It’s that time again: It’s been about five years since the first Internet bubble burst, and now there’s another push to move commerce online. And of course the jewelry industry is getting into the mix.
This past year, Blue Nile had a successful public offering, and Amazon.com opened an online jewelry portal. Jewelry.com—a partnership among gemstone jewelry manufacturer Andin International, sightholder and diamond manufacturer Leo Schachter, and gold manufacturer Aurafin/OroAmerica—has successfully marketed jewelry on the Web by partnering with national retailers J.C. Penney, Sears, and Zales, rather than selling directly to consumers.
Independent jewelers now have the opportunity to join an effort similar to Jewelry.com but with a much larger scope. Super Bell Jewelry Co., Los Angeles, has created a business model designed to bring consumers, independent retailers, and manufacturers together online. Called the “Jewelry Club House,” the plan was first presented to retailers during the 2003 JCK Show ~ Las Vegas. But the original model was broadened and reintroduced at the 2004 JCK Show.
What’s the difference between e-commerce in the late 1990s and e-commerce in 2004? This time there is solid evidence that consumers are more comfortable using the Internet to research products and make purchases, including jewelry and luxury purchases. Consider these statistics:
Online sales of jewelry and luxury goods were $2 billion in 2003 and are predicted to reach $6 billion in 2008. (Source: Forrester Research)
If predictions hold, the annual compounded growth rate for online jewelry and luxury goods sales from 2002 to 2008 will be 31%, which is stronger than overall e-commerce sales, currently estimated to be $120 billion in 2004. (Source: Forrester Research)
As of May, online jewelry and watch sales were 48.3% higher than at the same time in 2003. (Source: Bear, Stearns & Co. Inc.)
In general, e-commerce sales are growing at the rate of 30% per year, much faster than total retail sales. (Source: U.S. Department of Commerce)
Members of the Generation Y and younger demographic have grown up accepting and relying on the Internet, according to the World Internet Project. Nearly 91% of those between 16 and 24 years of age are using the Internet compared with 74.5% of those between 35 and 44 and 67.3% of those 55 to 64.
Super Bell has hired Jeff Taraschi and Michael McMullen, both veterans of television shopping networks, to create, position, and sell the Jewelry Club House concept. Taraschi and McMullen also have tapped into another source for their model: self-purchasing women and their reliance on fashion advertising (primarily in consumer magazines and online) to help them make purchases. It’s a concept the two say has been underused in the jewelry industry.
In addition, the Jewelry Club House model is focusing on the success of business-to-business (B2B) enterprises on the Internet. B2B already amounts to $3 trillion annually or 25% of all inter-business purchases, Taraschi and McMullen say.
Jewelry Club House is attempting to combine the strengths of the retail jeweler (for example, the years invested in the store brand, history in the community, reputation, and personal relationships with loyal customers) with the opportunities the Internet provides on both a business-to-consumer (B2C) and B2B basis. Its founders are looking for jewelry retailers to become stockholders in the company, hoping to build a national network of jewelers that will support the online presence locally. In return, those retailers will enjoy exclusivity within their geographic markets, a unique marketing relationship, and, potentially, financial benefits. The company already has received the investment support of key manufacturers, says Super Bell Jewelry Co. chairman and CEO Lo Huang. Officials declined to name the manufacturers.
Jewelry Club House will consist of two separate Web sites—one where consumers can learn more about fashion trends and order jewelry online, and one where retailers can efficiently maintain inventory and quickly order new products, which are primarily provided by Super Bell and manufacturer investor companies, Taraschi says.
The ‘virtual store.’ Many Internet sites that sell product are primarily online catalogs. But the Jewelry Club House (still being beta-tested), is designed to transcend that concept.
It will, of course, provide product listings, but it will also offer a full fashion experience for consumers, including product demonstrations, the latest in fashion news, features about fashions and accessories, trends stories, tips on how jewelry and apparel work together, and seasonal features. And, it also will incorporate the latest in technology such as streaming video and audio technology to show, for example, runway shows. It may even provide live feeds.
In addition, the site will be able to track sales, determine what is selling well and what isn’t, find out which Web pages within the site are receiving the most attention, and track other data to determine trends in consumer behavior. Retailer members will have access to that information on the B2B site—both to reorder product and as a general sales tool.
“It’s the perfect circle,” McMullen says. “The retailer sees the trends on the business-to-business site ahead of time.”
Promoting the site will play a significant role in the new venture as Taraschi and McMullen are working on implementing a national online advertising brand campaign that will combine premium display ads, paid-search marketplace advertising, and “active insertion” advertising on general interest and jewelry and fashion-specific Web sites.
The site is being marketed to “upscale, sophisticated users who are highly educated and have a higher per capita income,” Taraschi says—the type of people who don’t make purchasing decisions based on price alone, he adds.
Customer relations. Consumers can choose to buy a product online or see it first from the retailer-member who has exclusivity within that market area.
“Our model doesn’t judge,” McMullen says. “It allows the customer to choose.”
Either way, the retailer that has exclusivity in a market will have the opportunity to create a long-term relationship with the consumer, something that Taraschi almost guarantees. “We create a client,” he says. “Not just a one-time buyer.”
As soon as a sale is made, a video-enhanced e-mail is automatically sent to the customer from the store, letting her know where to get additional support. In addition, the retailer shares in the sale of the product—whether it’s done online or at the store. Under the business model in effect at press time, all shareholders share equally in a sale, no matter where or how an item of jewelry is sold. Retailers also can have their own consumer Web sites, which will be part of the national network but provide an individualized appearance to the consumer.
The bottom line. Under the plan in effect at press time, retailers have the following investment options:
The cost is $10 per share
There are three levels of investment: Silver, 250 shares; Gold, 500 shares; and Platinum, 2,500 shares.
All net revenues earned through the Web site are split evenly—among retailers.
Monthly dues that support the exclusive relationship between the retailer and consumer, such as the follow-up e-mail service and other marketing services are Silver, $75; Gold, $125; and Platinum, $250.
“Points” will be earned among retail investors depending on their level of membership. Points can be redeemed for products used for demonstrations, consignment inventory, and personal Web site promotions.
Huang says the investors are eventually planning to take the business public. Business projections are as aggressive as the business model, with first-year sales estimated at $14.5 million followed in the second year by sales of $42.5 million, and reaching $200 million in five years.
Taraschi says that investment options could change based on how they meet their sales projections. There are no minimum merchandise commitments.
“We are creating a spirited partnership where retailers recognize the value of the relationship,” Taraschi says. “There are no stipulations or commitments other than initial investment and monthly dues.”
McMullen estimates that the site will be launched no earlier than the beginning of 2005.