While many jewelry brands have a gloomy outlook for their business in China, an online diamonds and fine jewelry retailer believes China’s e-commerce boom is a golden opportunity.
E-commerce in China is booming. Consulting firm Bain & Co. estimates that B2C (business-to-consumer) online retail sales in China will grow at an annual rate of 25 percent, three times faster than overall retail.
Many jewelers are still trying to figure out how they can get a bigger slice of China’s growing e-commerce pie.
“We are excited about our future growth opportunities in Greater China,” said Jon Sainsbury, president of Blue Nile’s international business.
Founded in 1999, the US-listed company started its e-commerce business selling diamonds and fine jewelry.
Greater China is the company’s largest market outside the United States. The China business is approaching US$30 million in annual sales after growing 37 percent year on year in 2014.
“There are more than 10 million weddings each year in China and more brides are buying traditional western engagement rings,” Sainsbury said.
“We believe there are more engagement rings sold in China now than in the United States. Chinese consumers are also increasingly embracing online shopping. These two trends align nicely with our business.”
Seeing the article before buying it used to be the norm but more and more customers are buying luxury items online including jewelry and diamond, he said.
In fact, professional diamond buyers generally don’t see the diamond beforehand.
“That’s one the biggest secrets in the jewelry business. They buy ‘sight unseen’ based on the diamond’s characteristics, commonly known as the Four Cs — cut, clarity, color and carat weight.”
About 57 percent of Chinese consumers have greater confidence in online luxury shopping over the past 12 months than in the previous year, according to China Luxury Forecast, an annual publication on key trends in the luxury market.
Anne Geronimi, vice president of Ruder Finn, a co-publisher of the report, said consumer confidence comes from different factors such as endorsement by a trusted party, consumer data protection and third-party vendor certification of authenticity.
“E-commerce has grown in popularity among Chinese luxury shoppers who continue to demand high-end goods and value the convenience and pricing advantages of shopping online,” she said.
Also, they want more choices of brands and products sold online that otherwise might not be available in China.
Blue Nile’s Sainsbury said competitive pricing encourages customers to shop online.
Blue Nile prices are up to 40 percent below those in traditional jewelry sales.
While pricing remains a compelling “pull” factor, unpleasant experience in a store could be a “push” factor, particularly in Hong Kong and mainland China.
China Luxury Forecast said about 63 percent of consumers are dissatisfied with their retail experience in Hong Kong which used to be a popular destination for luxury shoppers from the mainland.
This is reminiscent of the experience of shoppers in the United States 15 years ago when Mark Vadon founded Blue Nile.
After a frustrating search for an engagement ring, Vadon observed that a significant number of consumers were confused, intimidated and discouraged by the traditional jewelry shopping experience.
He founded Blue Nile with a mission to deliver “the ultimate pressure-free setting for luxury jewelry”.
Candace Cheung, a senior manager for strategic marketing of eBay, said the average selling price of jewelry and diamond still has room to grow.
She said e-commerce for luxury goods has emerged as a global trend and jewelry and watches are among the top three categories with the fastest growth.
E-commerce shows more potential in enhancing the Chinese consumer’s everyday shopping experience.
Their appetite for luxury is strong. Last year, Chinese shoppers accounted for nearly half of global luxury sales, according to Fortune Character Institute.
That’s good reason for luxury brands to be optimistic.
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