Building an e-commerce business is not for the faint of heart. The Internet makes it possible to sell more things to more people than ever, but online retailers can also find themselves collecting millions of dollars in revenue without getting anywhere near consistent profits.
Gemvara Inc. knows that story well. Started by Babson College students in 2006, the Boston jewelry seller has tried to make a dent in the business by letting shoppers customize their baubles online.
Venture capitalists have invested more than $60 million in it, including a $12 million round that Gemvara quietly added last year. It’s been through four chief executives, with cofounder Matt Lauzon holding the job twice. Gemvara once had about 80 employees between offices in New York and Boston, but has suffered through layoffs, most recently last year.
“Getting people confident in jewelry is not easy,” said Matt Nichols, who took the CEO job early this year. “Particularly going online and going away from their local jeweler — despite how much they may not really like their local jeweler. There’s so much unknown.”
Nichols thinks he has found a promising new avenue to expand Gemvara’s customer base, however. Instead of coaxing shoppers to buy new gemstones, the company hopes to make money from consumers who want to reset an old stone in a new ring, necklace, or earring. A customer can order a free, insured shipping kit and then mail the company the older item with instructions on how to incorporate it into a new design.
It started as an experiment, but Gemvara says the consumer response has been promising. In early June, only a handful of people were requesting the kits. “And in a matter of weeks, that went from five or 10 a day to 100 or 150 a day,” Nichols said.
Gemvara is now devoting most of its resources to expanding the resetting business. Its online shopping sites will remain in place but will operate mostly on autopilot as the company’s roughly 55 employees focus on beefing up the resetting business, Nichols said.
“We have to continue to find new ways to expand Gemvara, and that’s what it comes down to,” Nichols said. “We’ve sold jewelry to well over 50,000 people, and the more ways we find to give them more follow-on products and services, the better.”
Twenty years after Amazon.com went online, the jewelry sector remains relatively untouched by e-commerce. Seattle-based Blue Nile Inc. is the largest company devoted to online jewelry sales, but its revenue of more than $473 million last year represented less than 1 percent of the nearly $69 billion US jewelry market, according to industry analyst Edahn Golan.
Gemvara doesn’t disclose detailed financial results, but its sales since January have it on pace for a projected $20 million in revenue this year, Nichols said. The company isn’t yet profitable, but has cut its expenses in half from last year, he said.
The central idea behind Gemvara — creating your own jewelry by using online design tools — may not translate well for an expensive purchase like precious stones, said Joe Pine, a business consultant and analyst who has studied mass customization in various industries.
“My suspicion is that a gemstone is something people want to see,” Pine said. “I think they want to verify and evaluate the quality of it, even though they have all of the same certifications you do in a regular jewelry store.”
That’s one reason Gemvara thinks resetting old jewelry could help it grow: Since customers already have the expensive gemstones, they should be less anxious about paying for new rings or pendants to display them.
It’s also a relatively easy switch for the company to make. When someone orders a new piece of jewelry, “we would basically procure that gemstone from a dealer in New York and bring that to our manufacturer, who would craft it,” Nichols said.
“The only difference with reset is you are giving us the stone instead of that stone dealer in New York,” he said. Of course, that also means putting grandma’s diamond ring in the mail, which might make some customers nervous.
It’s possible that cutting out the expensive gem purchase could make Gemvara more appealing to a wider pool of shoppers, Pine said. “But it’s also a much smaller market.”