Journal of Internet Commerce

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A Case Study: How a Retail Jewelry Store Learned

to Compete in the E-Commerce Market Place

William P. Cordeiro PhD

To cite this article: William P. Cordeiro PhD (2003) A Case Study: How a Retail Jewelry Store
Learned to Compete in the E-Commerce Market Place, Journal of Internet Commerce, 2:1, 19-28,
DOI: 10.1300/J179v02n01_03

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Published online: 17 Oct 2008.

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 A Case Study:
How a Retail Jewelry Store
Learned to Compete
in the E-Commerce Market Place
William P. Cordeiro

ABSTRACT. The Case Study describes how a retail jewelry store

adapted to a new e-commerce market place. Until the mid-1990s, their
marketing strategy included (1) a large dramatic sign visible from sur-
rounding streets, (2) local print and radio advertising, (3) a sales staff that
aggressively pushed the perceived value and emotional component of
jewelry, and (4) an after-sales follow-up program. Typical customers
were in the lower to middle socio-economic segment.
E-commerce created more knowledgeable customers who recognized
their buying alternatives. The Store reacted by developing several pro-
prietary web sites, displaying products in the store “as seen on” the home
shopping networks or on various web sites, and offering classes on how
to become a more knowledgeable jewelry shopper. During the imple-
mentation of the e-commerce changes, problems arose in two areas:
project management issues (deadlines, staffing, testing) and cultural ad-
aptation issues. Once these issues were effectively addressed, and the
e-commerce changes were implemented, sales stabilized and returned to
prior levels.
The Case Study explores a well-known strategic principle: all organiza-

William P. Cordeiro, PhD, is Professor of Management and Academic Coordinator

for Business Programs at California State University Channel Islands, Room #237,
Professional Building, One University Drive, Camarillo, CA 93012 (E-mail: William.
Cordeiro@csuci.edu).
Journal of Internet Commerce, Vol. 2(1) 2003
http://www.haworthpress.com/store/product.asp?sku=J179
 2003 by The Haworth Press, Inc. All rights reserved.
10.1300/J179v02n01_03 19
20 JOURNAL OF INTERNET COMMERCE

tions must monitor their changing environment and adapt accordingly.

e-commerce is a current example; there will always be others. [Article copies
available for a fee from The Haworth Document Delivery Service: 1-800-
HAWORTH. E-mail address: <docdelivery@haworthpress.com> Website: <http://
www.HaworthPress.com> © 2003 by The Haworth Press, Inc. All rights re-
served.]

KEYWORDS. Retail jewelry marketing, e-commerce marketing, case

studies

INTRODUCTION

Effective strategic management requires that organizations monitor

their environment and adapt to its changes. During the last few decades,
a key environmental change has been the growth of information tech-
nologies: personal computers, specialized television (cable, satellite,
hundreds of channels), the Internet, the World Wide Web, and personal
communication devices (hand held computers, enhanced cell phones).
These emerging technologies have helped create an “eCommerce mar-
ket place.”
An important element of consumer-based capitalism is a knowledge-
able consumer. The consumer needs information to make rational eco-
nomic choices among buying alternatives. Typically, the seller has
more information than the buyer does about a product’s origin, charac-
teristics, capabilities, limitations and value. Naturally, sellers present
information most favorably to induce buyers to purchase their product.
But, as more information becomes available to buyers, the sellers’ ad-
vantage decreases.
At the same time, the uniqueness of a product is inevitably shifting to
a commodity status. Over time, the characteristics that make any prod-
uct special are copied or imitated by competitors. As they gain more in-
formation, buyers realize that there is nothing special about a particular
product. These two trends, (1) increased buyer knowledge and (2) the
constant “commoditization” of all products, create challenges for mar-
keting organizations.
These challenges are especially vexing for organizations that market
“retail commodities.” For example, sellers of consumer soaps, paper
goods, bread, soda, beer, bottled water, gasoline, paints, lumber and
tools constantly struggle to differentiate their commodity from their
 William P. Cordeiro 21

