Valley of the dollars? - NJ Article
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by Bagpuss » February 3rd, 2005, 4:34 am
''Internet e-tailers are killing the industry'' is a cry I''ve heard often and not just in relation to selling diamonds. B&M stores of all descriptions are finding that they have real competition with those selling via the Internet.
More and more consumers use the Internet for all kinds of purchases and price isn''t always the only factor. The trend is going to continue and get worse, so the B&M stores better get their act together, stop whining and do something to get their customers back otherwise they''ll end up like the Dodo - stuffed and behind glass in a museum. |
One of the banners coming with the article
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Pretty interesting stuff...
For once, it seems that on the average Net sales are still not very selective. Aparently the B&M customers (or the jewelers themselves?) are more critical. Here's the relevant bits of text: " But the risks of selling to both Web and store-based merchants are outweighed by the numerous benefits, say wholesalers. For one thing, when an e-tailer orders a diamond, the order is usually "a done deal," meaning the customer has already committed to the purchase. No such guarantee exists when a brick-and-mortar retailer requests a diamond. [...] <<We have personal relationships with our suppliers, too, and they're indebted to us for the business we bring them," says Jim Schultz, founder of DirtCheapDiamonds.com, one of the best-known online jewelers.  "We buy all the time. We return very few stones. We pay fast. And we don't negotiate.>>"Overall, it doesn't seem like the supply of diamonds to be sold online could possibly be cut by B&M lobby - as is  And that promoting quality online is still very young...One question comes up. Why didn't suppliers rise prices for internet sellers ? Not only this would protect those dwindling B&M margins, but it doesn't appear against the interests of wholesalers either. Once prices come down, it is darn hard and cotly to bring them up again. What gives ? |
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That would make for some pretty nasty lawsuits. If it could be proven that it was a conspiracy and enough has been said about it too make that case it would result in a lot of federal jail time for a lot of people under the US rico act. |
4:46 PM|
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Dave, I don''t think they would be able to compete AS STRONGLY as they do now....
Some internet vendors can tout amazing stones at amazing prices. Those two as a combo do make an appealing package. The thing that is interesting to me is that Garry always notes Pscopers are only about 5% of the whole industry consumers....so I still don''t understand WHY everyone is so up in arms about the internet ''killing the industry'' when only 5% and MAYBE up to 10% are even interested in buying online? I think more change towards online will come, but slowly, so it gives B&M and people who feel they can''t compete enough time to figure out HOW they can compete (if they even want to). As a consumer, PRICE is a huge deal to me. Diamonds may be a luxury purchase but I still want to get best bang for the buck. |
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They could add a service charge for drop shipping and it would be legal but to charge higher prices to one group to protect another then it opens a huge can of worms.
If someone can prove that there is a conspiracy behind it then that can of worms turns into a can of pit vipers. The cc companies get by with it by calling it a service charge and justify it by the added costs associated with it. When it comes to this kind of stuff if you want to stay legal it becomes vital to watch the way you word it. The question as asked and the context its in would make the act illegal under several US laws. That said there are a lot of things that go on that are illegal and no one does anything about it so they might get by with it. RICO would be worse case for them. Disclaimer: Im not a lawyer and this is not legal advice. Consult a licensed attorney in your state for legal advice. |
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These are exactly the classic reasons why rising prices once they''ve been allowed to drop is considered hard (= not quite feasible). Because of #2 rising prices is not practical go-it-alone practice (that''s good to make clients self-select, not to rise the average market price) and because of #1 (price fixing) a joint action is not sustainable upfront. Not to mention #3 - that kind of business environment is definitely not conductive to voluntary price corrections. A story by The Economist (published last September, I think) went along the same lines... I am more curious about what internet sellers might do to get to profit margins comparable to the competing B&Ms. If they''d even want to... but why woudn''t they ?  |
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Yea there are ways around it, I should have said could instead of would. They would have to be real careful in how they did it. See my other post above... |
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I don''t know if anyone has counted Pricescope''s impact exactly... Do you happen to know where this 5% comes from ? Just curious... I was looking for an estimate of online diamond sales without much luck. 
