For diamond and jewelry firms, as with many other companies, a website can, of course, be an ideal platform for selling. Once the site is up and running overheads are relatively small, just a handful of highly-trained customer service staff which means goods can inevitably be sold at lower prices than a store can sell and a handsome profit for the web retailer even after taking into account the cost of free shipping to the customer.

 

As with any other business, however, selling via a website is not all plain sailing and the history of Internet jewelry retailing is littered with sites that have gone belly up as the Internet boom of the late 1990s came to a shuddering halt in 2000 and 2001.

Among the victims in the jewelry field are Enjewel.com, Gemconnect.com. Miadora.com, Adornis.com, Firstjewelry.com, and Gemkey.com. One of the highest flyers in the online jewelry world was Ashford.com which began as an online watch retailer and eventually went public. However, the firm struggled to achieve profitability and shore up its operations. It was sold twice during 2002 and is now a division of Diamond.com.

 

The initial excitement turned sour as sites that were feeling their way in a new selling environment failed to realize that a different style of marketing was needed for a new selling method. “Every Internet business was an experiment,” said a spokesman for Internet jewelry site Bluenile.com. “The ones still around are those businesses that are operated well and that are not just selling something online for the sake of selling something online.”

 

Although sites going under may have deterred some customers from buying on the web, the Internet’s ongoing popularity has allowed those firms that took the right steps in the early days to take off as the benefits of buying on the Internet become clear to a wider audience. Analysts and market watchers attribute the growth in large part to improved levels of service and operations from the sites still in business, as well as to an increased comfort level of people shopping the Web.

 

For Internet retailers who have survived, the advantages of trading on the web are clear: they are able to offer a vast selection of jewelry which they do not have to physically keep in stock thus keeping operating costs down. And they don’t have the advertising costs connected with doing business the traditional way. Instead of printing and mailing catalogs, personalized e-mail featuring the jewelry that most interests the customer can be sent for a fraction of the cost of snail mail. And there are plenty of other saved costs as well.

 

“Our prices are lower than jewelry sold in stores because we don’t have overhead costs to keep the store and for things like showcases, carpets and security guards,” said Neil Kugelman, Chief Executive Officer at Goldspeed.com. Instead of throwing pricey luncheons and staging fancy events, many of the online sites are thriving by focusing on achieving profitability and sales and refining marketing techniques that increase the confidence of potential buyers.

 

For buyers, Internet shopping also has its advantages: it’s easy and quite often a lot of fun as well as being a novel, albeit a sterile, experience. You can research your purchase from the comfort of your home, compare prices without having to visit endless stores listening to the same sales pitch over and over again and learn all about diamond issues, such as the 4Cs of color, clarity, cut and carat. And the price is not just lower than most stores can offer. It’s considerably lower, meaning the jewelry is often assessed for insurance purposes at a much higher price than that paid.

 

There are no pretty sales girls sweet-talking you into buying. No romantically dimmed lights. No fireplaces or mahogany bars offering complimentary glasses of wine. For this is a different kind of diamond buying - one done with a click online, at home or in the office. A way of buying that is perfect for men, discreet and with no pressure. “Most guys hate to go into jewelry stores,” said Mike McCooey, a diamond broker and owner of a jewelry store planning to launch a web site selling diamonds this spring. “It’s like walking into a lingerie store. It’s a very girlie place.”

 

Web shopping means that within minutes, you can look at an enormous selection of fine jewelry. At Bluenile.com, for example, customers can build their own engagement rings, choosing among 80 different settings and 32,000 different single diamonds, ranging in price from a few hundred dollars to $440,000 for a nine-carat stone.

 

Via the Net, customers can ask questions and complete purchases without leaving the computer. Not only that, but many Internet retailers offer a number of benefits in order to win web custom. These include a free calendar gift reminder service that sends clients e-mail reminders of anniversaries and other special occasions, the opportunity to consult with jewelry experts, frequent-buyer reward points and personalized e-mail bulletins and newsletters that contain information about issues or products of interest.