competitors’. Retail product firms use well-known marketing tech-

niques such as market segmentation, advertising, promotion, packag-
ing, and special pricing methods to shape buyer behavior.
Precious metals (gold, silver, platinum), diamonds and colored gem-
stones (rubies, sapphires, etc.) are commodities. They are often fungi-
ble: one ounce of liquid or powered gold is indistinguishable from
another. They are extracted/produced in commodity-sized batches (tons
per year). Throughout history, humans have recognized that precious
metals and gems contain some intrinsic economic value based on their
physical characteristics (molecular stability, malleability, hardness, re-
fractive ability). Also, humans have always placed a perceived value on
precious metals and gems, using them for decoration, jewelry, money
and as a depository for wealth. Until recently, most nations guaranteed
their paper currency with precious metal deposits.
Watches are another commodity product with characteristics similar
to precious metals and gems. “High-end” watches (e.g., Rolex) are
hand-made. They contain precious metals and jewels in their internal
mechanisms and on their external cases. While all modern watches
maintain time accurately, high-end watches are marketed as more valu-
able based on their components, workmanship and prestige. Most
watches are machine-made and produced in batches of thousands per
week.
The modern retail jewelry business emphasizes the perceived value
of precious metals, gems and watches. Some marketing approaches
may mention quantity: percentage purity, weight of metal, weight of
stones. But quantity is not as important as perceived quality (gems are
graded), perceived value and a significant emotional component
(Dobkin, 1999, 52; Marchetti, 2000, 15). Marketing stresses the rela-
tionship between jewelry and feelings of friendship, love and commit-
ment. Marketing stresses the connection between jewelry and cultural
practices such as graduations, engagements, weddings, anniversaries
(Day, 2001, 8).
Similar to other commodity marketers, jewelry retailers use market
segmentation, special advertising, promotions, packaging and pricing
to attract buyers. Total USA annual sales exceed $40 billion for all jew-
elry segments. Firms like Tiffany’s, that sell individual pieces for thou-
sands, hundreds of thousands or, even, millions of dollars, occupy the
highest market niche. Auction houses (e.g., Christie’s, Sotheby’s) oper-
ate in this highest niche, facilitating the sale of “historical or collectible”
items, often for millions of dollars. Rare coin and stamp dealers also sell
in this niche. Rare coins and stamps only have perceived value since
22 JOURNAL OF INTERNET COMMERCE

their intrinsic value is very small. Often, the “issuer” culture or country
no longer exists.
The largest market segment for precious metals, gems and watches is
serviced by retail jewelry stores (often called specialty stores) and the
jewelry departments of fashion or general merchandise stores: Macy’s,
Mays, Nordstrom’s, Saks, Sears, J. C. Penney’s, Wal-Mart. While
Wal-Mart does not report their jewelry sales separately, most analysts
believe that Wal-Mart has the highest jewelry revenue in the USA. The
majority of sales are through jewelry chain stores (Zales, Fortunoff,
Gordon’s, Peoples, Reeds) and through thousands of independently
owned jewelry stores (Richardson, 1999, 56). Most jewelry stores are
located in malls or in separate stand-alone buildings.
This Case Study describes a retail jewelry store and its struggle to
stay competitive in an e-commerce environment. In exchange for shar-
ing their story, the owners asked to be kept anonymous: in this paper,
their business is the “Store.”

