C hinese consumers only started shopping online a few years ago. But the range of items they are prepared to purchase is growing. Last year more than Rmb250 billion ($36.6 billion) was spent shopping online, says the China Internet Network Information Centre. Cosmetics are now a major draw, as well as bigger-ticket items like mobile phones and computers.
But what about diamond engagement rings? It might not sound especially romantic but Bloves.com, one of the country’s largest online jewellery retailers, says that many love-struck couples are now ready for diamonds on the internet. Founded in 2008 by Cao Lin, the company is touted as China’s answer to Blue Nile, the Seattle-based company that has also convinced shoppers to buy jewellery over the internet.
“I have been engaged in the jewellery business for over 10 years and often see stressful shoppers dashing from one mall to the other,” says Cao. “By the end of the day, they don’t even look excited when they get their ring. So after doing some research on diamond online retailing, I decided to set up Bloves.”
A recent report from professional services firm KPMG forecasts China will become the world’s largest diamond market next year. Nearly 6 million couples are expected to marry this year.
With such potential, Bloves now expects to hit Rmb500 million ($73 million) in sales by 2012, says the Southern Metropolis Daily. Last year the company saw sales spike over 300%.
This is how Bloves works: first, buyers can browse the website’s material to acquaint themselves with the “four C’s” – carat, clarity, colour and cut. Then, if they’re still uncertain on what to buy, they can dial up a Shenzhen-based sales representative for advice. Once they’ve decided on a purchase, it’s time to pay online.
Many are looking for a bargain. A quarter-carat diamond white gold ring costs around Rmb5,000 ($730); and a pair of wedding bands costs Rmb3,000 ($438). That is a decent discount on over-the-counter prices, although old-school retailers are often sniffy about online quality.
Bloves found its customers often hesitant to pay up without first trying on the products. So it set up what it calls “experience stores,” or showrooms, where shoppers can see the goods first hand. That seems to undermine some of the professed savings of the online model. But Cao says it will help shift more people towards buying on the internet. Bloves claims it takes only 12 days before purchases are delivered.
Compared to traditional stores, Bloves carries less inventory at its showrooms. To keep overheads low the company also chooses real estate in off-prime locations in big cities like Shenzhen, Ningbo and Changsha, says the Manager’s Daily. That allows it to sell its diamonds at roughly half the price of other retailers. And still make money.
Bloves shoppers have also proved reluctant to use their credit cards for online purchases. So the company turned to AliPay, an online payment system that serves as an escrow service, to hold customer payments until they have received their products and expressed themselves satisfied. Bloves also offers monthly instalment packages in which shoppers can pay with credit cards from larger banks like China Construction Bank and China Merchant Bank. Analysts say the monthly instalment plans appeal to new customers, who may be reluctant to commit to full payment the first time that they shop online.
Bloves may have carved out a lucrative niche but competitors are trying to capture their own share of the market. Well-known retailers like Hong Kong-based Chow Tai Fook Jewellery and Shanghai Laofengxiang are both considering adding online sales capacity. But the biggest rival is Taobao.com, the consumer-to-consumer website that controls 80% of China’s online shopping (see WiC47).
To take on Taobao, Cao said Bloves will expand its national presence by opening more showrooms. He now expects to grow from 27 of his experience stores to 100 by the end of 2012.
To get there, venture capital firm Tiantu Capital injected Rmb30 million into the diamond retailer in April, says research firm Zero2IPO.
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