The new rules of luxury
Ten years ago, if you were to mention to anyone — jewellery industry insider or not — that you would like to sell diamonds online, the best reaction you could hope for would be a look of total disbelief. If fashion brands were slow to embrace the digital world, jewellery companies were even more reluctant to set up e-shops — or even consider building an online presence. To be fair, the difficulties at first glance could deter even the boldest entrepreneur. How do you recreate an offline luxury environment online? How do you make people trust you with such an expensive and sentimentally-driven purchase? And how do you convince them to buy something so personal and connected to an important moment in their life without even touching or feeling it?
Fast-forward to today, where the initial denial and scepticism has been replaced by an arms race between online jewellery retailers to grow their market share and expand their businesses. Fashion We Like got to talk with Tobias Kormind and Vadim Weinig, the co-founders of 77 Diamonds, about their experiences of building an online diamond brand, their challenges, as well as their views on a rapidly changing retail environment where content is key and the consumer gets to decide where a brand needs to be present.
What is the concept behind 77 Diamonds? What were the initial difficulties and how did you deal with them?
77 Diamonds is based on fusing the noble craft of fine jewellery making with a modern retail shopping experience. Taking the best aspects of a local family jeweller, 77 Diamonds adds master craftsmanship and provides full access to the closed world of diamonds, delivering affordable luxury. We initially faced challenges on all fronts, like the lack of belief from the diamond cutters to sceptical consumers who did not believe diamonds could be sold without being seen first, to technological problems with displaying videos, and dealing with more than 300,000 diamonds uploaded and sorted multiple times per day. These challenges have all been overcome and the initial scepticism from the industry is now being billed as a growth driver for the future.
How is technology changing the rules for traditional jewellers?
The internet, more than technology, has had a dramatic impact on the jewellery sector. In the actual jewellery manufacturing process, there has been a string of technology advances that have had significant impact. We were early adopters of lasers for mounting, microscopes for setting and CAD for 3D image printing of designs, giving us an advantage over more traditional-minded jewellers. However, the major innovation and almost revolution has been the advent of the internet, which has empowered the consumer like never before, with an abundance of information and a demystification of the opaque world of diamonds. We have embraced this and play an active role to ensure our customers get both the choice and value without having to compromise on quality, while more tradition jewellers have struggled to compete.
Online security has always been an important issue of e-commerce. Unfortunately, we recently witnessed a new wave of attacks that compromised the security of major U.S. retailers. How is this going to affect a sensitive market like yours?
We always deploy the latest security measures and test our website daily, but if the inner sanctum of the government is not impervious to attacks, then we are all vulnerable to some extent. This is the main reason why we have opted to store as little as possible client information, except for limited contact details and purchase history. I believe our payment partners are amongst the most vigilant in terms of security and we leverage off of their substantial investments in security to ensure our customers benefit from this protection.
According to American entrepreneur and investor Marc Andreessen, "Retail guys are going to go out of business, and e-commerce will become the place everyone buys. You are not going to have a choice." Do you agree with this notion and if so, why?
I think this statement is missing the point. Fundamentally we are all in retail (online or offline). A business selling to consumers is about how good your product is, how well you look after your customers and how good you are at controlling your costs relative to the margin you make. The internet is just a channel to reach customers; if the customers are increasingly using the internet as their point of acquisition, then that is where you need to be. For our sector, as jewellery is a very tactile product, I believe you need a blend to cater to a wider range of preferences. If you sell less and less through a store, you need to look at your numbers and work out if it is cost-effective to have that store at all.
As e-commerce continues to grow, how do you see physical retail spaces responding to this challenge? Do they need to focus more on creating concepts and offering a richer in-store experience?
Physical retail space will always be important because there will always be a demand to touch and feel products. However, consumers are much smarter today and if the value proposition is more compelling online, they will either a) go to a store to browse and then purchase online or b) purchase online if there is a good return policy to try the product on. To combat this, retailers need to improve pricing in store to be more competitive (reduced costs will allow for this) and invest heavily in online (through organic growth or customer acquisition). They need to change their head office structure to allow for a new generation of technology-oriented staff and digital marketers to come through the management structure to change the way the selling is done.
