Reaping benefit from SARS
JNA: Looking at your previous sales record, I note that you posted the highest growth in 2003, when your sales soared tenfold to US$3 million from US$250,000 in 2002. The SARS outbreak occurred in 2003. Can it be said that the epidemic made a tremendous difference to your business?
Shepherd: SARS was a big factor in our success. One thing was that National Public Radio, a major radio station in the US, found out that I was in China during the SARS epidemic. They interviewed me, and the interview was played every day. This was very good publicity.
The other thing was that I got great prices and premium quality pearls. Before SARS I often came up against the problem that farmers didn’t want to sell me the best quality and wanted a premium price. However, during the SARS period, every company contacted me and asked me to visit them. They were harvesting and had to sell. It was like walking into a store and getting a 95-percent discount, and I bought as much as I could. That was when my business really started to explode, because I had no competition in prices and quality.
JNA: Weren’t you worried? It’s SARS!
Shepherd: People thought I was crazy, but I had spent a lot of my life living overseas – Japan, Mexico and Africa. There wasn’t anything that really scared me. There are many millions of people living in China, but how many had SARS? The fear was unwarranted. I was going to be careful and protect myself. In fact I was very excited, as I knew I would get everything I wanted.
How to sell pearls on the net?
JNA: Building a luxury business online isn't easy. How do you manage to get people to buy pearls they can't touch?
Shepherd: You need to have a brand name that people trust. To achieve this we blanket our website with educational materials on the cultivation and nature of pearls, and display our company’s membership in organisations like the Better Business Bureau, the Safe Shopping Network and the MJSA. In addition, we have grading scales for different pearls, and accompany all pieces with an appraisal and a 90-day money-back guarantee.
JNA: What is your return ratio like?
Shepherd: Our return ratio is less than 2 percent. Most of the goods that come back have been bought by husbands for wives who don’t want pearls. Almost none of the returns are related to pearl quality.
JNA: How do you deal with old inventory?
Shepherd: If we have an over-stock of particular items, we put them into our biannual customer-only sales held before Mother’s Day and Christmas. We send out emails to our past customers only, inviting them to a special web page, set up just for them, featuring items at prices less than 10 percent above cost. Response is very good, and we can sell all the pieces in one day.
JNA: In addition to presenting jewellery to celebrities at the Oscars, you appear frequently in the media, including The Wall Street Journal, Entrepreneur Magazine and Ocean Scene Magazine. Is a high level of publicity a major reason for the success of Pearl Paradise?
Shepherd: The press ask me for interviews, and they do help our business. WSJ did an article on us last July, and that one article caused our business to just explode. We advertise very occasionally, typically when the consumer press is writing a story about us.
Referrals and repeat business make up a huge percentage of our customers. We have a strong customer base because we provide quality pearls at reasonable prices.
Best sellers at PearlParadise.com: Tahitian, akoya
Tahitian pearls and akoya pearls are the best sellers at PearlParadise.com, Mr Shepherd said.
“Our Tahitian pearl sales are very strong right now. The most popular are gem-quality peacock pearls, and the retail prices are US$3,000 for a 9mm to 10mm necklace and US$3,400 for a 10mm to 11mm. We make necklaces only with A quality pearls and sell 150 to 200 Tahitian pearl necklaces every month. The public will not see most of them on the Internet because they are already sold to our waiting customers. It's simply that the prices are attractive. They cannot find such strands at these prices even if they come to jewellery fairs in Hong Kong.”
Top sellers for akoya are necklaces with 6.5mm to 7mm and 7mm to 7.5mm pearls, he said. For 6.5mm to 7mm, AAA quality sells for US$300 per necklace and the second tier, AA+ quality, for US$200; for 7mm to 7.5mm, the top quality goes for US$500 and the second tier for US$400.
“Meanwhile, our Chinese freshwater pearl sales are quickly catching up with akoya. I thought I had purchased enough Chinese freshwater pearls to last a year last autumn – not the case at all. The best sellers are 7mm to 8mm necklaces retailing at about US$86,” he said.
From flight attendant to million-dollar online pearl purveyor
Jeremy Shepherd visited the Hongqiao Pearl Market in Beijing for the first time more than a decade ago when he was working as a flight attendant for Northwest Airlines, flying to China on a regular basis. One day, he purchased a set of Chinese freshwater pearl jewellery at the market, and gave it to his girlfriend in the US. She had them appraised and told him the value: it was 20 times the price he had paid!
The idea of starting a pearl business formed in his mind. He bought pearls at the Hongqiao market and tried to sell them to jewellery stores and boutiques in the US, but very few of them wanted anything. Then, at the suggestion of a friend, he auctioned them on Amazon.com, and they sold. He cashed his entire savings and bought as many pearls as he could, selling them exclusively online.
In 1997, he established Pearl Paradise. He made use of his language talents – he speaks Japanese, Mandarin, Spanish and Chuuk (the language of the South Pacific Micronesian Islanders) – to buy pearls from different areas. Over the years his business has expanded from Chinese freshwater pearls to akoya, Tahitian and South Sea pearls.
In addition to PearlParadise.com, he operates Pearl-Guide.com, an educational website on pearls, and 13 websites in the US and Europe for pearl trading employing marketing strategies different from that of PearlParadise.com. The company has its headquarters and appointment-only showroom in Santa Monica in southern California, serving just one customer a day.