Even though we're fighting through a dreadful economy, many men will be making a substantial purchase during the holiday season. These are men who are going to propose and need an engagement ring to complete the ritual. For many men (if not most), they have no idea what they're doing when looking for a ring.
Mark Vadon, founder of online jewelry retailer
, was in this position in the late 1990s. He bounced from one jewelry store to the next, facing either salespeople who were too aggressive or got ignored because of his casual appearance wearing shorts and baseball cap. Vadon decided to go online to educate himself on diamonds. There, he came across a small Seattle-based jeweler at the domain InternetDiamonds.com, and found what he was looking for.
"I was struck by the experience," says Vadon, 38. "I wound up paying about 40% less than what they were charging in the stores, and I walked away feeling like I got better customer service through this person I never met than what I was getting in stores."
During the dot.com boom when everything was moving online, Vadon quickly realized nobody of scale was selling diamonds and jewelry. He raised $6 million in financing and purchased InternetDiamonds.com in May 1999. At the time, the Web site was doing sales of a few hundred thousand dollars a month. Vadon reintroduced the site, aiming for a larger audience, and changed the name to Blue Nile. Sales rapidly jumped to $10 million in the last quarter of that same year.
Blue Nile's success with customers, about three-quarters of whom are male, can be credited to its straightforward approach in demystifying the process of selecting a diamond. The Web site has an extensive education section explaining everything from different cuts and settings to how much customers should spend.
When you're talking jewelry, however, some individuals like to announce how much money they spend and shop with the intention of purchasing a status symbol, often found in a little blue box.
"When people come to Blue Nile and see that our prices are lower, they don't put some of their money in their pocket," says Vadon, "they end up spending the same amount of money. They just get more. So women, instead of getting a half-carat diamond, wind up getting a full carat. And by and large, the women who receive rings from Blue Nile are incredibly excited about that."
Adding carats to its customers' fingers is a formula that has worked well for Blue Nile. Since launching the site, the company has raised a total of $57 million and eventually went public in May 2004.
is now the largest online retailer of certified diamonds and engagement rings, with sales of $319 million in 2007. The company's stock has fallen 58 percent this year after almost doubling in 2007.
This year, the company and its 180 employees have racked up sales of over $140 million in the first two quarters. It's understandable, though, that nothing can be taken for granted in today's economy. Still, Blue Nile is a dot.com crash survivor.
"It's a different type of downturn today, but I think it's similar," says Vadon. "You had to make sure that your business model made sense and was executing well, you had to rigorously manage cost, and it also provided a culture internally where it really bonded people together. At Blue Nile we kind of felt like it was us against the world."
"When things are tough, the strongest companies are going to survive. I've talked to a lot of Internet entrepreneurs who survived that period and I think all of us would say the same thing, which is: Going through that environment made us much stronger as companies."
Steve Cooper was most recently managing editor of Entrepreneur.com and research editor at Entrepreneur magazine. He runs his own business, Hitched Media Inc. (www.hitchedmag.com).