PRICES: Online vs B&M ???

[Iceberg]

Leonid Tcharnyi: The statistics show that not more than 5 percent of consumers are buying jewelry and diamonds online.

Here''s my question.

I have searched for more than a month for my diamond (VS2 , G): AGS report done on August 19th (New AGS report since June 1st 2005). AGS Ideal 0 (Light performance 0, Proportion factors 0 and Finish 0 (ideal symmetry and polish) AND an HCA score of 1.3. I also received a GIA report that gave the same grading that AGS had and got a GCAL report showing excellent symmetry.

I live in canada and have purchased my diamond online from Blue Nile for 1815$ (2200$ canadian). Moreover, that price was comparable to all other prices found on the net for the same diamond quality.

Since my purchase, I have been to five different B&M (in Canada) and each relatively gave the price for an AGS excellent cut VS2 G diamond ---- 5700$.

That''s 3500$ more than I paid for mine AND we''re talking about an excellent cut compared to my ideal cut.

Does the same mark-up exist in the States ?

Finally, with such a price difference, why would only 5% of consumers purchase online ?????

Paul

 

[perry]

Iceberg:

In general the answer to your question is "yes".

Most online sales are done to a different marketing model than a retail store:

Bluenile is almost a pure "relister" with a very small stock of diamonds in house. They do have to pay inventory cost on all those diamonds they list, they do not stock much jewerly (not even many unset rings). Thus, their primary cost is maintining a website, a small collection of "signature" diamonds, a backroom jewelry setting shop (that handles only the basic settings - the fancy ones will be sent out). Since most of the diamonds sold are never inventoried and in many cases never even touched by blue nile (their wholesalers drop ship them straight to you), they do not maintain a store (and opt for cheep industrail office space); Blue nile can afford a very modest mark-up on the diamonds they sell.

On the other hand: A store starts with expensive space if they are going to be in a standard retail location. They must staff the store for a lot of "unproductive" hours to meet most people''s expectations. They inventory their entire diamond and jewelry collection (1/2 - 1 Million is typical). The advertise in the local market - all of which cost a lot more. Then they sell a fraction of the dimonds that Blue Nile sells. A local stores "business overhead" cost per stone is much more than internet players - and is thus priced so. However, most people want to look at rings and diamonds in person and select what they can get. This is a viable business model (if done correctly).

There are a few who work both sides (good old gold, and niceice, etc); and they have different stratagies.

Some others (Wink Jones) maintain an office (not a store) and work by appointment only or internet sales.

Overall, the actual profit made at the end of the day is about the same; regardless of the business model used.

I think internet purchasing will increase in volumn and most retail stores will have to find other ways to pay for their overhead. I think I see more cases of Local Office (not store) and working by appointment to keep overhead cost down.

Perry

 

[kenny]

If only 5% of diamonds are sold on the Internet it is because Internet buyers are both smart and have overcome the fear and discomfort of buying a sight-unseen diamond from a sight-unseen vendor.
Trust and comfort level is a factor in all sales, especially high-dollar and high-emotion sales like diamonds, especially engagement rings.

You ask how could the B&Ms charge $5700 for what you got from BN for $1815.
As already mentioned, overhead.
Also volume, the Internet reaches the world, a B&M reaches a relatively small community.
I suspect $5700 is the price they HOPE to get if you don't negotiate; although I'm sure you could never negotiate it down to $1815 .

Next (and I think this is KEY) the Internet has price-transparency.

B&Ms have mystery-pricing - you never know if you could have negotiated a lower price.
High-ticket items like houses, cars, pianos, fine oriental rugs, and diamonds are sold under a different business model than a can of corn.
For every diamond sold a zillion cans of corn are sold.
So, it is important to get every dollar possible from each diamond/car/piano.

There are a range of customers for a fairly "similar" diamond.
A few will walk into Tiffany's and pay $30K, no negotiating.
A few will walk into Zales and pay $22k, no negotiating; a few others will negotiate and get it for $20K or less.
But a very few, (but growing number) will buy it online for $10K.

Diamond shopping is complicated and intimidating for most first time buyers.
Internet shopping simplifies it; many websites have great tutorials.
You are not intimidated by a human sales person looking down their nose at you.

To me the best thing of online diamond sales is PRICE-TRANSPARENCY.
By transparency I mean a certain diamond, let's say a GIA 1 ct G VS2 with Ex polish and Symmetry, sells for X dollars.
It has to sell for VERY close to X at all of the websites.
It takes about 90 seconds to compare several vendors' prices so they CAN'T vary much.
If a website sold it for triple like those B&Ms they would be toast.
So the price you get doesn't depend on your ability to negotiate.

Also, no B&M can have the scale of the Internet.
It is a lot more hassle to drive around and compare at B&Ms.

I think online diamond sales are quickly reaching a certain critical mass.
There are enough buyers and sellers today to make it work for both.

 

[tawn]

Let me start by saying that if Pricescope didn''t exist, I probably wouldn''t have ever considered purchasing a diamond online!

THANK YOU PRICESCOPE!!


Truth be told, I wasn''t even aware that purchasing online was really a reasonable option until the frustration of looking at overpriced, unoriginal, and shoddy jewely at the local malls got to me, and I started looking for different options. I''ve been lurking on PS for slightly over 2 years, and I just got my ring last week(gorgeous gorgeous..thank you WF!), and people are completely shocked when I tell them that I custom ordered it from an online vendor! I tried explaining that I''ve been following the work and reputation of these online vendors for a few years, and that I have far more confidence in them that a salesperson who has worked at a local store for 3 weeks and knows significantly less about diamonds than I do, and I don''t know a lot! My husband actually told me that I had to stop telling the salespeople at some of the mall stores that their diamonds were crap, and to stop laughing out loud when they would tell me how their K I2 from the ABC lab was a really top notch stone! (I got a J SI2...so I''m not a "perfectionist" by any means!) For the same price that they were selling frozen spit for, you can buy something incredibly beautiful and well cut with a GIA certificate from someone with a great reputation!

I''ve looked at some comparable size/quality rings in the higher end jewelry stores in San Diego....and for anything even close to what I got, the list price is almost twice as much, and not nearly as original! I don''t know if I will ever purchase a significantly expensive piece of jewelry from a B&M store again...but I know that I will most definitely purchase from online Vendors!

For your money you get better customer service, better selection, knowledge, and WAY more diamond for your dollars!