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Thanks for the input Dave. Interestingly one of the major online wholesaler database services ARE raising their prices to EVERYONE who subscribes to their service and all sales will be channeled through their service. From what I understand there will be another more expensive service (up front) but will allow the vendor to deal directly through the supplier instead of the online service. There will be increased premiums based on *time* factors. Ie. if you want diamonds on memo, you will pay x amount more. If you need them past a certain time frame (tba) there will be another slight increase. The lowest prices (from what i''ve gathered) will be offered to those who pay immediately which basically means making a purchase (even from a vendors side) sight unseen. Since I do not purchase sight unseen (nor do I promote that) I''ll probably wind up using their other service. I may pay a little more upfront but I will not have to go through middleman. Are you aware of these changes Dave? |
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Exactly  Sounds reasonable, for staters. More precise certification can only help. That''s right at the door, it seems. And I would bet there are more surprising things comming along the way. Any thoughts ?
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From the link above:
This had me rofl! "For jewelers, overcoming price sensitivity is an even greater hurdle, since jewelers seem to run a sale every day of the year. In addition, discounts touting “50 percent off” just are not credible any longer. The jewelry industry has engaged in pricing roulette for far too long and it came back to haunt it during the 2004 holiday selling season." Well duh! |
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I think there will be plenty of buyers for sellers in all types of markets for some time to come.
There will be always be "cattle" shoppers that walk into the local maul store and buy. Head ''em up! Move ''em out! Rawhide! YeeHaw! There will always be more discerning buyers who want more personalized attention and rely on the judgement/knowledge of their local independent B&M jeweler. The trusted family jeweler. The jeweler of a friend of a friend. The long standing business they drive by on the way to work or the grocery. And there will always be saavy shoppers who research every detail, scope out all the pricing info, consider their options, and decide to purchase via the Net. 
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I''m not a jeweler or even a too-much-informed consumer. I''m a stay at home mom who wants the very best deal for her money. As a consumer, I do all my research for major purchases online. While researching new diamonds, I happened upon this site. I''ve been to countless b & m stores and I have looked at many, many diamonds. I''m probably going to be ordering from the ''net sometime soon. Cost is a HUGE factor for me. I''m one of those annoying people who will price items at 10 different stores to get the best deal.
Anyway, I think this site is good for online vendors b/c so many customers have shared their positive internet experiences with me. Many jewelers have tried "scare tactics" to make sure I don''t buy online. I try to reconcile those "warnings" with the experiences I''ve heard here. Had I not found this site in particular, I sure wouldn''t even be considering an online purchase of a diamond. If and when I do buy my gorgeous diamond, I''m sure more than one person will ask, "where did you get it?". As more and more people purchase from the net, they will be telling more and more of their friends about their experience. This, IMO, will ultimately lead to increased internet sales. However, if prices were comparable, I have to say I''d go with a b & m store. I stopped shopping at amazon when most of their items were in line with what I would pay at a local book store. Just my 2 cents... |
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Consider Blue Nile annual sales about $200M. Let's assume the rest of the internet diamond sales is about the same (I suspect it is less than that). We've got $400M versus $30B of annual diamond jewelry sales in the US (according to Rapaport). Just over 1%. |
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Don''t forget about convinience of shopping online, quality and selection of the goods. Dealing with the known names like Amazon or Blue Nile will make it even more comfortable. |
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except for the fact that the quality is the same at convenience stores and the grocery store. the decision to pay more is only based on convenience, as you know you are getting the exact product you want. even if it is at a higher price. can''t say the same about most mall stores. |
