E-commerce is the equivalent of a frontier town - a good place for adventure pioneers to put down stakes by Alan Korwin Many individual jewelry artists have embraced the Internet; among those who have launched their own Web sites are William Richey, whose rings of pearl and white, yellow, and pink gold are shown above (Photo: Pam P. Marraccini). Top Left: A ring of sterling silver, 18K gold, and aquamarine by Janis Kerman. Photo © 1999 Janis Kerman Design. Bottom Left: Gaia Pelikan created this ring of Australian opal and iron. Photo: Gaia Pelikan. Like it or not, the Internet and e-commerce are bearing down on you and your business like a high-speed steamroller. It's way too late to hit the brakes, and anyway, guess what? There aren't any brakes. In a recent issue of this magazine, two out of three display advertisers included a Web site or e-mail address in their messages. Five years ago, no such thing existed. Do you think the number of Web-savvy firms is going to shrink? Not a chance. Do these companies know something? Are they making money at this new game? What effect will the World Wide Web have on the jewelry business? The big question has already been answered. “There's proof now that people are willing to spend money, so there's a lot more action, a lot more activity. Some of it is very high end. The consumer is willing to buy jewelry on line.” So says Steve Feldman, senior vice president for RLA Creative in Cresskill, New Jersey, a full-service advertising agency that has been serving the jewelry business for more than 30 years. Supporting Feldman's observation is the recent announcement of two major fine jewelry retail Web sites. In a front page story, National Jeweler reported the big budget pre-holiday rollout of adornis.com, featuring nationally recognized designers, and luxuryfinder.com, which includes fine jewelry in its high-end product mix. This includes branded products, and must be making retailers sweat. All Jewelers, an RLA client, is reportedly already selling goods in the $299-$899 range, and other sites are undoubtedly in the wings. “People are starting to spend serious money over the Web, with clothing, cars, vacations - but jewelry is a tough category for obvious reasons,” Feldman says. “You need the touchy feely aspect of it. You want a live salesperson to talk to and answer questions.” Ruthie and Mike Cohen designed and created the brooch at the top of this page using the work of glass artist Timothy Lewis as a centerpoint (Photo: Jerry Anthony). It's been known for years that businesses will buy from each other over the Web. That has already reached a point where major retailers like WalMart and Target require automated restocking without human intervention, using the Web as a backbone. The only question remaining for our industry is how much jewelry people will buy online, and how soon. Based on the activity already going on, some conclusions seem reasonable. See if these might impact your own business model just a tad: Within five years, the number of people with buying power who have never bought anything over the Internet will be near zero. In the next five years, brick-and-mortar businesses with an Internet presence will obtain an increasing share of their revenue from the Web. Physical retailing will change in fundamental ways, as e-tailing continually absorbs share and creates new markets. The Web will make business-to-business sales one huge wholesale infrastructure. These are large-scale predictions for a business venue that is still in the process of being born. Although its growth has been explosive, there is not a lot of business being done on the Web, relatively speaking, this early on. Software is an obvious hit because software manufacturers reach 100 percent computer types, and it's easier to deliver the product online than any other way. Books and CDs sell because of the convenience, and buyers know exactly what they get - a Grisham novel is the same no matter who sells you yours. You can comparison shop and it's pretty hard to get hurt. The more standard jewelry items (chain, wedding bands, solder) are likely to see similar activity. INDING A HOME ON THE WEB. It may be early in the annals of e-commerce - we are absolutely on the front edge of this thing - but it's way late in the game for getting a good site address, or URL (universal resource locator). Addresses like silver.com, platinum.com, diamond.com, are all long since taken. And none by jewelry firms! Jewelry.com is currently held by a firm in New Mexico who has posted some GIA fact sheets, a few generic links, and a promise of 15,000 products in the future. Promises notwithstanding, this looks like