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Christmas Gift Guide
Culture

USA Networks moves to become first in jewelry

The Internet Shopping Network launches First Jewelry, hoping to leverage the powerful distribution, fulfillment, and customer service infrastructure of USA's Home Shopping Network.

A division of Barry Diller's USA Networks moved to adorn the Internet with jewelry today.

USA Networks Interactive's Internet Shopping Network launched First Jewelry, hoping to leverage the powerful distribution, fulfillment, and customer service infrastructure of USA's Home Shopping Network. The site will be a full-service online jewelry retailer offering a range of jewelry--including earrings, rings, and watches.

First Jewelry is a latecomer to a sector already filled with companies, some that also are funded by powerful investors. Online retailer Ashford.com, for example--backed in part by venture-capital firms Benchmark Capital and Sequoia Capital--began selling jewelry over the Internet yesterday. Zales, the United States' largest fine jewelry retailer, also has made aggressive moves online, cutting a marketing deal with America Online.

Apart from these jewelers, there is a whole host of other players online, including DiamondTrade.com, Diamonds.net, and DiamondCutters.com. These companies are vying for a piece of the estimated $102 million in online jewelry sales this year alone, according to Forrester Research. That number is expected to nearly double in the next five years.

Dara Khosrowshahi, president of USA Networks Interactive, sees First Jewelry as having a distinct advantage over its competitors because it will benefit from the on-air promotion at USA Networks cable and online empire, including cable station USA Network and online sites First Auction, Ticketmaster, and Ticketmaster Online-Citysearch.

First Jewelry also can build on the experience of the Home Shopping Network and its online site, said Khosrowshahi. He added that the Home Shopping Network was one of the first merchants to sell jewelry via televisions and computers.

"We are taking advantage of all the back end: the distribution, fulfillment, the customer service, and other logistics that are already in place with HSN," said Khosrowshahi.

Through its proposed but failed acquisition of Lycos earlier this year, USA Networks was hoping to build the kinds of e-commerce sites that it is now offering. But CMGI's David Wetherell marshaled his forces as one of Lycos's biggest investors to block the acquisition because of what he perceived as a less than premium price for the portal. CMGI and USA Networks also will compete in the jewelry space after @Ventures, the venture arm of CMGI, last month invested in online jeweler Mondera.com.

Brick-and-mortar envy
As the popularity of e-commerce explodes, online merchants are finding renewed respect for the distribution, warehousing, and fulfillment capabilities that traditional retailers have built over the decades, analysts say.

Illustrating this point, many online companies have made strategic moves to emulate the efficiency of established leaders. For example, Webvan announced a $1 billion plan earlier this year to build automated distribution centers around the country. And Amazon.com, last year, snagged Wal-Mart executive Jimmy Wright--who had more than 26 years of experience in logistics management--to oversee the company's distribution centers, product purchasing, and shipping.

Last week, USA Networks created Electronic Commerce and Services, a firm that will leverage the call centers, customer-service operations, and packing operations from USA's empire to provide "back-office" services to e-commerce companies.

For its part, First Jewelry has cut several marketing alliances with magazines that have compatible readerships, such as Vanity Fair and Elle. The company also is in an alliance with Women.com, a destination site for women.

"This is a terrific market for us to address because there is no clear leader yet in the field," said Khosrowshahi.