Ask a woman where she buys the following, and she'll probably respond like this:
- Jeans? Everything from The Gap to Seven.
- Purse? Coach, Louis Vuitton, etc.
- Shoes? DSW, Steve Madden, Aldo.
- Makeup? Sephora.
- Lingerie? Victoria's Secret.
- Dress? BCBG, Anthropologie, Bloomingdales
Ask her where she buys jewelry, and she'll meet your question with a blank stare.
There are high-end jewelry stores like Tiffany's, where few women shop for themselves. There are the low-end, teenie-bopper stores such as Claire's. But for the average woman who just wants some fashionable bling? It comes from an assortment of places: boutiques, antiques, or just before check-out at a clothing store. No one brand comes to mind.
Two 20-somethings, Daniella Yacobovsky and Amy Jain, realized this one day while shopping for shoes. They worked for the same investment bank when they graduated from college and later attended Harvard Business School together. Yacobovsky and Jain wondered why women were willing to cough up a few hundred dollars for a pair of shoes, but not spend $50 on a nice necklace.
"We started thinking of pain points," a jewelry-free Yacobovsky told Business Insider. She's surrounded by so much of it now, she sometimes forgets to put it on. "Two big things stuck out. Shoes or handbags are seen as more durable purchases. You can't get away with wearing the same statement necklace everyday. Also, there isn't a go-to retail destination for jewelry. Jewelry is not a destination purchase. It's an afterthought of retail stores."
The pair, who knew nothing about the retail or jewelry businesses, spent their next year at Harvard conducting research and putting together a working prototype of an e-commerce site. They wanted to figure out the supply side of the industry, create a private label for jewelry, and sell fashionable accessories at a price women wouldn't balk at.
They spoke with over 550 jewelry suppliers who produced items for stores such as Antropologie and Bergdorf Goodman. Of those 550, Yacobovsky and Jain convinced 30 to join the test site. They learned the business on the fly, and would often run home to google foreign terms merchandisers used throughout meetings. "It's all fake-it-til-you-make-it, right?" Jain said.
The closed beta site performed well enough for the founders to secure a seed round of financing from Accel Partners. BaubleBar's site officially launched in January 2010, three months later. From there, purchases grew 23% month after month, and BaubleBar was given an additional $4.5 million from Greycroft Partners.
If you stop to think about why jewelry is an "afterthought" for most retailers, it seems like it'd be because the margins aren't great. A store can make more selling a pair of $100 jeans than on a $25 ring. But Greycroft Partner's Ellie Wheeler, who is also a BaubleBar board member, says the margins are "fabulous."
"Retailers actually use jewelry as a margin category," Wheeler says. "They use it as an impulse buy and put it by the cash register, and there's often a big mark-up on it, particularly in the fashion-jewelry category."
BaubleBar uses a traditional e-commerce business model. Jain and Yacobovsky purchase jewelry at wholesale prices from manufacturers, then sells it for more online. They constantly monitor how well a product is selling and can tell within minutes if an item will be a hit or a dud. They keep track of the quantity of materials suppliers have in stock, so BaubleBar can push fast-selling products and pump the brakes as needed. They can get hot items turned around in just a few days' time.
When an item is popular on BaubleBar, a few thousand items can move in a week. One necklace posted on Monday had already sold 2,500 items by our Wednesday meeting with the founders. BaubleBar products have been worn by Justin Bieber, who received a bracelet from his on-again-off-again girlfriend, Selena Gomez, and Rihanna.
"An incredible amount of BaubleBar's traffic is organic, and partnerships help on top of the funnel," says Wheeler. BaubleBar has worked with one of the most followed brands on Pinterest, Honestly WTF, and DKNY. It also partnered with a New York City fundraiser called Raise Cache and clothed all the models in its jewelry (see photo above).
"They are scaling revenue very well, and they've been smart about building their brand and catering everything they do to serve their end-consumer," says Wheeler.
While BaubleBar has established its brand quickly, it's still early to tell if the business can scale.
Right now, 30% of BaubleBar's products are original designs. The remaining 70% can be found in other retail outlets across the nation. Jain says they hope to dwindle that percentage down to 50% by year-end.
In addition, BaubleBar isn't vertically integrated like one of its competitors, Chloe & Isabel. And because BaubleBar has to buy, hold and ship all of its items, it runs the risk of purchasing inventory that may never sell. Currently, BaubleBar eats the cost of shipping and returns.
Yacobovsky and Jain have plans to perfect and scale the business. They've mulled over a pre-order model to test which designs will be popular before they buy jewelry from suppliers. They're adding content to purchase pages, because when they show women how to wear the jewelry, they sell more. They've also tested physical retail stores, because shoppers who hold their products become more loyal customers than those who find BaubleBar online first. They haven't over-spent on customer acquisition either. Of BaubleBar's repeat purchasers, 70% shop another three or four times, and over 50% shop five times or more.
Their best customer has spent more on BaubleBar jewelry than some of its 50 employees make, having purchased over 500 items. Yacobovsky and Jain are also buffing up their customized jewelry business, which has better margins than a statement necklace.
"We consistently think of the cash-flow line," Jain said, her chunky black-jewel necklace glistening. "We're nerdy bankers so every dollar you give us, we're calculating what we're going to get when we put it toward something. We test as much as possible."
Please follow SAI on Twitter and Facebook.
Join the conversation about this story »
     |