For weeks, the build-your-own-ring feature has been showing up on Amazon.com Inc.’s home page. Today, Amazon made official that it is launching a jewelry store.
Amazon says its Jewelry Store will offer more than 75,000 items, ranging in price from $15 for sterling silver, blue topaz earrings to $93,000 for a platinum, radiant-cut diamond necklace totaling 31.74 carats.
Amazon plans to compete in the online jewelry market partly on the basis of price. Among its strategies is a low-price guarantee with a twist: If a customer finds a similar item for a lower price at another online retailer, Amazon will reduce its price--not just for that customer but for all future customers. Whether that exposes Amazon to any risk is open to debate, analysts say. “Non-branded jewelry is very hard to commodity shop,” says Lauren Freedman, president of Chicago-based consultants The E-Tailing Group Inc. “Very few people will be able to take advantage of what seems like a great offer.”
It’s also willing to settle for lower margins on jewelry. “While the average margin in jewelry retailing is approximately 45-50%, Amazon.com targets substantially lower margins on jewelry sales, and lower still--about 13%--on diamond jewelry,” the company says. “Traditionally, jewelry product margins are high in order to cover the costs of holding inventory, renting store space, and providing display cases, a professional sales force and security. Because Amazon.com does not incur many of these costs, the company is able to significantly reduce the margin on its products.”