Same As It Ever Was

Many independent jewelers originally looked at the Internet with great expectations … and much dread.

The optimism came from the promise that the Internet would allow retailers to sell their products to anyone, anywhere, at any time of day. It would also offer another way to market their stores and a way to order products more efficiently.

The fear came from predictions that “pure-play” e-commerce operators would replace brick-and-mortar jewelry stores.

None of those things happened. In fact, according to the results of a recent JCK Retail Panel survey, the majority of jewelers addressed the Internet’s impact on their business with a collective shrug. As one respondent said, “Frankly, we’re so busy running the day-to-day store that we don’t have time to mess with the computer.”

When asked what statement best expressed how the Internet will affect the industry, 76% of respondents replied, “Same as it ever was.” More than 14% of respondents agree with the statement, “The future’s so bright I gotta wear shades,” while less than 10% agree with the statement, “Here today, gone tomorrow.” One respondent believes there’s a problem with loyalty among those who learn about the store through its Web site: “[The Web site] sends me lots of customers, [but] they have no staying power.”

More than 90% of the 160 jewelers who responded to the JCK survey say e-commerce operators have little to virtually no chance of replacing brick-and-mortar operations. In fact, more than 60% of respondents say retail operations are in the best position to profit from the Internet. And more than 95% of respondents say customers want to see and feel jewelry before purchasing, placing jewelers in the best position to meet customers’ needs.

Among the minority was one Alabama-based jeweler who says that for the past five years he has been unable to convince his co-owners to get more involved with the Internet. “I believe we’re losing a lot of market share,” he says. “One jeweler friend in Alabama is selling more jewelry on the Web monthly than I’m selling in one of my stores.”

E-marketing. One of the more extravagant claims made during the Internet craze was that e-commerce was going to change the way retailers and consumers interact. Outside of a few successes, this prediction, particularly in the jewelry industry, has failed to materialize—and in some cases, failed dramatically. Another, lesser claim, which gained momentum after the business-to-consumer link didn’t pan out, was that e-commerce would revolutionize the way retailers order product and manage inventory. Again, according to the survey, success in this area has been slow in coming.

The JCK survey reports that jewelry retailers were either unprepared or unwilling to invest the time and money it takes to make their Web sites e-commerce enabled. Jewelers with sites that have e-commerce capabilities have said that online transactions are actually a very small part of overall business—again because of a lack of time, money, and knowledge of e-commerce and the Internet. “We thought it would add sales, but we have had very little action,” says one respondent. “It seems you have to know how to get your site on the right servers, which is a ‘cyber’ issue—not an advertising issue. You either know how—which we don’t—or you must pay someone to do it.”

It appears that the success of the Internet, so far, has been dependent upon using store Web sites as an advertising, marketing, and education source for consumers. Nearly 88% of respondents say this is the primary function of a store Web site, while 12% say the primary function is to sell goods.

More than 72% of respondents have Web sites. Of this group, 67% report that they’re used only for marketing and other consumer information; the remaining 33% say their site is e-commerce enabled.

Some jewelers are experimenting with using e-mail as a personalized marketing tool. More than 88% of retailers surveyed say their Web sites have an e-mail contact, and another 70% retrieve e-mail addresses.

However, only 24% of respondents use e-mail as a marketing tool. Among this group, 68% say they use e-mail to make their customers aware of store specials. About half (51.6%) alert customers to the arrival of new products, and 22.6% regularly send an electronic newsletter to their customers.

But overall, even as a marketing tool, the Internet hasn’t been nearly as successful as advertised. Nearly 87% of respondents attribute less than 5% of their total business to having an Internet site. Slightly over 5% attribute between 5% and 10% of their business to an Internet presence. Meanwhile, 1% of respondents attribute between 11% to 15% of business to the Web, and 7.2% say they receive more than 15% of business because they’re on the Internet.

E-commerce. Among the e-commerce group, the majority of retailers use it for business-to-consumer transactions (41.3%). A total of 25% use it for business-to-business transactions, and nearly 35% use e-commerce for both types of transactions.

A total of 96% of respondents with e-commerce capabilities say their Web site attracts less than 5% of total business, while 2% say it attracts more than 15%. “I suspect there’s business to be done, but not a lot for many right now,” a New York-based jeweler wrote.