 

Online jewelry sales are expected to reach $577 million this year, a 37 percent increase from 2003, according to ComScore Networks, which tracks Internet traffic. Although that’s not even one percent of total online sales, which are expected to reach $62.2 billion this year, jewelry sales are growing at a faster pace than overall online sales, which are increasing by about 27 percent annually, according to Bizrate.com, an online comparison-shopping site. And the massive year-on-year jump in the jewelry category is proof that consumers are getting used to the idea that it’s safe to buy not just clothes, couches or digital videodiscs online, but even a $10,000 sparkling gem.

 

Meanwhile, Jupiter Research forecasts U.S. online retail sales will reach $65 billion this year and will continue to grow by a compound annual growth rate of 17% through 2008 to top $117 billion. Though still a relatively small part of overall U.S. retail sales, just five percent by 2008, the influence of online retail goes far beyond the confines of the web. Consumers will continue to research purchases online before buying in store. In fact, Jupiter Research’s forecast projects that by 2008, nearly 30% of non-Internet retail purchases will be influenced by research performed online.

 

The online retail growth is fueled by two main factors, according to Jupiter: new online buyers and increased average spending per buyer. As Internet usage matures and the online population reaches saturation, the growth in new consumers choosing to buy online will gradually slow and reach a penetration of 67% of all online users by 2008. However, through 2008, average spending per buyer growth shows steady increases and will be close to $780 per buyer by 2008. “Consumers will continue to embrace the convenience of shopping online over the next five years,” noted Jupiter Research Analyst Patti Freeman Evans.

 

Needless to say, traditional storeowners say buying on the web is chancy and that such a major investment shouldn’t be made on a computer. “Would you marry somebody after only seeing all their information on the Internet?” asked Carter Hofmeister, owner of Hofmeister Personal Jewelers, located on East 82nd Street. “Diamonds are people. There are no two that are alike. You can have all the info in front of you, but you still don’t know what the diamond looks like until you physically see it.” Customers need to see how it glistens, how it looks in the light, the cut and the sparkle, he said.

 

But it shouldn’t be a scary experience, according to one of the nation’s largest sellers of diamonds online, Diamond.com, the owner of Internet e-commerce websites, Ashford.com, Diamond.com and WorldofWatches.com. It comes down to the same basics as any traditional sell - finding a reputable company - said the company’s chief marketing officer Michael Dellarciprete. “The diamond is a huge purchase, and in some ways it’s the most perfect thing to buy over the Internet because it’s so specific as to what it is.” If the customer knows he wants a 1.5-carat, pear-shaped diamond that’s VS1 for clarity and color D, he can get exactly what he wants. “Our customer never has to compromise,” said Guy Richman, Diamond.com’s diamond director. While many jewelry stores wouldn’t have that specific gem in stock, Diamond.com, with about 10,000 gems in its warehouse, likely would have several fitting that specification, he said.

 

Although Diamond.com’s stated target consumer group covers the demographic spectrum, Dellarciprete said in reality online diamond buying is mostly carried out by the “young and mobile who appreciate the convenience and savings”. More than that, it is “mostly men who are well-educated with a high income”. In addition to convenience, online jewelers stress savings. They are not paying for a retail front, for a crew of salespeople or their commissions. Because of that, consumers are going to the Internet to make some major purchases, Dellarciprete said. Recently, Diamond.com sold a pair of earrings - four carats per ear - that cost $200,000.

 

But how do you persuade potential customers that you are for real and that you will deliver what you promise? After all, people naturally want to handle what they are being offered not just look at it on a computer screen. The answer seems to be a mixture of several factors: word of mouth advertising, perhaps the most effective type of advertisement that exists, and an increasing trend, as Dellarciprete at Diamond.com has noticed, of confidence among the young of buying on the web. In addition, there is growing belief in the web and, not least of all, because in difficult times people are looking for the best deal available and few retailers can beat web retailers. Surfers seem to have been persuaded that the considerably lower prices offered on the Net are not a result of a scam or inferior goods but that a site with minimal overheads is clearly going to be able to offer goods cheaper than a store.

 

Most of the diamond and jewelry sites contain many of the same features in attempting to convince potential buyers they are legitimate sellers who are going out of their way to show them their money is safe and their products will arrive as quickly as possible. In addition to offering “educational” facilities to teach buyers about diamonds, they usually offer a choice of thousands - sometimes tens of thousands - of goods, and free shipping for orders worth more than $150. Indeed, most Internet retailers cite free shipping with conditions as their most successful promotion for increasing business, according to shop.org.

