 "Couples don't buy diamonds online the way they used to")
A diamond is no longer forever. It’s until you get sick of it, list it for sale online, and buy another one.
Modern expectations for engagement rings have proven more fluid than the future heirlooms sought by earlier generations. Just like virtually every other purchase, diamond rings frequently change hands online, far from a loupe-holding jeweller. It’s still a shaky time for the diamond industry, but the ring market on eBay has grown 58 per cent over the last five years, and digital jewellery consignment has become safer and more popular.
This moment of transition makes it particularly interesting to note what happened on Monday to the long-time pioneer in online diamond sales. Blue Nile Inc, which began selling diamonds online in 1999 and went public in 2004, cancelled its third-quarter earnings call to announce instead an agreement to be acquired by Bain Capital Private Equity and Bow Street LLC. The all-cash deal values the diamond seller at about $500 million, about 34 per cent over Blue Nile’s Friday afternoon closing price.
The deal announcement comes at an uncertain time for the future of engagement rings, a purchase that has come under pressure, in part, from the shift by millennial shoppers. The 18-to-35 demographic is marrying older than the Gen Xers and Baby Boomers, who cemented the link between diamonds and matrimony. Millennials, famously, have less to spend in their twenties than prior generations did, due to mounting student debt and having entered the job market in the wake of the financial crisis. The average cost of an engagement ring in the US is close to $6,000.
Retailers are understandably concerned about the next generation’s approach to engagements. Diamond Producers Association last year launched an $18 million advertising campaign to persuade younger buyers that a diamond engagement ring isn’t outdated. Prior to announcing privatisation, Blue Nile reported an 8.5 per cent drop in net sales of engagement rings in the US during the recent quarter, from the same period a year ago.
When they do choose to settle down, today’s brides aren’t making exactly the same choices as their predecessors. Kieron Hodgson, a commodities and mining analyst at Panmure Gordon & Co, said the traditional diamond engagement ring found at a conventional jeweller has been losing ground to vintage or bespoke alternatives. A ring from a big-name diamond retailer where mass-produced, identical rings line displays loses some lustre in this context. Some customers are looking for colourful gemstones instead of diamonds, Hodgson added.
Competitors have flooded the market to fill this need, displacing Blue Nile’s dominance in the marketplace and helping drag shares down by 18 per cent this year. Part of the problem is that online start-ups with alternative inventory can piggyback on the good reputation Blue Nile helped build for the diamond e-commerce industry.
-----------------------------------------------------------------------------------------------------------------------------------------------------------------------
© Bloomberg
