The Store on the Corner of the Cloud
May 01, 13By Danielle Max
It takes a whole lot of pluck to think that you can change the way people buy jewelry, but the creators of online jewelry site Plukka are changing the traditional buying model with their consumer-led, social media-driven business model.
Founded just last year by Joanne Ooi (formerly creative director of Shanghai Tang) and Jay Waney, the Hong Kong-based company is not only becoming a must-visit resource for consumers in the know, it is also providing an important lifeline for jewelry manufacturers.
As Elle Hill, Plukka’s director of Business Development explains, when she met the founders of Plukka, she convinced them to use their innovative business model in the jewelry industry, where there had been little progress taking advantage of tools such as the Internet or even different business models – previously, they had been planning to create a children’s clothing company.
“There’s a hell of a lot of fat in the jewelry industry, especially the designer jewelry industry. There’s a lot of money left on the table that doesn’t need to be there and is scooped up by the retailers.”
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The key difference between Plukka and other jewelry sites is that the company does not keep a huge inventory in stock, many of the items shown online are made only when and if a customer places an order for them.
In fact, Hill emphasizes that Plukka is not a manufacturer itself but a PR and marketing machine that works to give manufacturers a fairer deal than they would get elsewhere and which in turn gives consumers access to lower prices than they are used to seeing.
Plukka offers three ways of buying jewelry. Those items marked “In Stock,” which includes some of the site’s most popular pieces, are available for purchase at a fixed price and are delivered within a week or so.
Then come the “Made-to-Order” items, which are custom made for each individual purchaser. These pieces embody Plukka’s tagline: “What we make is what you want.” Only when an order is received does the manufacturer create the item.
Finally, the site offers goods at what it calls its “Plukka Value Proposition (PVP) Pricing.” The company offers select items – to subscribers only – through its reverse auction pricing. Harnessing the group-buying principle, the more people who buy the item, the lower the price becomes.
This triumvirate of selling options is revolutionary since it means that manufacturers do not have to invest in inventory that does not sell – and they have the chance to design something bold and innovative, without the risk of a large investment. If it does not sell, it is simply culled from the site and replaced with something else that will hopefully grab the buyers’ attention.
To Hill, who has spent almost two decades in the manufacturing sector at companies including Fabrikant and Dalumi, the chance to help manufacturers was one of the things that most attracted her to the fledgling company. “I’ve watched company after company be squeezed and squeezed by the major retailers. I want to create a business where I bring up the manufacturing partners with us and give them access to higher margins and make sure we all grow together. Something I feel in my heart having watched companies like Fabrikant fall and small manufacturers with great creativity fall because they couldn’t compete. Being a lifeline to those companies is so important to me.”
As she explains, one of the problems for manufactures is not being able to access the end consumer. “They’re stuck with the retail middle man or the wholesaler that’s going to sell to the retailer because they are all the way over here in China, whereas we can come in and get them right to the market. They can be right in the place [the U.S.] where 30 percent of the jewelry they make is sold, not to mention the six other markets we sell in. We’re giving them direct access to the end consumer and the retail margins that go with that.”
Unsurprisingly, there are manufacturers who are suspicious of the proposition of someone who will come in, photograph their jewelry, put it up on a website and give them a large share of the profits, but the idea is taking off.
“We are doing business with manufacturers because they get more sales and often at higher margins. We are giving them the confidence to try something new. Every manufacturer would like to have [their products] online, and many do, but they don’t know what goes into making it sell,” she says.
“We are very opportunistic, but we have created a business model where we are able to give manufacturers a chance. Most retailers mark up two, three times if they are not branded or seven, eight, nine or ten times for household names. At Plukka, a $2,000 dollar ring can retail for $3,000 instead of $6,000 that it would go for in major department stores and people will then buy it because the consumer is very savvy.”
The savvy consumer base frequenting what Hill refers to as “the store on the corner of the cloud,” is bifurcated. One type of client loves items under $500, likes to buy things with a short lead time and opts for items that are very stylish and trendy, such as silver or black rhodium with large colored stones,.
Another sort of client, she explains, loves goods priced at $1,500-$2,500. These are generally the made to order items and such clients are happy to wait three or four weeks to have the item manufactured and delivered to them because the product is so unusual.