Selling online was touted as a way to move merchandise all over the country—even the world—24 hours a day, seven days a week. This is the only area of business-to-consumer Web selling where jewelers have expressed some optimism, according to the survey. More than 68% of respondents have sold jewelry online outside the store’s region, and 40% consider national business part of their overall Web strategy.

Even though inventory tracking is becoming more automated, jewelers have not been using the Internet for business-to-business purchases. Nor do many believe that the Internet is a more efficient way to buy and keep track of inventory.

Nearly 86% of respondents order less than 5% of their inventory online, followed by 10% who say they order between 5% and 10% of their inventory online, and 4% who order between 11% and 15% of their inventory. When asked about the efficiency of online ordering, 67% of respondents say there has been no difference, 17% find it to be a disappointment, and nearly 16% say it has increased inventory efficiency.

One jeweler wondered if his disappointment with ordering product online was his own fault. “We simply don’t have the time or inclination to keep up. When there are only a few people to complete tasks, some things get left undone.”

Web site management. Operating a Web site for a jewelry store, whether or not it’s e-commerce enabled, requires technical skills, constant updating and improvement, and a general understanding of how the Internet works. For those selling online, packaging, mailing, and dealing with returns must be an integral part of the store operation. This requires manpower and money. As previously noted, many retailers don’t believe that the return on this type of investment is worthwhile. So in most cases Web site management and backroom operations are considered secondary functions in many retail operations.

The majority of jewelers (64%) say they update their Web site whenever they can. Among those who update their sites regularly, 29% say they do it monthly, while 4% do it weekly and 3% do it daily.

Responses regarding who handles the task of updating the site were distributed fairly evenly among the owner (42.1%), an outside person (30.8%), and a store employee (27.1%).

More than 80% of respondents say they have not increased their backroom operation to keep up with online demand, while 9.7% say they have added staff. Again, some do see the Internet as a moderate growth opportunity, with 31% anticipating a time when they will increase their backroom operations. However, 48% don’t plan or anticipate an increase in their backroom operation.

The Internet may have a future in the jewelry industry, but that future has yet to be fully defined. Jewelers, for the most part, are unaware of how to use the technology and don’t know how much time and money to invest.

Meanwhile, the great expectations inspired by the initial wave of Internet hype have been tempered by reality. And the fear triggered by the same hype has all but evaporated.

Choose the option that best reflects your opinion regarding the following statement: While there’s a small segment of the population willing to buy jewelry online, and there are brands that can be positioned to sell online, the vast majority of customers will always prefer seeing and feeling fine jewelry before purchasing.
Agree strongly 71.2%
Agree somewhat 24.4%
Neutral 2.6%
Disagree somewhat 1.3%
Disagree strongly 6%

Choose the option that best reflects your opinion regarding the following statement: Brick-and-mortar jewelry retailers are best positioned to profit from the Internet.
Agree strongly 15.6%
Agree somewhat 46.9%
Neutral 20%
Disagree somewhat 12.5%
Disagree strongly 5%

For those who have a Web site for consumers, what type of consumer information do you provide?
Basic store information (location, hours, services) 85.4%
Basic information about diamonds and gemstones 64.1%
Sales and special events 35.9%
Store inventory 37.9%
These plus other information not mentioned 30.1%

How much of your inventory is displayed online?
Zero 25.7%
1% to 5% 49.5%
6% to 10% 13.8%
11% to 15% 4.6%
More than 15% 6.4%

How often do you update your online inventory?
Weekly 4.9%
Monthly 23.2%
Quarterly 17.1%
Whenever I can 54.8%

How much online business (actual online transactions) do you expect your Web site to attract in the next five years?
Less than 5% of total store sales 65.2%
5% to 10% 25.8%
11% to 15% 4.5%
More than 15% 4.5%

For jewelers who have Web sites that are able to sell jewelry to consumers, how much online business (actual online transactions) does it attract as compared to total sales?
Less than 5% of total store sales 96%
5% to 10% 25.8%
11% to 15% 0
More than 15% 2%

For jewelers who have Web sites that are able to sell jewelry online to consumers, have you sold jewelry outside your region?
Yes 68.1%
No 31.9%

Do you consider national business part of your overall Web strategy?
Yes 40%
No 45.5%
No opinion 14.5%

Who manages your Web site?
A store employee or owner who has other functions 51.5%
An outside Webmaster 45.5%
An in-house full-time Webmaster 2%
An in-house part-time Webmaster 1%