Direct-to-consumer (D2C) jeweler Brilliant Earth says its path to growth after its expected public trading debut next week relies on omnichannel capabilities and a younger set of consumers — assuming it can overcome significant headwinds and a fragmented market.
Millennial and Gen Z consumers collectively represent 87% of the brand’s active customers, Brilliant Earth said in a filing with the U.S. Securities and Exchange Commission (SEC), based on the company’s digital presence and emphasis on sustainability, both of which are resonant factors for younger shoppers.
Indeed, PYMNTS’ Global Digital Shopping Index research has found that 28% of millennials are online-native shoppers and 39% are mobile-native. Nearly 9% of consumers have shifted their shopping journeys from in-store to digital since the early days of the pandemic.
Brilliant Earth also pointed to research from Nielsen’s Sustainability Report that found 73% of millennials are willing to spend more on a product if it comes from a brand that stands for sustainability, as well as a study from the Capgemini Research Institute that said 79% of all consumers are changing their product preferences based on social and environmental impacts.
“We believe we are uniquely positioned in the industry to build on our brand loyalty to increase future purchases,” the company said in its SEC filing.
Still, consumers have historically been slow to adopt online shopping for fine jewelry, as it’s a high-value purchase that people prefer to see and touch before dropping cash on it. In its SEC filing, Brilliant Earth noted that “changing traditional fine jewelry retail habits is difficult, and if consumers and retailers do not embrace the transition to an eCommerce and omnichannel fine jewelry retail experience as we expect, our business and operations could be harmed.”
Brilliant Earth also has 14 showrooms across the U.S., and plans to open more in the coming years. The showrooms have limited inventory and require consumers to make an appointment, meaning they’re not reliant on foot traffic and can offer a more personalized experience to shoppers.
Because the showrooms “serve as destinations with some customers traveling long distances to visit them,” Brilliant Earth believes it can reach “near-national showroom coverage with under 100 locations.”
Brilliant Earth joins a flurry of D2C companies that are moving to go public, including Allbirds, Warby Parker and the Roger Federer-backed sneaker startup On.
Related news: Sneaker Startup IPOs Take a Run at Nike
Strong Headwinds in a Fragmented Market
Brilliant Earth, which said earlier this week that it’s planning to raise $250 million by offering nearly 17 million shares at a price range of $14 to $16, is preparing to go public amid a resurgence in consumer demand for luxury and jewelry purchases. Mastercard projects that jewelry will see a 60% year-over-year jump in sales between October and December and a 55% increase compared to 2019.
The jewelry market is highly fragmented, and includes major players such as mall jewelers, local independent stores and department stores, among others who are also doing well as COVID-19 wanes. Earlier this month, for example, Signet Jewelers, which runs about 2,800 retail locations under names like Jared, Zales and Kay Jewelers, said its same-store sales in the second quarter nearly doubled year over year and were up 38% compared to two years ago. Signet’s eCommerce sales were up 25% compared to 2020 and up 114% versus 2019.
Brilliant Earth itself pointed out in its SEC filing that no single fine jewelry player has more than 4% market share globally, and 65% of the industry is composed of small and independent jewelers.
But these same merchants, Brilliant Earth claims, “are struggling to address consumer preferences for personalization and eCommerce,” relying on an outdated retail experience and inventory-heavy model. “We believe the rapidly changing industry provides ample opportunity for Brilliant Earth to take share,” the company said.
Another headwind, however, is that Brilliant Earth has historically struggled to make a profit, as have several other D2C brands. Though the jeweler recorded net income of $21.6 million and nearly $252 million in sales in 2020, it reported a $7.8 million loss in the prior year.
Brilliant Earth is also relying on the assumption that young couples who purchase engagement and bridal jewelry from them will return in future years to make other fine jewelry purchases — something that is far from certain as consumers’ brand loyalty wanes. An estimated 45% of American shoppers have changed their brand preferences during the pandemic.