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| WWD MONDAY 7th May, 2007 |
LUXURY BAUBLES AND BAGS ARE FINDING A STRONG DOMAIN IN CYBERSPACE.
Prices for designer handbags are up, luxury watches and fine jewelry are having their moment in the sun, and, according to several e-commerce Web sites specializing in premium accessories, consumers aren't hesitating to buy these goods online.
Ankur Daga, a Harvard Business School graduate and founder of Angara.com, an e-commerce business specializing in diamond and gemstone jewelry, said the site's main business was engagement rings. Angara offers custom engagement rings and other jewelry categories at prices generally 35 to 50 percent cheaper than at traditional retailers. The average engagement ring sale on the site is about $15,000, Daga said.
Prices would be significantly higher with the overhead of a traditional store, which is why Daga never plans to open one. The value of the site's inventory exceeds $180 million.
The target customers earn $125,000 or more a year, are between 25 and 35 and are Ivy League alumni. Angara advertises in the alumni magazines of Harvard, Yale, Princeton and Stanford.
"When I was in school, a lot of people were looking to the Internet to buy jewelry, which is 25 to 50 percent off of Tiffany or Cartier, but the quality was not as high," said Daga, whose family is in the gemstone business.
Many of these jewelry sites, including Angara and Bluenile.com, sell their diamonds with certification from trusted sources such as the Gemological Institute of America.
Angara offers pieces such as baby jewelry for $100 or diamond stud earrings I as low as $525, but prices for the heftier pieces, like a South Sea pearl strand with diamonds or a collar made from cushion cut yellow diamonds, can climb to hundreds of thousands of dollars. The site also features a collection of rare diamonds in colors such as red and orange.
Daga said he would meet in person with customers who wanted to see merchandise firsthand in his Manhattan salon. This month, the firm is introducing a visual chat program via Web cam in which a consumer can interact with a salesperson. Also, the jewelry is photographed with a special camera that shows intricate detail.
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"I'm surprised that [people] aren't doing it more," he told WWD. "We're at an interesting time in history. People actually do buy a lot. The key to the transaction is trusting the other side."
Some industry watchers are skeptical. One said that sites often highlight a select few over-the top items to pique consumer interest, akin to what luxury re tailer Neiman Marcus does with its holiday catalogue that features items like his and hers camels or submarines. Then there's discount retailer Costco, which offers a 3-carat yellow diamond ring for $39,999.99 on its Web site.
"Branded jewelry can do well on the Internet," said Carol Brodie, chief luxury officer of CurtCo
Media, which produces the Robb Report and other luxury-oriented publications. "But an educated consumer who wants to buy something that's one-of-a-kind and more rare that is unbranded will go to their jeweler to buy it. While GIA certification is so important, you can't see the brilliance, the fire or the beauty of a diamond on it. You can only read about it on the certificate."
"[Accessories] is definitely a growing business in general," said Holli Rogers, head of retail at Net-a-porter, which has been in business almost seven years. "We've seen it dramatically rise in the past two years."
Cult styles once considered fashion insider items, such as $720 Christian Louboutin platform sandals, are hard to keep in stock. |
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Also tapping into the trend is Portero.com, an auction Web site that offers used art, watches and fine jewelry. Portero.com will launch an accessories segment next month selling used handbags from luxury houses such as Hermes and Chloe, and writing instruments from Montblanc and Cartier.
Portero.com chief executive officer Michael Sheldon said consumers were willing to spend tens of thousands of dollars online without trying on or even seeing the objects in person.
On the accessories side, pricy designer bags and shoes are bringing in sales at sites like Net-a-porter.com and eLuxury.com.
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"There doesn't seem to be any price resistance," added Rogers, who said the firm had plans to beef up its accessories business by adding new designers. "Our customers are fashion customers. When they want something, they just buy it. It's always good to add to your mix."
Rogers said consumers also flocked to buy what was in the ad campaigns of designers because they were already so familiar with those runway looks.
As accessories prices have skyrocketed, some say that being able to ponder a purchase on the Internet without the pressure of a salesperson is a benefit.
ELuxury.com, which sells handbags, shoes, belts and high er-priced items like Dior fine jewelry designed by Victoire de Castellane, agreed with Rogers.
"When it's a showpiece, it sells regardless," said Sarah Logan, buyer at eLuxury.com, referring to a $5,190 Fendi handbag that was showed on the brand's spring runway. "We're able to show detail, so you can look at an item more closely."
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| RAPAPORT June 1, 2007 |
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| By LARA EWEN |
Online sales are growing, and not simply maturing, as some in the industry had predicted.While the year-on-year percentage increases are softening somewhat, there is still plenty of growing left to do, and some categories, such as jewelry, can expect steady increases well into 2011. In fact, according to the latest report on ecommerce, "U.S. eCommerce: Five-Year Forecast And Data Overview," from Forrester Research, Inc., "The jewelry category in particular is expected to double from $4 billion in 2006 to an estimated $8.5 billion in 2011, which would account for 14 percent of all online sales."
