Diamonds Are a Girl’s Best Friend
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Guess what’s selling on ecommerce sites? Yep, you’ve got it, with Christmas and Valentine’s just behind us, studies show that men are buying their wives and girlfriends diamonds online.
Online jewelry sales in the U.S. reached a hefty $2.45 billion in 2006, which is nearly a 20 percent jump from 2005. Before getting too excited, you should know that this is a mere 3.9 percent of total jewelry industry sales, which amounted to $63 billion in 2006.
However, it tells you that diamonds are very saleable online. Not so in the early days of ecommerce. In fact, way back then, Internet analysts thought jewelry would be a hard row to hoe online. What happened instead is that online buyers are getting more and more confident about buying online, and when it comes to jewelry, shoppers currently buy a greater range of jewelry merchandise than books and CDs, which dominated Internet sales in earlier days. And jewelry buyers spend a lot more per purchase online.
My brother-in-law bought my sister one of those Journey diamond pendants from Blue Nile for Christmas, and then turned around and got her a Channel-Set diamond band for Valentine’s. He’s a busy guy and doesn’t have time to go to the store. Like so many other Internet shoppers, he knows diamonds can be bought from a reputable online jewelry store, and he chose one that provides easy returns and free FedEx delivery.
Online Jewelry Sales Are Widespread
Based on the typical growth rate normally associated with a maturing market, online jewelry sales are now widespread. At the current growth rate, online sales will represent over 8 percent of the industry total by 2010, which will represent more than a 100 percent increase from the 3.9 total jewelry sales in 2006.
Diamond sales — especially diamond engagement rings — have an impact on jewelry sales because they are high-ticket items. Diamonds account for about half of the average specialty jeweler’s sales. Blue Nile, the largest online jeweler in the U.S., sells about 90 percent diamonds. The company’s 2006 sales totaled $252 million. It also sells more engagement rings than the average specialty jeweler (over twice as many). That’s surprising because the average price of a ring from Blue Nile is $5,700, compared to the $2,750 average for most specialty jewelers.
Online jewelry sales went over the top in Q4 2006. The online jewelry sales growth rate outperformed all other retail categories during the 2006 holiday season compared to the year before. Growth rates for U.S. retail ecommerce holiday sales by category are shown below (from comScore Networks 2006).
- Jewelry and watches 67%
- Video games 64%
- Video game consoles/accessories 63%
- Event tickets 55%
- Consumer electronics 39%
- Toys 35%
- Sports and fitness 32%
- Apparel and accessories 30%
Preparing for the 2007 Holiday Season
If you’re an online jewelry merchant, now is the time to prepare for the 2007 holiday season. Consider what promotions to run. Free shipping is a favorite motivator for customers as is a good return policy. For instance, I buy all my shoes from a site that has an unbelievable return policy. You never pay shipping, even on your returns. And I get good prices, too. Think customer loyalty.
Customer attitude studies about free shipping indicate that sites with unconditional free shipping get higher consumer attitude scores than those without free shipping or restricted free shipping. While it doesn’t make sense that a customer buying a $3000 engagement ring would balk at paying for shipping, Blue Nile’s free FedEx shipping is definitely a factor driving its success.
Jewelry retailers may want to rethink their promotions for the coming holiday season, perhaps testing different strategies ahead of time to see what motivates customers most.
Claudia, thanks for the interesting facts pertaining to online jewelry sales. Sounds like quite a channel to be involved with right now. $2.45B in sales with a potential to do over $64B sounds like qite an opportunity for all of the entrepreneurs out there!
You are so right, Jason. Just think, every ecommerce site already online is on the bottom floor with nowhere to go but up. Eventually everyone will shop online to save time and energy. With all the traffic jams and crowded freeways, it’s a given. However, web entrepreneurs must know how to design a site for good organic rankings and have a decent budget for paid search advertising. Additionally, they need to know what their customers want and what motivates them, and then respond to those needs. Information is available on the web about customer behavior. Many research studies will tell you all the best features of retail sites and what online promotions work best. Check out the studies by Internet Retailer, The National Retail Federation and others that conduct research regularly. You need the smarts, but you almost can’t miss. We’re in the early frontier days of Internet commerce – stake a claim.