In which aspects of business is your company choosing to invest right now? Is your showroom more important than your online presence, or the opposite?
We are still investing in every single aspect of the business and in some ways it still feels like a start-up because there remains so much left to do to grow the business. From developing the website, building out the mobile platform, to expanding the jewellery collection, new social media strategies to international expansion… the list just goes on and on and on.
How does social media influence the way people interact when it comes to shopping? For example, do you believe that Facebook or Pinterest could offer an integrated shopping experience?
Social media has a huge influence on shopping. If you think about it, Facebook has one billion users and the average Facebook user spends 17 minutes a day updating, profile searching etc., and a portion of that time is spent sharing shopping experiences or discussing products. If we were to use social media networks with integrated shopping experiences, it would be a great way to drive business for any e-commerce retailer. The concept of peer review and validation has become much easier and is more important than ever before.
Currently, quite a few online fashion retailers are focusing on quality content and even by publishing print magazines. How important is content to you as a retailer? How is content marketing affecting the world of fashion e-commerce?
Content is key! Information and content about a product are always a strong influence on purchasing behaviour and the more respected the source, the stronger the influence — in particular with e-commerce. If you look at Net-A-Porter, they provided couture and accessories to people that weren’t able to pop into a Dior store for a jacket and a Jimmy Choo shop for some shoes. They made fashion accessible no matter where you are and no matter what your budget. Their new print publication “Porter,” will establish them as the head of fashion e-commerce. Their magazine shows trends and people will know instantly where to go to buy it — their own website. It’s a genius idea and it transforms brand aggregators into publishers. That’s what we do with diamonds; you go into a high street store and are told minimal information about the quality of the stone options you have in front of you. On our website you get the ultimate diamonds content, the largest selection of certificated diamonds in the world, and with a simple click you have the knowledge and content to help you make an educated decision about your purchase.
We see brands becoming publishers and publishers stepping into retail sales. Is this the beginning of a new era for these industries? How do you see the relationship between media and retailers developing in the future?
These industries can work hand in hand. People go online to make their lives easier and more often than not to make their purchases cheaper. Having someone like the Telegraph going from telling people what is hot and what is not, to then being able to add “click here to buy it” allows the customer to be more spontaneous with their purchases, while easily facilitating sales. I know I’ve seen shoes in a magazine that I’ve wanted, but you forget about them and never go in store to look and then buy. E-commerce allows the customer to get product information and then purchase straight away, which is a win-win for both the retailer and the consumer. However, publishers will need to maintain their independence and credibility, and if they are not careful, they will lose their edge and influence, which would result in a lose-lose.
Collaborative consumption, personalised recommendations, social shopping. Are there any online trends that have the potential to disrupt fashion? Where would you choose to invest if you had to?
I wouldn't say there are trends that would disrupt fashion; if anything, online media and trends have only proven to aid the industry. The availability of items online does remove people from the store as they know their size and preference is usually guaranteed online — as opposed to what's in store. This in turn can affect the general retail market as a whole. Social media is levelling the playing field and allows smaller brands to develop followings quicker, easier and at a lower cost than ever before. This type of access to the consumer allows 77 Diamonds to compete with brands like Tiffany & Co, who have budgets many times larger than ours. This is why in terms of investment, combining social media with the purchasing process would be the best way to engage the customer in the same way the trip to the showroom does — it informs and educates so that the customer feels comfortable with what is both a great financial, and more importantly, sentimental purchase.
Can smartphone (or tablet) screens, with all their physical limitations, offer a true luxury experience for affluent consumers that want to purchase from you?
Absolutely (with caveats!). The purchase journey is so interconnected these days that brands cannot afford NOT to invest in a multi-platform strategy. Although the majority of purchases still occur on desktop and increasingly on tablet, mobile is now so integral to the journey that a mobile-friendly site is essential. Any attribution modelling by platform will show such an investment as fully justified. The trick is to get a consistent experience across all platforms and to optimise that experience on each platform. Responsive design, if possible, is the way to go.
As online entrepreneurs, what is your biggest challenge right now?
If you are in the right space with the right products, the remaining challenge comes down to execution. It may be a cliché, but having the right team and making sure you have the right vision to set the right priorities can be the difference between life and death. Execution remains our key challenge.