Don't Get Mad At The Internet. Get Even!

The statistics are ominous. In 2006, online US jewelry sales are up 20% over the prior year. 2.45 billion dollars of jewelry was purchased online in the US in 2006. And each year the news is the same: an increased percentage of the market is moving online. The stock price of Blue Nile is soaring, as well it should be. And by the way, what about the erosion of profitability? It’s not just the increasing percentage of sales that are moving online. It’s the price competition that retail stores have to face from the Internet, even when they are able to make the sale.

What’s an independent bricks-and-mortal retail store to do? Sit back and accept a declining share of the pie? Or fight back, and if so, how?

We recommend fighting back, and we also have some ideas for how the battle should be waged. OK, there’s irony here. Arguably Polygon itself invented the concept of online trading in diamonds and jewelry back in the late ‘70’s. Blue Nile actually began life as a Polygon retailer that took CertNet inventory and started displaying it on their own website. Perhaps the whole thing’s partially our fault. But don’t blame us for creating the Internet. That was Al Gore, remember?

In any case, for over two decades Polygon’s mission has been supplying the jewelry industry with the online tools it needs to stay competitive, and so we have some pretty strong ideas about what retailers should be doing in the Internet Age.

How to fight back? Obviously, technology is part of our answer. But before we go there, let’s figure out what the vision should be. What can retail jewelry stores offer their customers that the big e-tailers cannot? The answer is obvious: a local presence. But how do we leverage that?

I’m reminded of a seminar at the NY JA show a few years ago. It was a marketing expert discussing the results of a recent study on consumer buying in the apparel industry. The study sought to understand the primary reason consumers chose to buy in physical stores, as opposed to via mail order catalogs such as Land’s End or Spiegel. The results were only mildly suprising. Consumers who shopped in retail stores did so not because of the their desire to physically see the merchandise, to touch it, or to compare multiple items at the same time. The overwhelming reason they preferred physical stores was because they wished to try on the clothing and make sure it fit!

The marketing expert noted that if this was really the main reason people went into physical stores, it was a bit surprising that store layouts were not organized around dressing rooms. Her point was that dressing rooms were typically far back in the store, tricky to find, too small, often too few were provided, and other inconveniences. Apparel retailers, she explained, were not leveraging their most valuable asset: their dressing room. They should be providing lavish, accessible, well lit, easy to find dressing rooms, because that was their single best competitive advantage!

It makes sense when you think about it. So what can jewelry retailers learn from this?

No, you don’t need to install dressing rooms. But you do want to provide more ways the consumer can “interact with you” as part of the shopping experience. Remember, unlike a clothing store where the sales assistant is often-times merely a nuisance, consumers are keenly aware of their lack of knowledge about gems and jewelry. That’s why the process of buying jewelry so often terrifies them. They know they need your help, but are reluctant to get drawn into the “gravitational force-field” of the salesperson. They suspect—often correctly—that they will lose in that process. They will get sold something they don’t really want, or will end up buying something too expenisve. In short, they fear that their own lack of knowledge will make them easy prey. (These are all feelings they don’t have, for example, when they walk into a grocery store.)

So here’s the challenge: What can retailers do to (1) overcome the consumer’s fear of talking to the salesperson, (2) leverage the power of their store being physically located in the local community, and (3) convince the consumer that they should buy here, not online?

Our answer: a flanking maneuver. Dissolve the traditional uncertainty the consumer experiences (Should I talk to the salesperson? Should I avoid the salesperson?) with an invitation. Not an invitation to see jewelry; they’re expecting that. But an invitation to (and here comes the technology part)…

Compare the light measurement readings of several different diamonds (You’ll need a GemEx, Brayscale, IdealScope, or something similar that you can fascinate them with.)
Check “World Diamond Prices” from your counter-mounted laptop. (We suggest Polygon for this, using the markup feature.). “Oh, you’re interested in a diamond? Would you like to check World Diamond Prices real quick? Let’s see what the market’s doing today. Ahhh, looks like it’s up in Antwerp! Let’s see what’s happening in Hong Kong. Yes, just come right over hear and take a look at the screen…”
Learn how to detect fracture-filling using a Gemscope (You’ll want a Gemscope and two sample diamonds: one fracture-filled, one not.)
Design their own ring, using the latest Cad-Cam program (Gemvision, or similar)
See some other cool piece of technology that helps educate them about gems and jewelry.

What does any of this accomplish? Everything we needed it to. (1) The consumer is now talking to the salesperson in a non-threatening, relaxed, and intriguing way. They are being shown something interesting, something they didn’t know about before, something that will help make them a more educated consumer. (2) The consumer is having an experience that only the local retail store can give them. The retailer is leveraging the power of the local connection. And: (3) The subtle message—or perhaps not so subtle—is: That online etailer didn’t show you these things, did he? We’re on your side. We can do things for you that that impersonal website cannot. Work with us, and the whole experience will be more enjoyable and interesting and fun.

Consumers are moving to the Internet because they like it’s convenience, and the ability to price shop. If you want to pull those consumers back into your store, give them a reason to make the trip. Innovative technology you can show the customer, in your store, is one way to “get even” with the Internet competition.

Jacques Voorhees, Founder and President,
Polygon