NUMBERS
It's helpful to understand what place these numbers have in the bigger picture. In February, the United States Census Bureau of the Department of Commerce released a report on online sales, not including travel or online ticket purchases. The report states, "Total ecommerce sales for 2006 were estimated at $108.7 billion, an increase of 23.5 percent (plus or minus 3.3 percent) from 2005.Total retail sales in 2006 increased 5.8 percent (plus or minus 0.3 percent) from 2005. Ecommerce sales in 2006 accounted for 2.8 percent of total sales. Ecommerce sales in 2005 accounted for 2.4 percent of total sales."This means that online sales increased at approximately four times the rate of overall retail sales.
This kind of increase, however, is not going to continue. According to eMarketer,2004 online retail sales topped out at $70.9 billion, a 25.2 percent increase over 2003.By 2005, online retail sales hit $88 billion, only a 24.1 percent increase. Though 2006's 23.5 percent increase is still healthy, eMarkerter predicts that by 2010, online retail sales will likely only increase 16 percent over 2009, reaching $211.8 billion.
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Still, the news is good. Ten years ago, more than $200 billion in predicted online sales seemed like a pipe dream. Today, predictions such as these indicate consumers' growing comfort level with online shopping. According to the Department of Commerce's most recent e-stat report, released in May 2006, "Rapid growth in e-retail has been the norm. From 2000 to 2004, retail e-sales increased at an average annual growth rate of 26.4 percent, compared with 3.9 percent for total retail sales. "While the report makes a point of noting that 2004 e-sales were only 2 percent of total retail, up from 1.7 percent in 2003, current U.S. government figures indicate that this percentage is increasing, however slowly.
It's not just overall figures that are increasing, either. According to its latest internet shopping summary, Jupiter Research has found that "average online spending per online buyer increased from $667 [in 2005] to $742 [in 2006], an increase of 11 percent." JupiterResearch expects online spending to reach $1,039 per online buyer in 2011 and says increases in the amount of online spending per buyer are more important to overall online growth than sales increases in product categories.
That said, online retail is still not seriously threatening brick and mortar.... yet. According to Forrester, "Online retail is still less than 6 percent of the total retail pie. While this is not an insignificant number, the entire online retail industry is smaller than the annual revenues of Wal-Mart." But while the numbers are still small, it's important to note another figure. According to JupiterResearch, "Considering both buyers and browsers, i.e., users who research online but do not transact online, close to 86 percent of current online users research products and services online. However, some browsers will shift to purchasing online over time."
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WHO ARE ONLINE SHOPPERS?
So who are these online buyers and browsers? One thing chat defines them is comfort with technology. According to JupiterResearch, "A clear correlation exists between users' experience on the internet and the likelihood of their purhasing online. Users who have been online for two years or more show a markedly higher propensity to shop online, due to their increased comfort using the internet and greater awareness of online merchants."
JupiterResearch also found that while to day's online shoppers are approaching middle age, the future looks considerably younger. According to Jupiter, "Users ages 35 to 50 are most likely to purchase online - 87 percent - while kids and teens are just beginning to emerge as an online customer base. However, kids and teens, not including college students, comprised 22 percent of the online population in 2006, and will account for 10 percent of the online buying population in 2011; therefore, it is critical to con sider them in calculating online shopping penetration."
Additionally, Forrester finds that while "price-driven consumers dominated the landscape of online retail for years," that trend is now changing. According to For rester, "A more lucrative value proposition for online retail is making life easier for time-starved consumers. Nearly 40 percent of web shoppers say they are pressed for time, and more than 70 percent find shopping online
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easier than through other channels. Furthermore, active web shoppers, a segment of consumers who spent at least $500 [online] during the past three months, comprise approximately 10 percent of the U. S. online population and are the group most likely to spend more dollars online and pay for convenience."
PREPARING
According to JupiterResearch, "70 percent of online users will make online purchases in 2011, up from 66 percent in 2006. Combined with the growth in the online popula tion, the overall buying population will climb at a steady rate from 135 million in 2006 to 165 million in 2011."
Those are numbers worth targeting Today's online retailer should remember that while price is still going to be a rel evant factor in the years to come, convenience remains essential. According to Forrester, "Nontravel online retail revenues will top the quarter-trillion-dollar mark by 2011. The driver of this growth? A segment of the most active web shopping households that is roughly 8 million strong. This group of consumers is extremely comfortable with technology and values convenience above all else in the online retail experience. As retailers begin to wade through their copious data warehouses and understand the who, what, when, where, why and how of this segment, they will benefit from targeting these customers." .•.
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