a classic illustration of cyber-squatting - sealing up the rights to a good name and then holding out for the highest bidder. Experts believe that the most generic Web site names will ultimately enjoy the highest traffic worldwide. It's a straightforward numbers game - anything that brings more traffic to your site increases your business. A main attractant is a generic address, which people worldwide would think of even without knowing you, and then poof, there you are. Say you sell gold jewelry. A guy in Hoboken is looking to buy a gold wedding band. In a process roughly equivalent of not being able to look up a word in a dictionary until you know how to spell it, unless he already knows you exist, he won't necessarily find you on the Web. But say he takes a blind stab in the dark and types in “gold.com” as the Web address. Who would he find? Kay Jewelers uses the Web primarily to direct customers to their “brick and mortar” stores. He'd be in luck, and you'd be out of it. The lucky holder of gold.com is Kay Jewelers. A brick-and-mortar retailer founded in 1916 that now has more than 500 locations nationwide, Kay uses their Web site to direct customers into their stores. The site features confidence-building history, an enticing portrayal of their stores, and displays some products. Kay features what is known as a “site locater,” allowing visitors to the site to find the Kay store closest to them by entering their zip code, address, or city, or simply clicking on a U.S. map dotted with Kay locations. For the moment, Kay conspicuously avoids direct online sales, which would compete with their individual stores. But how long will they be able to continue turning away customers who would like to buy online? They may find, as did book giants Borders and Barnes & Noble, that you need to offer a physical site and online convenience in order to stay competitive. Looking at a more modest example, Tribal Village, Inc., imports wood carvings and bamboo. Their Web site (www.tribalvillage.com) is a simple affair, being done by an in-house staffer who knows enough about computers to get the site up and keep it running. It has taken months of effort, a little at a time, since they can't devote full time to it. “But we're getting good response,” reports general manager Doug Badik. “We get valuable feedback and statistics, at about 100 to 125 hits a week, and we are getting orders off it.” A lot of Badik's business comes from mom-and-pop stores, run by older folks and retirees, who are not really into the Net, so it doesn't effect them, he says. “I don't have much up there now, but I do have some closeouts pictured, and I got four or five calls from the Web, and sold out most of that merchandise. People could see what it was. I may be based in Orlando, but people anywhere can see I'm beating the prices of other suppliers.” Sister company Village Originals is using e-mail as a tool to preview one-of-a-kind specimens - geodes - to customers who ask. A digital picture is taken, loaded into a computer, and sent by e- mail so the customer can see it before buying. The e-mail is free, there's not even a cost for film, and the customer gets more accuracy than a printed catalog can deliver. The company could take it to its logical conclusion, and post all its specimens to a Web site, but they don't even have one up yet. Why not? “Because there's too much else to do,” says manager Jim Gehring. “It's just not our number one priority right now. We're refurbishing our stores, and doing trade shows.” The young Web is only part of the ride, and it's the back seat. O SILVER BULLET. There is a wholly bogus notion that by simply going on the Web you reach 100 million potential buyers. This is pure hype. At a very healthy 500 hits a week, for example, it would take something like four years to reach the readership of a magazine like Lapidary Journal. Hits are widely regarded as a weak indicator of sales prospects, because many people have no interest in sites they surf to, whereas 100 percent of a specialty magazine's reach is the target audience. At 10,000 hits per week - the point at which online banner advertisers take notice of you - you'd be reaching people about 2.5 times more slowly than LJ does. Even major online players like Yahoo! and Amazon.com have found they must use “real” advertising, like print, radio, and TV, to lure people to their Web sites. For all its whupass, the Web is still a babe in a world of giants. Queen of the Nile necklace by Gaia Pelikan, made using 3,000-year-old Egyptian beads, a Peruvial ceremonial axe head, Baltic amber, 18K gold, and a clasp of Tibetan turquoise. Photo: Gaia Pelikan. Rick Coddington, the