Browsing for a $1 million purse?

A new group of e-tailers is offering everything from pearl earrings to a $1 million jewel-encrusted purse in the hope that online consumers will shell out the big bucks for baubles, bangles and beads this holiday season."Just because the Internet started out with low-value or low-priced goods like CDs and books, that doesn't mean people didn't want higher-priced goods.

A new group of e-tailers is offering everything from pearl earrings to a $1 million jewel-encrusted purse in the hope that online consumers will shell out the big bucks for baubles, bangles and beads this holiday season.

"Just because the Internet started out with low-value or low-priced goods like CDs and books, that doesn't mean people didn't want higher-priced goods. They just weren't available," said Barry Gilbert, president and CEO of Miadora, an online jeweler that launched in September.

"The spectrum of consumers who are on the Internet will eventually model consumers in America. And if consumers in America want luxury goods, they'll buy them online just like offline."

Miadora's not alone. Other online startups include Denmans.com, which will formally launch next month, selling jewelry, diamonds and watches online. Offline firms are reaching into the space as well. Zales, which runs a 1,330-store chain in the United States and has been online since 1997, announced an e-commerce deal with America Online Inc. (NYSE:AOL) in September.

The $1 million purse
"People are getting more and more comfortable buying higher-end items online," said Jim Kurtz, president of Mondera.com, another online jewelry site.

Mondera, which currently sells diamonds and jewelry and last week unveiled a $1 million diamond evening bag, will branch out into watches, leather goods and crystal later this month. Unlike some of the other sites, Mondera designs and produces its own line of jewelry.

The founders of Mondera, which is backed by Net Investment firm CMGI Inc. (NYSE:CMGI), come from a long line of diamond merchants. They say that they'll be able to use their connections to get the best prices for gems, and will then be able to pass those prices on to consumers.

"The family background has been invaluable for us," Kurtz said.

Analyst: Consumer fears
But while the connections may help the company get in good with wholesalers, it won't help assuage consumer fears, said Mike May, an analyst at Jupiter Communications in New York

The online jewel merchants biggest problem will be building a brand. Unlike categories such as books or music, jewelry is an information intensive purchase, he said.

And while sites can help educate consumers -- teaching them the "four Cs" of diamond buying, for instance, that doesn't guarantee safety to the consumer.

"The difference here is that the information itself does not legitimize the authenticity of the (purchase)," May said. "If a consumer is buying from Tiffany's, they know they're getting a quality diamond. If they're buying online, they (may not) feel as secure."

Third-party appraisals
Mondera is attempting to reassure consumers by selling each diamond with an appraisal from a third party, the Gemological Appraisal Association.

The company is also planning a $4 million ad blitz to launch this fall. Officials for another major luxury goods site, Ashford.com, could not comment because it's in a quiet period related to a public offering. But sources close to its advertising agency said it is preparing a major holiday-season marketing push, which will include print, local television, and radio and online ads.

Gilbert said his company will spend $10 million on marketing in the fourth quarter, with a new ad campaign coming next month.

The ads will help build trust in the brand, he said.

"If you see Miadora in newspaper ads and magazine ads, and they're on the radio, you start to get that comfort level," he said, comparing the marketing push to a movie campaign. "If you see it on TV, in bus shelters or in full-page ads in newspapers, that's what's called frequency. It's a large determinant of confidence more than just time. We really recognize that frequency is an important contributor to brand awareness. "

They'll need it, May said, pointing out that this is one category where there could be a "first-mover disadvantage."

"A lot of their spending will go toward growing their market. They're not just selling jewelry they're selling the idea of selling jewelry online," May said. "Somebody who follows them won't have to spend to sell the market."

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