The online jewelry industry is booming

If in 1999 investors were unconvinced that buyers would buy a diamond ring online, the glint is certainly in their eyes today. E-commerce has been one of the most active segments, with 67 M&A deals exceeding $6 billion so far in 2011 compared to $180 million in the same period of 2010 according to the investment bank Petsky & Plum tree.

Within e-commerce, one of the segments that is gaining popularity and investment is jewelry. Since late 2010, Gemvara, Stella & Dot, Baunat and BeachMint have all secured major funding rounds ranging from $4 million to $40 million. And jewelry is an active segment of the growing fashion flash sale business, which includes websites as heavily funded as Gilt Groupe, which recently raised $138 millionBeyond the Rack, Hautelook, Ideeli, Modnique, Rue La La and My Habit.

VC funding activity in jewelry is supported by research from Forrester, which includes jewelry as one of the fastest growing e-commerce segments through 2014. As a product category which initially started slowly online (compared to books for hardware), jewelry is now enjoying strong growth for several reasons:

Increased buyer confidence: Twelve years ago, investors were skeptical that shoppers would flock online to buy big-ticket items. But the growth of e-commerce since the late 1990s has proven that consumers will buy everything online that they used to buy in person. Through mechanisms such as seller reviews and based on an overwhelmingly positive shopping experience, shoppers, who first entered e-commerce with the purchase of a book or t- shirt, are now ready to trust online merchants the same way they trust a local merchant.

Personalization: A big advantage for online jewelry retailers over local jewelers is the ability to create custom jewelry based on buyer requests. With most local jewelers buying directly from a few wholesalers, they generally lack the design and manufacturing contacts to design and manufacture custom jewelry. Additionally, a one- or two-store operation typically lacks the scale to make such an operation profitable, and the wholesalers who supply their jewelry focus on selling existing (not custom) jewelry through their pipeline. For an online jeweler, customization can be a point of differentiation around which the business has grown. And in the same way that local jewelers have historically built their businesses by knowing the tastes of their local clientele, online jewelers have built their businesses based on the ability to source jewelry from a wide range of international suppliers to improve profitability and create product differentiation.

Product selection: Similar to customization, product selection is another area where local jewelers face challenges when competing with online jewelers. All an online jeweler needs to do to add a new product is upload a photo and description of the product. A local jeweler, on the other hand, must physically source the product and then market it in-store. The ease with which new products can be added and removed allows online retailers to easily add and then change entire product lines, facilitating much smoother merchandising opportunities. This problem is amplified when it comes to loose diamonds. Online stores can hold a virtual diamond listing, allowing them to display tens of thousands of loose diamonds for sale. Needless to say, no brick and mortar store can hold such inventory.

Enhanced Product Views: In 1999, most online shoppers accessed the Internet through a dial-up modem. Today, almost all buyers using

broadband

The internet and advances in 3D imaging and graphic displays, buyers can really see what the ring or necklace will look like.

Best customer service: One of the reasons for improved buyer confidence is undoubtedly improved customer service. In 1999, most shoppers had to disconnect from an e-commerce website and their dial-up Internet service in order to free up their phone line to call customer service, if the website even published a number to call. Today, most online retailers offer shoppers a range of options, including real-time chat, FAQs and toll-free customer service numbers, all available 24/7, and often in many languages. Along with these pre-purchase services, online shoppers also enjoy free shipping from many online retailers on many items and very liberal return policies.

While social and mobile shopping apps are also helping all online retailers, including jewelers, it is the aforementioned improvements in online retail that are driving the new interest and investment in online jewelry businesses. . Yes, Ms. Monroe was definitely right, but watch out girls, diamonds just might be an investor’s new best friend.