DESCRIPTION OF THE STORE

The Store is an independent jewelry store, in business for over 20

years. It is located in a major city in a stand-alone building in a neigh-
borhood of street-front stores. It has 2,500 square feet of retail space.
Department stores, local mall jewelry stores and other stand-alone jew-
elry stores are several miles away. A prominent feature is a large re-
volving sign that can be easily seen from neighborhood streets and the
nearby freeway. There is adequate parking. The Store is well appointed
and usually very crowded–often lines extend outside. Annual sales
from this one location exceed $15 million.
The Store’s customers are generally in the lower to middle socio-
economic segment. Over half are African American or Hispanic. Many
customers bring family members with them to shop at the Store. There
are hundreds of regular customers who come in several times per year.
Open every day, the Store is staffed with many sales persons, including
those who speak Spanish. The Store has powerful point-of-sale systems
and an information system that maintains in-depth data on regular cus-
tomers. The Store has strong profit margins based on its ability to pur-
chase its commodity products at favorable prices. The Store does not
offer its own credit–sales are made for cash or on major credit cards.
In addition to its large sign, the Store markets itself through local
print advertising and an after-sales follow-up program. It has sales
 William P. Cordeiro 23

events and offers discount coupons to customers. It sends customers re-

minders of their special days–birthdays, anniversaries, etc. It does not
advertise on television, but does occasional radio advertising.
The sales staff is trained to emphasize the perceived value and emo-
tional component of buying jewelry. The staff can be characterized as
aggressive in pushing customers to buy. The staff is knowledgeable
about available product choices and directs customers toward higher
profit margin products. A typical sales ticket is $200-$1,200. The Store
also offers expensive watches ($5,000+) and sells/trades gold and silver
bullion. These customers realize that bullion is a commodity and expect
up-to-date quotations. Therefore, bullion transactions can have a high
dollar value with a low profit margin.
The Store has a repair shop onsite that allows it to offer additional
services, and an opportunity for customers to “trade-up” to new jewelry
by changing the setting or by adding stones. The repair shop is a cus-
tomer retention mechanism, allowing the Store to foster and maintain
customer relationships.
Some staff members are “certified jewelry appraisers,” providing the
Store with another technique to build a quality reputation and maintain
customer relationships. The Store’s experts can certify the “market
value” of jewelry, which makes customers more comfortable with their
purchases from the Store (or from competitors).

CHANGES IN CUSTOMER BEHAVIOR

Several years ago, the Store began noticing changes in customers’

behavior that led to decreased sales and profits. After discussions with
their customers and further analysis, the Store traced these behavioral
changes to the growth of the e-commerce market place.
First, customers began making references to “home shopping pro-
grams.” These programs run on dedicated cable or satellite television
channels 24 hours per day, seven days per week. “QVC” and “HSN:
Home Shopping Network” and “Shop At Home” and “ShopNBC” are
some of the more successful shows. These four examples are nationally
broadcast in the USA. There are also domestic regional shows and inter-
national home shopping shows. Similar types of programming called
“infomercials” are shown on regular and cable TV for several hours
each day in many domestic markets.
24 JOURNAL OF INTERNET COMMERCE

All these programs prominently feature jewelry sales. Some pro-

grams are devoted to specific product classes: gold, silver, diamonds,
pearls, rings, and collectibles. Home shopping shows have an on-cam-
era host describing the jewelry while the product is displayed via close
camera shots. Often, the product is offered on a 1-6 payments basis. The
prices are described as “lower than normally found” in retail jewelry
stores. Frequently, the host announces that there is only a “limited quan-
tity” of the product available. The screen displays a reducing count of
the remaining items available as phoned-in orders are recorded. Also,
there is a reducing time limit (e.g., 25, 24, 23 minutes) displayed on the
screen–after which the product will be unavailable. Perhaps not surpris-
ingly, many of the “limited” products are offered for sale several times
during the year.
Some home shopping shows often feature celebrities who display
“their line” of jewelry. The host interviews the celebrity who describes
how she designed the jewelry and why it would be an attractive pur-
chase for the viewing audience. Accurate sales data for these outlets are
difficult to determine. But the Store’s analysis concluded that home
shopping programs had a negative effect on its sales.
Next, customers began making references to web-based jewelry in-
formation and buying alternatives. They asked sales persons very de-
tailed and knowledgeable questions about the source (county of origin,
wholesale supplier), weight, grade, purity, and manufacturer/assem-
bler. Customers came in with printouts from their home PCs of product
comparisons, of price comparisons, of purchasing alternatives. Cus-
tomers had “print screens” from Amazon.com with product descrip-
tions and asked for the identical product and price. Some printouts
displayed “local competitors”–a list in descending price order for the
same product in jewelry stores within a 50-mile radius of the Store.
Customers had printouts from eBay auctions and asked if the Store car-
ried the same product as shown on eBay. Customers had printouts from
sites or bulletin boards that discussed marketing/sales techniques and
price markups in the retail jewelry business.
An immediate effect of this emerging e-commerce market place
(home shopping and the web) was a reduction in sales and profits. The
Store’s analysis determined that sales/profits fell because:

