Digital Bling: Diamonds For Sale Online

In the days leading up to Valentine's Day, jewelers typically step up their advertising for precious stones like diamonds. Consumers now have the option to buy certified diamonds at traditional retail stores or through online retailers like Blue Nile.

Valentine's Day isn't just a celebration for lovers. It's also a time when jewelers step up their advertising for precious stones like diamonds.

Traditionally, consumers have gone to jewelry stores to purchase engagement rings and other fine gems. Now, a small but growing number of people are buying diamonds online and spending thousands — even tens of thousands of dollars — to buy something they have never seen.

Alok Kapur proposed with champagne, chocolate and a diamond ring. It was classic and romantic. But he bought his ring in a much less traditional way. He purchased it online from Blue Nile — the nation's largest online seller of diamond engagement rings.

Initially, Kapur was skeptical. Buying such an expensive item sight unseen required a leap of faith. But his concerns were put to rest.

"They answered all of my questions — explained everything about the diamonds," he says. "The transparency was great."

Buying Sight Unseen

At Blue Nile, there is no "romancing the stone" as the industry calls it. That's an emotional approach in which customers are encouraged to buy the diamond that speaks to them. Instead, the company provides educational information, including grading certificates for all of its conflict-free diamonds.

Independent groups such as the Gemological Institute of America grade diamonds for quality. That industry standard means that a certified, one-carat, princess diamond of a specific cut, clarity and color should be almost identical in appearance no matter where you buy it.

Diane Irvine, Blue Nile's chief executive officer, says the company's philosophy is that consumers will buy diamonds sight unseen if you provide honest, complete information and have a liberal return policy.

Traditional jewelry retailers often sell from the inventory on hand. Blue Nile works differently. Its Web site lists about 55,000 stones offered by different suppliers. Once the consumer selects a diamond, it's cut and then sent to jewelers in the company's Seattle facility to be set into gold and platinum, and turned into an engagement ring.

Because of the way the publicly traded company does business, its operating costs are significantly lower than traditional retailers. It has no brick and mortar stores, hardly any inventory, and it doesn't pay commissions to its sales staff. As a result, it's able to offer prices that are often less than those of a traditional retail jeweler.

"I was able to essentially benchmark different stores against Blue Nile for exactly the same diamond," says Kapur. "And I found Blue Nile was about 15 to 30 percent less. "

Pressure On Traditional Retailers

Although Blue Nile and other online sellers represent just a tiny sliver of the overall market for diamond rings, they are exerting enormous downward price pressure on traditional retail jewelers.

Rob Bates, a senior editor at Jewelers' Circular Keystone (JCK), a jewelry industry publication, says that in order to remain competitive, retailers have to demonstrate that buying a diamond is about more than just price.

"They basically have to say: Here's why it's better to buy from us than from a machine on your desktop," says Bates. "We offer the ability to see the stone close up, the ability to customize, [and] you can see what the ring looks like."

Bates adds, "There are still a lot of people who aren't comfortable buying a big, high-priced item off the Internet."

Copyright 2010 National Public Radio. To see more, visit http://www.npr.org/.

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