The third client group is those who love a good deal and opt to shop via the five-day subscribers’ reverse auction flash sale that the company runs once or twice a week for its 50,000 members only.
This is where the company’s social media savvy comes to the fore. “Most weeks we put three of our brand new items out on our Facebook page on a Monday and we ask our subscribers which one they would like to buy,” Hill explains.
“To us, that’s absolutely groundbreaking. Every sale in history has been items that did not sell, so they are marked down, but we are doing the absolute antithesis of that and saying, here’s brand new stuff, which one do you like the most and we’ll do that one for you at this unprecedented price and it will get cheaper the more people buy it. It’s amazing what reach you can have with all the tools of social media.”
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This awareness of social media and going where the client base directs them also sets Plukka apart from other online retailers. “We have made countless changes to go along with whatever is catching the wind. Our core vision has never changed, but making sure we keep up with how the buyer wants to buy from our site is changing. They post on our Facebook, we have an incredibly high sticky rate. A third of them come back, four, five, six times to make purchases from a company that has only been around for a year. We are doing something right by them.”
Initially, the site used reverse auction pricing for most of its sales, but soon realized that people were buying regardless of whether the price went down or not. “It didn’t necessarily instigate anyone to rush and buy it. People were finding our opening price point good value. We knew we were undercutting the market in a significant way, but I think we underestimated how much the customers knew that.”
The price differential is certainly something that others have noticed. “Colleagues of mine from 20 years ago call me up and ask me, “how “are you doing this?” and I explain to them, it’s a different business model,” says Hill.
With her focus on the diamond jewelry manufacturing side, Hill has been especially keen to promote diamond jewelry manufactures. Until recently, diamond and gold jewelry have not played a prominent part on the site, but that is about to change.
The company has just launched a diamond and gold only “story.” Hill explains that it was not something that Plukka did from the outset because there were already online diamond jewelry businesses, which has created problems for some manufacturers. “A number of diamond and gold manufacturers are dying right now because bricks and mortar retailers are marking them up and out of business.”
“We wanted to be in a space that was not occupied and that’s fine designer jewelry, so going for anything that was going to go up against those goliaths didn’t make sense to us in the beginning until we had the strength to do it properly.”
It was also easier initially to sell lower priced items, those made of black rhodium and those featuring large gemstones garnered a lot of attention. Now the company has been able to push its price points higher and it has also found a lot more creative items.
“People go whack-ado with costume jewelry because everything in it costs a penny,” says Hill. “The more expensive the materials get the harder it is for people to take the risk to make something out the box creative. As a new company when we didn’t have the vendors at the beginning we were just funding enough to have 15 products go live a month. We had a lot of difficulty in finding designers that hade a sufficient amount of creativity.”
It’s this creativity that, according to Hill, sets Plukka apart from others in the market. “Our creativity is amazing. We aren’t making investment of 10, 100 or 1,000 units into all our stores. We aren’t scared to take a risk, since we only have to make one sample. Our manufacturing partners already have millions of dollars in samples that are already made so we can put that up there and let people vote with their dollars.”
The company has a featured designer section, which offers a specific name and a capsule collection, as well as icon product, which is developed from in-house design team. “We want to pluck designers from obscurity that are amazing, marry them with fabulous manufacturing and offer a retail proposition that is unprecedented in terms of price and value.”
Plukka works with manufacturers in China, Thailand, India and Sri Lanka to create the private label products on its website. By curating collections of items that already exist in their sample line they don’t need to do any further investment in order to get sales on that product.
“Plukka comes in and selects the product, photographs it, trains our customer sales people on it, puts it up in the site, PRs it and markets it and every time we get an order it goes straight to the manufacturer. They get most of the cut of the retail in that case. We really feel they don’t have anywhere else to sell their product at such attractive retails. We are generating sales and they are shocked and surprised. That’s the lifeline I’m talking about,” says Hill.
The concept has been a little hard for some manufacturers to take on board, “One of the manufacturers asked why are you doing this?” Hill recounts. “He was incredulous. Why are you giving me such a high percentage of the retail? I think you could keep more!”
The future of jewelry in general says Hill is customization and personalization. “This is where we are going and finding a way that you can support creativity instead of the spiral to bland sameness as you walk through any mall in America, that’s what inspires us.”