyst Seema Williams. But few independent jewelers have the capital or ambition to attempt market domination online. That’s an expensive proposition. Forrester projects that companies will need to spend an estimated $10 million to $20 million on advertising alone each year in order to achieve market dominance online in any business category. Besides, iQVC (www.jewelsandgems.com) already accounts for nearly a third of the online jewelry market.

“The important thing is just not to huddle and be terrified that you’ll lose sales to the Internet. The ones who wait will be toast.”

—Jacques Voorhees, president of Polygon

Short of aiming for market dominance, there are other, potentially lucrative ways independent jewelers can use the Internet to their advantage. The article on page 148 provides suggestions on how jewelers can stick their toes into the rapidly rising Internet waters and wade in more deeply when the time is right.

Retailer reluctance. While acceptance of the Internet is relatively high, few jewelers are using it to sell merchandise. The hype, confusion, and fear associated with the Internet may have caused many to feel intimidated about exploring its full commercial potential. A recent JCK survey found that 54% of jewelry retailers use the Internet for business reasons, such as buying merchandise, finding new suppliers, viewing industry Web sites, and researching competitors. Forty percent of the 156 panel respondents have a Web site. Just half of these sites (representing 20% of total respondents) are used to sell merchandise.

Of the 20,000 jewelry store Web sites linked to Internet- services company Polygon, less than 1% are used for e-commerce.

“Our industry is so far behind the times in response to changing technologies, it’s ridiculous,” says Robert Mann, chief operating officer of Mann’s Jewelers Inc., a high-grossing store in Rochester, N.Y. Mann has marketed his Web site (www.mannsjewelers.com) successfully and has added sophisticated features that contribute to the firm’s bottom line.

“We’re still scratching the tip of the iceberg,” says Rich Goldstein, president of iJeweler, Austin, Texas, which specializes in Internet marketing for the jewelry industry. “As much as people think the Internet is affecting the world so far, I don’t think we’ve seen it yet. Internet sales this Christmas will surprise people by how high they are. Then it will just keep going.”

Despite Forrester’s prediction that Internet sales will remain relatively modest, some experts foresee a different scenario. Jacques Voorhees, president of Polygon, says, “A huge percentage of the jewelry industry is going to move to the Internet, and if anyone is in doubt about this, they need to wake up, gear up, and look for ways to turn this phenomenon to their advantage. It’s a very scary and exciting time. The important thing is just not to huddle and be terrified that you’ll lose sales to the Internet. The ones who wait will be toast.”

Three approaches. So far, companies have used three basic approaches to reach customers through jewelry Web sites. One way is to create an informational Web site that functions as a

virtual brochure to build the image and credibility of the store, supplemented by e-mail to further strengthen relationships with customers. A second approach is to sell jewelry online using fixed prices. A third strategy—inspired by the frenzy of activity on eBay (www.ebay.com), which has acquired the San Francisco auction house Butterfield & Butterfield—is to sell jewelry through online auctions.

Until now, not having a Web site has been a valid choice, says Goldstein. That’s no longer the case. Going Web-less at this point “cuts off a piece of business for you,” he asserts. “It makes sense to at least sell your store on the Internet. Everybody ought to do that at minimum. If you’re not doing that, then you’re essentially declaring that you will not do business with people who prefer to use the Web.”

That number is large. Some 34 million people buy products from socks to stocks on the Internet today, accounting for retail sales of $14.9 billion in ’98 and a projected $36 billion this year, according to the Boston Consulting Group and Shop.org. Then there’s the appealing demographics of Web purchasers. Their average income is $56,000, 76% are college-educated, 62% are men, and the average age is 40. Sounds like an ideal jewelry customer, doesn’t it?