.bodytext {float: left; } .floatimg-left-hort { float:left; margin-top:10px; margin-right: 10px; width:300px; clear:left;} .floatimg-left-caption-hort { float:left; margin-bottom:10px; width:300px; margin-right:10px; clear:left;} .floatimg-left-vert { float:left; margin-top:10px; margin-right:15px; width:200px;} .floatimg-left-caption-vert { float:left; margin-right:10px; margin-bottom:10px; font-size: 10px; width:200px;} .floatimg-right-hort { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 300px;} .floatimg-right-caption-hort { float:left; margin-right:10px; margin-bottom:10px; width: 300px; font-size: 10px; } .floatimg-right-vert { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px;} .floatimg-right-caption-vert { float:left; margin-right:10px; margin-bottom:10px; width: 200px; font-size: 10px; } .floatimgright-sidebar { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 200px; border-top-style: double; border-top-color: black; border-bottom-style: double; border-bottom-color: black;} .floatimgright-sidebar p { line-height: 115%; text-indent: 10px; } .floatimgright-sidebar h4 { font-variant:small-caps; } .pullquote { float:right; margin-top:10px; margin-left:10px; margin-bottom:10px; width: 150px; background: url(http://www.dmbusinessdaily.com/DAILY/editorial/extras/closequote.gif) no-repeat bottom right !important ; line-height: 150%; font-size: 125%; border-top: 1px solid; border-bottom: 1px solid;} .floatvidleft { float:left; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} .floatvidright { float:right; margin-bottom:10px; width:325px; margin-right:10px; clear:left;} Seeing the explosive growth in the online jewelry business, Dave Arringdale joined his son, Josh, and Josh’s girlfriend, Heather Kelly, on a trip to New York City to talk with potential diamond suppliers. Arringdale’s interest peaked as he watched the suppliers work with retailers and his son and Kelly, who have 20 years of combined experience in the jewelry business, talk with suppliers on a technical level. He returned to Des Moines with the concept for Cloud Nine Diamonds.

About a year later, the online diamond and jewelry business, specializing in solitaire diamond engagement rings, kicked off with a new Web site last week. With enough capital, industry experience and suppliers, Arringdale is hoping the family-run business will become a big player in a field dominated by a handful of retailers. He expects to have $20 million in annual sales by the fourth year in business.

“There really aren’t a lot of key players online yet,” he said. “I think the big ones have really dominated that market and it has discouraged entry into the market by a lot of people. We want to be a big player at some point.”

Last year, online jewelry sales in the United States increased 20 percent to $2.45 billion, compared with a 7 percent gain across the entire retail jewelry industry.

Yet online sales remain a small portion of the jewelry industry, consisting of 3.9 percent of the $65.6 billion market. By 2010, IDEX Online expects online jewelry sales will represent slightly more than 6 percent of total industry sales.

A few key players dominate the online jewelry business. Blue Nile leads with 32.57 percent of the market and $252 million in Web sales in 2006. It ranks 49th among all online retailers, according to Internet Retailer.

The Arringdales incorporated Cloud Nine Diamonds in October 2006, and ran a test Web site for three months last spring before formally launching last week. Dave Arringdale, who is the CEO of Consumer Safety Technology Inc. in Clive, is acting as a consultant and providing the $500,000 in capital needed to get the project off the ground. Josh Arringdale, who lives in Fort Myers, Fla., is director of operations. Chris Arringdale is director of marketing, and his wife, Debbie, is director of communications; both live in Ankeny and work in full-time marketing jobs.

The family believes the emergence of online jewelry sales is changing the business, forcing smaller retailers to compete on price with online retailers, who don’t have to pay the overhead of a store and additional employees. Starting the business was less expensive as well, they said, because they did not have to buy inventory.

This situation is creating tension in the industry. At some trade shows, said Chris Arringdale, online retailers turn their name tags around, because the other retailers are unhappy with them. “If you talk to retail jewelers,” Dave Arringdale said, “online retailers to them is probably a four-letter word.”

Though Greater Des Moines jewelers see the online jewelry industry as a competitor, they believe it will not gain a much larger share of the market than it already has. They point to the problems accompanying online purchases, which include counterfeit grading reports, the company being unwilling to accept returned items and lack of service after the purchase. “If I’ve seen 10 of them, eight have had issues,” said Toby Joseph, president of Josephs Jewelers.

Carroll DeVries, general manager of Anglo Diamond, admits that online retailers have affected jewelry prices a little, but said the biggest advantage of a jewelry store is that customers can see the jewelry and ask questions about it before buying.

“Buying jewelry is a blind enough operation,” he said. “Why put a blindfold on while you’re doing it?”

DeVries added that many people who buy jewelry online come to his store asking for an appraisal, to have a diamond mounted, or to exchange it. “What’s your guarantee after the sale?” DeVries said. “Who’s going to clean it, check it and take care of it for you? I think the price savings are minimal.”

Cloud Nine Diamonds has a 15-day return policy and all of its diamonds come with a certificate from a diamontologist of the Gemological Institute of America. Unlike many other online operations, Dave Arringdale said, the company prides itself on giving customers a number to call to speak with an expert about any of the jewelry; they also can participate in a live chat with a diamontologist through Cloud Nine’s Web site.

“We have a fairly vast network of people we can draw upon to work with our customers,” he said. “What we’re trying to do is really provide a lot of expertise to customers and not put pressure on them.”

Another advantage of Cloud Nine being an online operation, Dave Arringdale said, is that it has access to more than 30,000 diamonds and pieces of jewelry through relationships with 10 suppliers in New York and Louisiana. It also has a pending relationship with a supplier in Israel.

“We’re not limited by the inventory that we stock in a particular store,” Arringdale said, adding that a product often can reach a customer in one or two days.

Still, Dave Arringdale believes it is difficult to enter the online diamond business, despite its explosive growth.

Suppliers are leery of online retailers, because the business is only 10 years old, he said, with most of the growth occurring in the past five years. Suppliers want to know how much capital and business and jewelry experience the owners have and their complete business plan. Visiting suppliers is “a relatively time-consuming process and kind of an expensive process as well,” Arringdale said.

But, he added, “what we discovered when we went out there is they had a tremendous amount of interest in working with good solid online retailers.”

To build the business, Chris and Debbie Arringdale are working on advertising through social media, including blogs, message boards and online communities. Debbie Arringdale runs a blog, focused on young males, that offers tips on buying engagement rings, and the Cloud Nine site has a “Tell a Friend” link. Through these efforts, the Web site received about 1,000 hits a week during its three-month test run last spring.

Though Cloud Nine Diamonds looking to become a major player in the field, it does not want to grow too quickly. Unlike Blue Nile, which Dave Arringdale said raised a huge amount of venture capital and poured millions into marketing when it started, “our philosophy is much different. We want to grow the business a little more slowly. We want to make sure we don’t compromise the level of service to our customers, so we’re not pumping millions of dollars into marketing that doesn’t make sense.”