Net Worth: Consumers Find Precious Metals on the Web
As he was being interviewed for this article, Louis Nagode couldn't answer all the cp1estions right away. He was too busy testifying
On 31 March, two parcels, ostensibly from Nagode's company, NetMetals.com, were delivered to an address in Brooklyn, NY. The recipient had been expecting a shipment of over 200 one-ounce gold Eagles, ordered over the Internet. He didn't expect that they would be delivered by the police.
The man was arrested and charged. Estimates are that he had attempted to purchase more than $500,000 worth of coins from several companies with copies of the same cheque.
Nagode understands the inherent pitfalls of doing business over the Internet, but he sees its speed as a real advantage. On this occasion, he used it to aid the police. He constructed a special web site for them containing all the details of the transaction, including a scanned image of the check and a record of all e-mail correspondence. The electronic evidence was enough for the authorities to act on. "It was the Internet that allowed the crime to be perpetrated, but it was also the Internet that was the criminal's doing", Nagode points out.
Nagode was one of two speakers at the LEMA Precious Metals Conference 2000 e-Commerce Workshop session, which focused on the role and future of the Internet in precious metals. While NetMetals. com offers bullion, Adonis.com, the other company presenting at the workshop, markets fine jewellery. Commercial enterprises on the Internet can be divided into roughly two categories: business-to-business (B-to-B) and business to consumer (B-to-C). Both Adonis.com and NetMetals.com are B-to-C. Both feel that thank, to the Internet they can attract the consumer with a better selection and more efficient service - which could ultimately lead to more consuming.
Nagode initially considered e-bullion from a consumer's perspective. He was an occasional purchaser of gold coins and wai1ted to add to his collection, but his supplier had gone out of business. For him, the Internet seemed a logical place to And a new one. After all, he was buying books, computers aids supplies online, so why not gold?
But the only web sites he found online were from dealers using the web to advertise and promote their toll-free numbers. He couldn't actually buy on line. To him, this represented a business opportunity. Looking back, he says "I found an industry that hadn't automated and had huge supply chain inefficiencies - but could achieve tremendous cost savings using technologies I am intimately familiar with!" NetMetals.com went live a few months later and had its first profitable month within a year.
With a huge and seemingly ever-expanding global market, it was inevitable that fine jewellery would find a place on the web. Adonus.com was set up by its current Chairman, Declan Ganley, in November 1999, with an industry-experienced management team from high-end retailers such as Tiffany & Co, Hermes and Saks Fifth Avenue.
But why should fine jewellery sell better over the net than in traditional brick-and-mortar businesses? The oft-cited advantage of shopping 24 hours a clay, seven days a week, in the comfort of home is perhaps particularly key when looking for jewellery, which is normally displayed in luxurious (and perhaps intimidating) surroundings.
To facilitate shipping of purchases, Adonis.com operates a 20,000-square-foot fulfilment and call centre in Memphis, Tennessee, adjacent to the North American hub for Federal Express. US customers who place their orders by 10 pm on a weekday can get next-day delivery. "So, when somebody like me forgets his wife's birthday until the night before, last-minute shopping is not a problem," says Ganley.
The Shop Window Goes Global
To display its pieces to their best advantage, Adonis.com uses mouse online to cha represented angles. Still, the drawback to shopping for Internet jewellery is, of course, that, no matter how sharp the image on screen is you can't touch it or try it on. But if that bracelet doesn't look quite as good on your arm as it did on screen, you can always send it back. The company offers a 30-day money-back guarantee with all items - no questions asked - and the shipping on returns is prepaid. But it's not invoked very often. "Our return rate is only about 14% - half of what we expected," says Marion Davidson, senior Vice President of Communications.
Adonis.com believes that advertising is vital. With fierce competition from both other on-line jewellery sites aid traditional companies, they have to stand out from the crowd. They sought premium positions in fashion, business and lifestyle publications to show Adonis.com as an established and desirable brand.
NetMetals.com also advertises in publications that appeal to its target customers - well educated with web access and disposable income. But most of their traffic still comes from 'web crawlers', so Nagode tries to make his site as easy as possible to find (or hard to miss) by specifically styling pages to fit search criteria.
How can a customer be better serviced over a computer than they would be in person? Some steps in the transaction chain can be automated, which Nagode finds an advantage. For instance, he uses email to send automated confirmations to each customer and acknowledgements of payment and then sets up an individual URL (a web page) so a customer can tell where his package is at any given time.
Customers have the ability to enter their own orders 24 hours a day, seven days a week, and Nagode feels that no order is too small to be profitable. "Most other dealers won't take small orders, let alone stay open all day because it would require an entire staff to be available to process the orders. All we require is a secure computer with a predictable cost structure. We let our customers start with orders they feel comfortable with, then earn repeat business for progressively larger order sizes by flawlessly executing each and every order."
Research carried out by Foote Cone and Belding on behalf of Adornis.com showed that many people didn't actually enjoy purchasing jewellery. They felt they ought to do it at times, but they didn't feel very knowledgeable about their purchases and didn't feel comfortable asking questions.
The key to feeling more comfortable (and buying more jewellery) may lie in feeling more knowledgeable. Adornis.com contains an on line encyclopaedia, with topics such as "Caring for Gemstones " and "Hallmarking". A consumer can study, then browse to his heart's content, making a purchase with a dick of the mouse when ready. But if the surfer has a specific question or wants help with anything, a 24-hour call centre is available. Ultimately click-to -talk buttons may be added, allowing on-screen access to a customer service representative. This could even be expanded to a video function, allowing both parties to see each other (but only if customers want it).
Both companies feel that giving customers what they want is the key to keeping them loyal. And their consumers have helped, freely providing valuable feedback. Those who shop on the Internet seem eager to share their likes and dislikes, and this information is used to fine-tune the system whenever feasible. "We always want to have access to the latest technology, but our aim is not to have the flashiest web site," says Davidson. "It's to make our customers feel comfortable."