advertising manager at industry giant Tripp's, agrees that the Web is just part of the mix. Their site has been up for a couple of years, is generating about three percent of their business, and it is growing. “I believe that learning how to do business on the Web is going to be an integral part of whether any company does a lot of business on the Web. “There are some misconceptions. The Web is not a silver bullet for business in my opinion - it is another marketing tool. People seem to be more and more comfortable doing business electronically. If Web TV comes in and the bandwidth expands, I think that will also help it.” The majority of the business that Tripp's does over the Web is for videos and tools, kits for beginners, that sort of thing. They don't do any substantial amount of gem business, and no expensive goods at all. “Gems over the Web is going to have a myriad of problems,” Coddington feels, because gem colors are critical to choice and evaluation. Computer monitors may be pretty snazzy for the Web site itself, but like television, are grossly inaccurate color reproducers, making it difficult to do any exacting business like that, he says. “We went in with tools and simpler goods, we have not tried to push gems over the Internet. We're looking for new customers, that's what we designed it for. We don't have our catalog up there. We're looking for startups. We're seeing 300 hits a day.” Tripp's animated site (www.tripps.com) was designed by the company, but then it was coded (that's geek for “created”) and is hosted (also geek, for “run”) off premises. “I see no point in having someone in the back room do it. It's cost effective to have someone else do that and devote ourselves to our catalog, which is our main sales force - trade ads and so forth.” Coddington believes their Web business will steadily grow, however, and has seen the evidence mount. “We put a standard order blank on our site about a year after we started up, so an existing customer can just go in and order online. We find that more and more people prefer to order that way.” ALL OUT TO THE WORLD and you may reach your neighbor. Stacey Nichols of Sleeping Beauty Turquoise reports that customers actually walk into her store in sleepy little Globe, Arizona, having found them on the World Wide Web. In contrast to the industrial-strength approach of Tripp's, her brother Clint developed their Web site, and her dad owns the mine that provides the goods. Brooch by Ruthie and Mike Cohen, glasswork by Richard Ritter. Photo: Jerry Anthony. “We're not making that much money directly off the Web,” she notes. “It's not like we sell a lot of stuff. But we do get a lot of interest generated, and phone calls, and it does increase walk-ins. People in Globe who didn't even realize we're here come by because of our Web site (www.sbturquoise.com). And we had one pretty big sale, a huge sale actually, where the customer initially found us on the Internet. Then they got a catalog and they bought quite a bit, over $10,000.” Nice work if you can get it by having your brother tinker in his spare time. Mr. Syam Kunam of AZ Gems, Inc. finds it advantageous to pay Yahoo! to maintain their online store. Yahoo! put the site up (www.azgems.com), and manages the technical support, at about $300 per month. “We do around 150 to 400 hits per day. Of that we have from one to five sales a day. The order size is $10 to $20,” according to Kunam. And he too has a glory story. Bead artists, such as Donna Zalusky, whose work is shown here, were quick to recognize the Internet's potential. Photo: John Lucas Zalusky. “We were demoralized at first because of no activity, but then a customer from Louisiana, and another from Florida broke the ice, and we were very grateful to them for getting us started, for giving us our first break. Then we had one order for a strand of Tahitian pearls for $2,400, that came solely through the Web. Those first ones gave us the confidence that this may work at some point. Now we're looking forward to this being our main business.” Kunam emphasizes a no-questions-asked return policy, as does Nichols, recognizing the need to establish trust. E-commerce demands a reliance on guaranteed returns, according to Larry Tahler, president of Cyber Concepts, Inc., an online investment firm with a division in online shopping malls that counts about 15 jewelry vendors among their virtual tenants. “Because consumers are buying at a distance, they need assurance they can return goods no matter what. Bigger stores are offering this but it's been slow to trickle down to mom-and-pops, where it will be needed to survive,” he believes. The second major trend