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Diamonds & Jewelry: Luxury or Commodity?
With the explosion of Internet sales of diamonds and jewelry during the past several years, consumers have learned that the online diamond and jewelry marketplace is not only a source of in-depth information and education, it is also a place where you can often purchase high quality diamond engagement rings and jewelry at a fraction of the traditional jewelry store prices.
This powerful concept, together with burgeoning consumer confidence in the Internet marketplace as a viable medium for making expensive purchases, has led to an overall decline in retailer profits (profit margins) for the sale of loose diamonds and jewelry.
Diamond stores, regardless of whether they operate on the Internet or off, have been forced to recognize the power of the "Internet revolution" and have lowered prices on their merchandise in order to remain competitive.
In almost all instances, traditional retail jewelry stores are no longer able to command and expect significant profits on diamond and jewelry products that can be purchased on the Internet for a fraction of the price. Consumers either buy directly off the Internet, or they use the price point on the net to negotiate a better price (or a price match) with their local jeweler.
Indeed, the only way that jewelry stores continue to reap some of the "1980's profits" on their diamonds and jewelry, is often by aligning themselves with a "brand" or a niche that gives them the ability to sell on their own terms, without fear of "watered down profits".
The Hearts on Fire Signature Diamonds Brand, which has a registered trademark touting themselves as being "the world's most perfectly cut diamond," is a perfect example of some of these last "strongholds" of retailer "profit bonanzas".
Hearts on Fire diamonds (tm) is a company that manufactures beautiful Ideal Cut Diamonds which they market through authorized retail jewelers across the country. They do not sell their diamonds over the Internet..and for good reason.
Indeed, diamonds of similar quality, beauty, and ideal cut quality, can be purchased over the Internet at an absolute fraction of the Hearts on Fire diamonds prices.
Therefore, Hearts on Fire made a decision to market their diamonds exclusively within the framework of traditional "bricks & mortar" jewelry stores.
They are an excellent company, with a high quality product and amazing retailer support. The retailers who are authorized to carry the Hearts on Fire diamond brand, swear by the product, since it allows them to sell a beautiful "flagship" ideal cut diamond, at a huge markup and significant profits, per the "suggested price" structure mandated and enforced by the company and without fear of being undercut by Internet diamond stores.
However, aside for a few select "brands" like Hearts on Fire diamonds, most of the diamond and jewelry marketplace has been strongly affected by the Internet revolution, with an overall decline in profits due to the competitive nature of the Internet.
So the question is, has the Internet turned diamonds and jewelry from a luxury item into a commodity?
I have recently seen threads on this topic from a few different marketing and branding gurus including our friends and Janus Thinking.
Here is my own take:
Obviously, the old profits on diamonds and jewelry are gone forever. Consumers today are smart, savvy, and educated. However, the reality is that diamonds are still considered luxury items. These are not commodities like bread, butter and milk. Additionally. diamonds and jewelry are not intrinsic to our survival...(well at least for most people..;-).
Therefore, the reality is that you are still buying diamonds and jewelry with your discretionary income, regardless of the value and excellent price.
This simple fact, in my opinion, still qualifies diamonds and jewelry as being considered luxury items.
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