Mejuri Inc.
Company Purpose:
To use crowd sourced designs and a more efficient supply chain to create a trusted online premium jewelry brand
Problem:
The fine jewelry industry has a two-pronged problem. Large, brand-name retailers such as Pandora’s/Kay’s offer a limited range of generic designs because they must hold large amounts of inventory at any given time and maximize their mass-appeal in a limited retail space. At the same time, independent local jewelers, who are more open to personalization, must charge high mark-ups due to inefficient supply chains and their inability to buy in bulk. This leads to a dilemma for the high-end consumer between choosing a generic, but relatively cheap piece from a big-box retailer and paying an excess premium from a local retailer. Consumers who are single-time purchasers (engagement rings) are very likely to buy in-store for security/comfort, but frequent jewelry consumers, who make up a large part of the fine jewelry market, are often left unsatisfied.
Solution:
Mejuri uses a unique approach to satisfy these left out consumers. They hold an open forum for designers or ordinary users to submit original ideas for pieces. The sites community votes for their favorite designs and Mejuri produces them (a la Quirky), while giving the original designer a percentage of profits. At the same time, the founder’s status as a significantly large third generation jeweler in Jordan allows the company to work with trusted manufacturers to cut out “middleman” distributors and drastically reduce the markup on prices. Furthermore, being a solely online presence allows Mejuri to hold lower levels of inventory, further reducing prices. The interactions between the community and the company also help the company establish a “trusted brand”, which is essential in the jewelry industry.
Market Size:
The overall jewelry market in the United States is $63 billion in the United States and about $180 billion worldwide and continues to grow at a pace of about 6% annually. McKinsey estimates that as of 2014, e-commerce represents only 4-5% of the global jewelry market, with that number expected to rise by 10% by 2020, an almost 100% growth over just 5 years. The biggest market shift will come from the transition from “branded” jewelers to “unbranded” jewelers. It is estimated that 30-40% of all sales will come from branded jewelers compared to 20% in 2011 and 10% in 2003. This shift is largely attributable to the increased cross-platform marketing available in today’s connected world, allowing companies with larger marketing budgets to access consumers locally and other high brand companies (i.e. Louis Vuitton) extending their product lines. In the online sphere, one company, Blue Nile has a near-monopoly of the engagement ring market (>50%), but no company owns more than a 7% total share.
Team:
Noura Sakkijha
-Native of Jordan, moved to Toronto to complete MBA
-Holds degree in Industrial Engineering from the University of Jordan
-Family of Jewelers, she is third gen. of family business
-Featured extensively on reputable sites such as CNN, Yahoo Finance, and City of Toronto
-500 Startups Batch 2015
Majed Masen
-Noura’s husband and co-founder
-Finance background, with degree in Economics from University of Toronto and MBA from Ryerson University
-Has been a partner at FirePower Capital, Canada’s leading entrepreneurial investment bank since 2010
Justine Lancon
-Creative director
-Bachelors and Masters in graphic communication, long-time art-director, both corporate and freelancing
-Has been at company since early stages
Risks
Premium Product Risk
Like any other premium good, sales of jewelry are associated with the state of the economy. In a down economy, sales of jewelry, especially fine jewelry plummet. During most recent recession overall jewelry sales fell by almost 7% quarterly
Scalability/Customer Segment Uncertainty
Mejuri has the opportunity to occupy a certain segment of the market of fine jewelry with repeat buyers who value unique jewelry, but it is uncertain how big this segment actually is. The primary/most profitable segments of the fine jewelry market such as engagement rings are already saturated or well established and entry into these markets would involve a price war.
Exit Uncertainty
There has recently been a mini-wave of funding for online jewelry startups but because the “next-wave” of online jewelry commerce has only recently commenced, there is almost no direct precedent of exit. This also makes it hard to get an accurate P/E multiple for valuation as well.
Seasonal Business:
The only steady source of income in the jewelry business comes through engagement rings, which are almost constant year round. Most of any jewelry company’s sales come primarily during the holiday season (November-December), which makes the business largely cyclical. Whether Mejuri’s target demographic of the frequent Jewelry buyer makes it averse to this risk will be determined
Competition:
Traditional Retailers
Although Mejuri’s prices are below the upper echelon of big retailer’s products, they inevitably ends up competing at least a little bit with both local and national retailers because their product must be unique enough to differentiate itself from that of national retailers.
Gemvara:
Gemvara is perhaps the Mejuri’s closest competitor. They are the only truly custom fine-retail Jeweler, and they make their custom products on-demand in addition to carrying a full line of traditional products. To date they have raised 45 million dollars in venture funding but are not profitable as of 2013. Their on-demand creations allow them to store even less inventory but also creates a much more complex and labor-intensive company.
Generic Online Sellers:
Other online sellers such as Blue Nile and Plukka currently have existed in the market since the early stages of the web but offer no unique value for the customer over traditional retailers except a slight price discount, the convenience of ordering online, and the ability to search easily through various pieces. They compete more with the each other and traditional retailer’s online presence, but also inevitably have some overlap with Mejuri’s product. However, none of these sellers have established themselves as a “brand”.
Third Party Sellers:
Unique products curated by Mejuri must also compete against products found on reseller sites such as eBay, Amazon, etc. These companies do pose a threat because they offer an almost unlimited range of products. The downside is that these are often used products and fine jewelry buyers may be more inclined to buy new products.
Sales and Growth Strategy:
As of February 2016, Mejuri has an annual run rate of $700,000 after being in business for effectively 2.5 years. According the Mejuri, the customer retention rate is an absurd 50%, fitting our thesis of their customer demographic being “multiple-time” customers. Website traffic stats are mixed as visitors have leveled off around 50k after reaching a high of 130k in December. However, the average per website time spent is a solid 1:51 and the bounce rate is 37% (percentage of single view visits to a website), which is high, especially for an e-commerce website.
Mejuri’s success will largely be a by-product of its ability to position itself as a community coming together to create products. As mentioned in the market size portion, Jewelry is shifting towards a predominantly brand shaped model. If Mejuri can position itself as a company that truly values customer input and encourages creativity, it will be able to attract top design talent and transform into a legitimate online brand.
Recommendation:
Mejuri appears to have the potential to carve a sizable niche in the jewelry market. The downside for the company lies in the state of the economy and the ability to appeal to a wide enough demographic, but a high repeat buyer range and expanding online jewelry market, as well as a unique concept, make it a feasible possible investment.