Tahler sees is that e-commerce is putting enormous pressure on price. “Where a consumer might formerly have visited a few neighborhood jewelry stores to comparison shop, they can and do now compare prices from all over the country. For stock items, this is bound to hurt local jewelers,” he says, who will have to become even more price conscious - while supporting retail-sized overheads - to compete. This appears to be developing into a sweeping trend, Tahler says, not just in the jewelry business. EW FRONTIER. Shrinking margins are not the only unwanted pressure from the Web. It's buyer beware in this new frontier constantly compared to the cowboy era. “This is still the Wild West,” declares RLA's Feldman. “And we haven't brought a marshal into town to round up the bad guys.” Helpful web links Web Design A Beginner's Guide to Web Design HTML Quick Reference How to Scan an Image for the Web Scanning 101 Marketing/Business Lapidary Journal Business Tips WebMonkey's E-business section Yahoo's Site Announcement & Promotion Guide Sites Featured in this Article adornis.com AZ Gems Inc. Cyber Concepts Donna's Designs/Twist 'N Curl Gaia Pelikan, Goldsmith Janis Kerman Design Kay Jewelers luxuryfinder.com Sleeping Beauty Turquoise tribalvillage.com Tripps www.brwm.org Lynn Ramsey, president of the industry-supported Jewelry Information Center, describes e-commerce as a mushrooming and generally positive fact of life, but with serious pitfalls. “Many consumers have no idea that there are legal requirements for disclosing gemstone treatments, and the Web, it seems, is not the place they're going to find out.” She cites an FTC study released early in 1999, where, in a review of 59 auction sites dealing with gemstones, 63 percent were out of compliance with disclosure requirements. Even worse, of 64 retail gemstone Web sites surveyed, 95 percent were out of compliance with the law. She estimates that Web sites related in some way to jewelry now number in the tens of thousands, and laments that hard numbers on the total volume of business cannot be quantified at this time. At the Jewelers Vigilance Committee, a not-for-profit membership group that advocates compliance with law and integrity and ethics in the jewelry industry, Cecilia Gardner has been monitoring similar disturbing trends. “We have detected a great deal of difficulty in regard to compliance on the Internet. Disclosure is one problem, but there have also been problems with cultured vs. natural pearls, diamond weight problems, and forged GIA certificates.” It may not be more prevalent than in other venues, she says, but it's easier to detect on the Net because of the visual nature of the medium. Either the disclosure notice is there, or it's not; the line between general practice and specific instance is erased. Consumers are at risk, especially since you can't see the goods as you could in a store. It's more of a problem for unique items like stones than for standard goods like chain. “Sometimes a picture paired with a particular description is not necessarily the piece that you are purchasing. In other words, it is a sort of generic picture and not precisely what will be delivered. In fine print at a jump point you might see a note that the pictures are not exactly what is being offered for sale.” The Federal Trade Commission's position is that their prior rulings about disclosure and other matters apply to Internet sales, according to Gardner. But this is new turf. The meanings of terms requires a different analysis. A disclaimer must be “readily accessible and in close proximity” to the item being advertised. So just how many hyperlinks constitutes proximity? No one knows, the officials haven't ruled, and the industry is waiting with bated breath. The marshal ain't in town yet. Larry Tahler says, “We are all just learning how to sell over the Internet.” Everyone seems to recognize the Internet is here to stay. So the big remaining question is this. Will you be getting into town before the marshal does? Think of the stories you could tell your grandkids. To contact the Jewelry Information Center, call (800) 459-0130; to contact the Jewelers Vigilance Committee, call (800) 564-6582; Cyber Concepts is on the Web at www.cyberconceptscorp.com. Alan Korwin, a full-time writer and consultant, has been covering topics for Lapidary Journal for 14 years. He is the author of six books about gun laws, and can be reached with a click at www.bloomfieldpress.com. Additional work by the artists shown can be found on the Web at www.gaiapelikan.com; www.janiskermandesign.com; www.brwm.org/; and www.twistncurl.com. 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