a. The sales cycle took longer, with more time needed to convince
customers to purchase an item;
 William P. Cordeiro 25

b. Customers often asked for a specific jewelry item and could not
be persuaded to buy another item (perhaps with a higher profit
margin); and,
c. In the most damaging effect: customers came in, examined
products, discussed comparisons, and left without buying any-
thing. During follow-up interviews, many customers said that
they later purchased the product at another local store or via an
eCommerce source (home shopping show or web site).

STRATEGIC CHANGES

Before e-commerce, the Store successfully exploited several strate-

gic marketing elements: a prominent location with few nearby jewelry
stores, a strong advertising and promotion program, a good sales infor-
mation system, a close customer follow-up process, and an ability to
market jewelry’s perceived value and emotional component.
E-commerce severely impacted some of these marketing elements.
E-commerce sources created more knowledgeable customers, reducing
the Store’s ability to exploit its product expertise and its ability to pro-
mote the perceived value and emotional component of jewelry buying.
E-commerce negated the location and signage of their retail store, since
customers could buy jewelry without coming into the Store. As custom-
ers developed a better understanding of the retail jewelry business–
especially the perceived value component–they realized that buying
jewelry is (essentially) a commodity purchase. This led to dramatic
shifts in the market place for the Store and for all retail jewelry stores
(Baar, 1999, 6; Orr, 2000, 63).
The Store made two major adaptations for the e-commerce market
place. First, it purchased a web development firm and developed its
own web sites: one site describes the Store and concepts related to jew-
elry products and the jewelry business; another site allows customers to
ask questions about products, pricing, repairs; another site offers all of
the Store’s products for sale via web transactions; another site offers
bullion sales/trades; another site offers low priced jewelry and watches
not carried in the Store. All these web sites are linked to one another and
to external web sites such as eBay and Amazon.com (Oberndorf, 1999,
63).
The Store made a strategic decision to purchase a web development
firm, rather than simply hire the temporary services of a consulting firm.
Management believed that purchasing a firm would provide (a) more
26 JOURNAL OF INTERNET COMMERCE