 

Diamond.com cites several factors that have helped sales rocket. “Firstly, we only sell diamonds with a certificate from the GIA, not an in-house certificate,” said Dellarciprete. “We offer a 30-day refund policy, free shipping and, if customers sign up for our e-mail service, they can get special discounts. We are constantly adding functionality to the website and all of this helps build up trust and a growing customer base.

 

“We have a totally secure encryption service for credit card transactions that has never been broken into which helps build trust. Add to that our highly trained staff and our emphasis on customer service and you can see why sales have rocketed from $30 million in 2002 to $50 million last year. We are planning very aggressive growth this year as well,” he said.

 

Diamond.com announced record-breaking sales of more than $1 million per day at the end of 2003 with order volume up 180 percent on a year earlier. “Over 250,000 unique visitors came to our sites each day, drawn by our increased selection of luxury brands at discounted prices,” says Alan Lipton, the company’s CEO.

 

Rising sales at Diamond.com and Ashford.com were also boosted by its expanding product categories that include handbags, scarves and accessories in addition to the core selection of certified diamonds, fine jewelry and designer watches.

 

Dellarciprete believes the public’s fear of buying on the Internet has passed into history as the Internet becomes ubiquitous. “People are past that stage now. Buying on the web has become like buying goods on television, it’s part of the mainstream. For single professionals, web buying saves a lot of time. If you go to stores to check goods, you might see 20-30 diamond pieces but on the Internet you can see thousands. At the very least we provide a way for people to become fully prepared and educated about what to look for.”

 

“We go out of our way to show potential customers that we are genuine and our Christmas sales proved just how much people are willing to buy from our site,” Dellarciprete said. In November more than 11 million users visited jewelry and luxury goods web sites, and in December the number leaped to nearly 15 million users with overall online Christmas retail spending growing by 30 percent to a record $12.5 billion, according to research firm ComScore Media Metrix. In addition, the report showed the U.S. Internet “population” alone numbered 152.1 million users and the third top gaining category web site in December was the Jewelry, Luxury Goods & Accessories category.

 

Another successful Internet jewelry retailer is Ice.com, established in 1999, which saw sales last year of $15 million and forecasts revenues will surge by more than 50 percent this year to $23 million, according to marketing boss Pinny Gniwisch. Top-selling items include diamond stud and chandelier earrings, tennis bracelets, initial pendants and heart rings, he said.

 

Gniwisch attributes Ice.com’s success to a mixture of factors, including a 60-day return policy - far more generous than the usual 30 days - and that customers can pay for purchases with five payments. “We believe these two factors prove to the buyer that we have strong faith in our goods and that we are helping them with the financing,” Gniwisch explained. “They can see that even in the most disastrous case - and this has never happened - they would only lose the first payment not all the money involved in the purchase.”

 

As for customer concerns about Internet purchases, Gniwisch said the “fears are dissipating as time passes. Sales of books and CDs led the way and now it’s become normal for more expensive goods to be bought. Customers feel secure with encryption technology for credit cards transactions and that is key to persuading them to buy.”

 

As far as loose diamonds are concerned, Abazias Inc, the owner of Abazias.com, became the world’s only publicly traded company to specialize in direct to the public online sale of diamonds at wholesale prices. With an inventory of 60,000 diamonds, Abazias has rapidly become a market leader although it declines to divulge its latest sales figures.

 

Going public, a move the firm undertook last October, gave Abazias several advantages, explained Public Relations Manager Michelle Acosta. “It gives us added credibility and it allowed us to raise cash to buy up some of our smaller competitors. We have been in business for two years and we are increasing sales year over year.”

 

Although no one believes Internet jewelry and diamond shopping has yet become a major threat to regular retailers, research group shop.org believes online retailing is set to reach new trading levels after the boost it received during the Christmas shopping season. “Online retailing is clearly seeing strong momentum based on this successful holiday season,” said Executive Director Scott Silverman. “Online retailers are becoming more sophisticated in their marketing and merchandising efforts.”