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I actually interpret it exactly the opposite way, Val. The fact that it''s a "done deal" when an e-tailer orders a stone doesn''t reflect a lack of focus on quality by the customer in my opinion. I think it''s more because the e-tailers tend to provide more data/grading reports/plot inclusions/etc PRIOR to the sale.....so when the customer says yes, the e-tailer''s sale is a done deal. I suspect that, expressed as a percentage, more e-shoppers are focused on cut quality than B&M shoppers. I think B&M customers aren''t more critical.....they are more indecisive and have a harder time making a decision because they don''t know what they want, and they don''t know enough about the subject matter to feel confident in their purchase. It''s hard to fulfill someone''s needs when you cannot identify what they are! By their nature, e-shoppers tend to be researchers, so they have a more solid idea of what they want and it''s easier for e-tailers to fill that want. B&M shoppers tend to be more along the lines of "I''ll know it when I see it" type of shoppers, so they aren''t "order this stone" types. In order for them to see it, B&M has to bring it in and hope it appeals to the "know it when I see it types"....and return it when it doesn''t. |
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Hard to say. Not all internet vendors are created equal. For me, price wasn''t the only factor....it wasn''t even the top factor. It was more that my vendor HAD IN HAND more than two dozen choices.....ALL AGS0, top-make stones. My local B&M stores didn''t house more than 1-2 AGS0 stones....if they had them in house at all. For me, it was about having an extensive selection to choose from....instead of simply "vanilla or chocolate". I suspect THOSE type of internet vendors....the ones who house their own inventory.....would still edge out the local B&Ms. I''m not so sure the strictly drop-ship vendors would compete if you removed the price discrepancy. |
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It surely isn''t market share that makes internet jewelry sales such a hot topic... Is there a webplace where these things are discussed ? Probably a silly Q - there''s hardly any kind of competitive business that reffers to an open common forum. But there''s hardly anything usual about virtual sellers, so ''thought I''d ask anyway. |
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It has worked because there previously wasn''t any option. If you wanted a diamond, you had to buy from one of these stores with the perpetual, cheesy 50% off sale. Times, they are a-changin now, though......12% of the people *aren''t* buying into it. 
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It''s not that you actually get to see diamonds online. It''s just numbers - that''s highly controlled information, even if different guys read it in slightly different ways. Perhaps choice online means allot more items to compare, but also gives a limited set of recipes of comparing them and a very, very narrow, predictable set of conclusions for them. This, even if one does not decide from the start which type of test, cert or ''scope to look for. I hope this remark is not taken personally by anyone. By "predictable set of conclusions" I am trying to sum up the very general observation. It seems straight unreasonable to predict that any buyer could prefer a lower versus higher scoring item on no matter what quality scale (say, at the same price - or at an arbitrary premium considered indifferent). The same person cannot perfectly predict if they''d make the same choice visually. The same person does not know what the range of choices even looks like. At it''s most optimistic, this difference of probabilities is completely academic and shrinking due to sophisticated cut studies. However, I am not known to be a very optimistic person... |
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Storefront jewelers want wholesalers who will give them exclusive sales opportunities for a certain stone and sometimes they can even get it. The usual way to get this is to actually BUY the stone but they are welcome to negotiate for whatever they want. Wholesalers, especially regional wholesalers, are suffering severely under the changes that are happening and they are being forced into a decision that the storefronts jewelers may not care for. I used to hear from my grandmother: “Be careful what you wish for, you might get it.” If the existing wholesalers refuse to sell to or raise their prices to DCD and their ilk, what do you think is going to happen? I have a few theories. Way down at the bottom of the list is the chance that Jim will agree to pay higher prices or to stop selling his stones online. I’ll put these two with the possibility of alien technology being to used to make diamonds as plentiful as quartz. I think a more likely resolution is an emerging group of wholesalers that cater to this new and growing market. It’s a different business anyway. E-tailers want sarins, DiamCalc models, certificate scans, photographs, Idealscope and Brilliancescope type images and other digital data that supports their own presentations. They want fast and efficient packing and shipping. They want different types of security measures to combat fraud by customers. Wholesalers that supply these things will grow along with their clients. It’s a big world out there and this is not a unilateral decision for the jewelers. Telling the wholesalers that it’s “my way or the highway” may not have the desired effect. Some will choose the highway. They may find that the stones they want are no longer being offered to them unless they are willing to buy them from DCD. Neil Beaty GG(GIA) ISA NAJA Independent Appraisals in Denver