control during implementation, (b) future cost savings, and (c) future
revenue opportunities. More control during implementation would oc-
cur because management would provide operational direction over em-
ployees, rather than having to depend on consultants. Cost savings
would occur because management projected a continual need for inter-
nal web page development and enhancements; and having their own
firm would lower their overall costs. Future revenue opportunities
would occur because management believed that many other firms, both
within and outside their industry, would need web development ser-
vices on a continuing basis. Having their own web development firm
could provide a sales opportunity (“Here’s what we did for ourselves,
how our sales grew, and we can do the same for you.”).
Second, the Store changed its in-store sales practices. The staff be-
came more open with the customers, treating them as knowledgeable
shoppers–not just “sales targets.” In-store displays have products “as
seen on QVC, HSN, eBay.” Displays list products by grade within clas-
sifications. Some examples: gold chain by purity and price per ounce;
diamonds by weight, grade and country of origin; watches by brand and
price. The Store has brochures describing various aspects of the jewelry
industry. The Store issues a quarterly newsletter with product and in-
dustry information (not a sales brochure). The Store holds information
sessions for customers who wanted to learn more about jewelry,
watches, bullion, etc.
All aspects of the implementation of these e-commerce changes (web
sites, new practices) did not go smoothly. Problems arose in two areas:
project management and cultural adaptation. Project implementation
encountered many of the “classic” problems of any project implementa-
tion: some deadlines were overly optimistic and therefore missed; some
project teams did not function smoothly, leading to “normal” staffing
issues: a few people needed to be reassigned; testing surfaced opera-
tional problems that required the redesign of two sites; some of the
Store’s staff resisted changing their practices–it was difficult for some
to adapt to the more customer-friendly approach since they were more
comfortable “pushing” customers to buy. All these problems and issues
were addressed using the standard management techniques and ap-
proaches that made the Store successful in most of its endeavors. Effec-
tive management techniques are adaptable to a variety of problems and
the Store’s managers were effective managers who solved their opera-
tional and implementation problems/issues.
Significantly, the Store did not change other business practices. It re-
mains in the same location, still only advertises in local print and radio
 William P. Cordeiro 27

media, is not seeking another market segment, and has not changed its
purchasing patterns. The Store’s owners believe their basic business
strategy is correct, with the recent adaptations for the e-commerce mar-
ket place.

IMPLICATIONS

The Store implemented many changes recommended by analysts of

the e-commerce market place (Brown, 1999, 231; Lach, 2000, 55;
Wilde, 1999, 92). They recognize that their customers, while still in the
same socio-economic market segment, developed into more knowl-
edgeable buyers.
There was quantitative and qualitative evidence that the changes had
a positive effect on their business. Sales stopped declining and began in-
creasing each quarter. Profit margins did not return to their prior levels
because the Store was not able to “push” as much of its highest margin
goods (as it had in earlier years). Sales increased in certain trade
categories–especially necklaces; and declined in other categories-espe-
cially watches. Management believed that these category shifts related
directly to comparisons made on two specific web sites.
Staff morale seemed to improve. Most of the staff expressed delight
in being able to “give the customer the full story” and not have to “push”
the product on them. The general environment within the store appears
to be friendlier–with more interactions among the staff and the custom-
ers. The Store has received favorable press coverage and comments
from competitors at trade meetings.
The Store adapted to e-commerce as it adapted to other environ-
mental changes in past years. Some of these prior environmental changes
included: growth of credit cards usage; an increase of women cus-
tomers working full time; an increase in disposable income in all
market segments with changing definitions of consumer “necessities
and luxuries”; a decrease in marriages of young customers; and a
growing business/marketing sophistication within all customer seg-
ments.
The national jewelry chains have aggressively embraced the e-com-
merce environment. All have web sites that offer information and prod-
ucts via the web (Anonymous, 2000, 19; Byrne, 1999, 15; Stein, 2001,
208). Some chains sponsor home shopping shows and infomercials.
E-commerce has dramatically impacted most retail commodity market-
ers (Anstead, 1999, 83).
28 JOURNAL OF INTERNET COMMERCE

As firms add e-commerce components, new problems arise related to

information technology processes (especially data analysis and coordi-
nation) and customer service (Del Franco, 2001, 51; Janoff, 2000, 89).
E-commerce is neither a magic marketing technique, nor a particularly
negative development. Customers’ product knowledge and buying al-
ternatives always shift over time. An effective organization, such as the
Store, needs to continually survey its environment for changes and
adapt accordingly.

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Furniture Sales,” Direct Marketing, (63, 2), pp. 19-25.
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(40, 42), pp. 6-7.
Brown, Ann (1999, October), “Ask Your Advocate,” Black Enterprise, (30, 3),
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Byrne, Harlan (1999, November 2), “Tiffany.com,” Barron’s, (79, 47), pp. 15-18.
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