IDEX Online Research: U.S. Online Jewelry Sales up 24% in 2005

Online jewelry sales in the U.S. market reached $2.1 billion in 2005, up about 24 percent from the prior year’s $1.7 billion. Online jewelry sales have now captured about 3.5 percent market share of total jewelry industry sales of $59.4 billion in 2005.

Online jewelry sales now represent the equivalent of about 2,000 independent jewelry stores, based on an average of about $1 million in annual sales per store, according to Jewelers of America. Just a decade ago, most people didn’t know what the Internet was, and online jewelry sales were nil.

Jewelry Online Share of Market above Average

Despite the idea that jewelry is an emotional selling experience, which must be conducted one-on-one by an experienced sales person, online jewelry merchants have captured a greater market share than the average for all retail categories. Online sales for all retail categories represented about 2.3 percent of all retail sales in 2005, while online jewelry sales reached 3.5 percent market share. In part, this is due to a very high online sales mix of expensive diamond engagement rings. Further, there is a heavy sales bias towards certified diamonds which, because they have certificates attached, have become a commodity.

Online Jewelry Sales Doubled in Three Years

It took seven years – from 1996 to 2002 – for online jewelry sales to reach the $1 billion mark. In the following three years, online jewelry sales doubled – up 100 percent – to just over $2 billion. But IDEX Online Research believes that growth rate won’t continue. Even if the Internet adds another $1 billion of sales over the next three years, the growth rate will halve to 50 percent (that’s a function of the math). As the base of sales grows larger, the rate of growth will slow. Further, as the Internet channel begins to mature, new sales will come more slowly.

Online Jewelry Sales Forecast: Moderating Gains

The graph below illustrates three growth scenarios for online jewelry sales.

• Straight line growth – The top line assumes that Internet jewelry sales continue to grow at a rate near the current 25 percent or so annually. This is a highly unlikely scenario, but it would raise the market share of online jewelry to just over 10 percent.
• Moderating growth – The middle line assumes that online jewelry sales growth slows to a mid-to-high teen range, primarily as a result of a larger sales base yielding a smaller percentage increase annually.
• Slow growth – The lower line, which IDEX Online Research believes is most likely, accounts for both smaller percentage gains as the jewelry sales base grows as well as moderating revenue gains due to maturing of the online channel. Further, IDEX Online Research assumed that local jurisdictions will begin collecting sales tax on all Internet purchases; this will help level the playing field and further slow Internet growth. However, this rate of growth – 11-13percent annually – is still roughly double the projected jewelry industry growth between now and the end of the decade.

Source: Dept. of Commerce & JIRI

Internet Penetration Moderating in U.S.

Harris Interactive has compiled a history of Internet penetration for U.S. adults. The trend is clear: Internet penetration is slowing. Will the Internet ever achieve the same penetration as the television or telephone? In our opinion, when Internet penetration reaches the mid-90 percent range, it won’t look like today’s Internet.

Source: Harris Interactive