Neil Beaty GG(GIA) ICGA(AGS) NAJA
Independent Certified Gemologist Appraiser www.americangemregistry.com |
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Isn''t it a healthy assumption that anyone would get the best they can if offered upfront  ... whatever that "best" might mean, as long as they agree to it. |
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The recipe of comparison is no more limited than that of the "I''ll know it when I see it" shoppers. Their recipe is even more limited.....they assess 100% visually and no other way. Which is fine, by the way.....no one is saying it''s wrong, it''s just their way. If they want an ideal stone and the store only has 2 on hand, that''s about as narrow a choice as one can get, frankly. As long as the online shopper is comfortable with the "recipes to compare them" and has confidence in it, that''s what counts for them. My point is that B&M shoppers don''t enjoy more "recipes" to choose with; they simply have an equally narrow but *DIFFERENT* recipe to choose with. As far as predicting if an online shopper would make the same choice visually....that''s not relevant. The point of the question wasn''t "would an online shopper make a different choice in person than online given the same array of diamonds to choose from." As an example, my husband prefers to shop online so he doesn''t have to traipse through the crowds at the mall. It doesn''t much matter if he''d pick the same item in person because he wouldn''t pick ANY item in person if possible. He doesn''t want to shop live, so it''s a moot point. The point is that many online shoppers are happy to let a trusted, experienced vendor/appraiser be their eyes. Therefore, they are more willing to buy sight unseen.....and trust the vendor to help them select visually once the customer has narrowed down the choices by the numbers. That''s why e-tailers can place the ORDER instead of asking for a memo. The B&M shopper''s customer isn''t a "sight unseen" buyer, so they can''t do the same thing. It''s entirely possible that I may have selected one of the other 3 diamonds I was considering if I had looked at them myself. However, I asked Brian to compare the stones and tell me with his learned eye what HE saw. He felt the stone I bought was the best choice. My independent appraiser gave the stone flying colors. I trust them to help me choose well. IF I hadn''t liked it when it arrived, I''d have returned it. |
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Im the same way I hate shopping. I take it one step further and the vendor that gives me enough information up front to be able to fire off an email that just says ship it is the one that is more likely to get my business. |
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Interesting discussion. But, I don''t think it''s correct to assume that internet shoppers are more savy. Perhaps PS''er - but I would fathom a guess that there are quite a few click & take diamond shoppers (or other shoppers for that matter) that find the internet convenient. But, I am one of those "I know it when I see it" shoppers. I have been known to pay considerably more for something I see in person. When I buy something off of the net, I assume a certain risk that I do not when I see something in person. Even with clothing shopping - unless I am needing something specific - I buy what catches my eye. All that said, I think the markets are all wide open. The information availble on the internet puts the consumer in a better position of knowing what may be a fair and reasonable price when offered. Pre internet - pricing was far more mysterious (on many commodities). I have to be competive with internet pricing. By competive, I don''t mean exact match - just not out in the stratosphere somewhere. And, when I buy - it''s the same thing. I''m confused as to why wholesalers would refuse to sell to a venue. Why close off a whole market? Maybe I am oversimplifying the situation. But, wouldn''t a B&M do less memo & buy more good saleable stones for inventory? They have far more control over exposure & pricing. I have stated this before. Why fight an inevitable? Why not adjust & deal with it? Isn''t that evolution necessary for any successful business? So, the diamonds are less profitable - find other ways to make money.
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