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DTC Brilliant Earth doubling brick-and-mortar

Richard Collings
Aug 23, 2022
Illustration of a glitching necklace made out of brains
Illustration: Rebecca Zisser/Axios

Brilliant Earth, a digitally native jewelry retailer, is doubling the number of its showrooms this year to 30 as it becomes increasingly challenging for brands to be online only, its CEO and co-founder Beth Gerstein tells Axios.

Why it matters: DTC brands are increasingly relying on physical locations to reach shoppers flocking back to stores, particularly as it becomes more difficult to advertise online after Apple changed its privacy terms.

  • The retailer is still "early in its journey," and could ultimately operate around 100 locations efficiently, she says.

Details: Brilliant Earth aims to have one showroom in each metro region in the U.S., Gerstein says, noting the company currently has 18 stores.

  • "What we want to do is provide broad coverage to the customers that we're already serving," she says.
  • In addition to having their data, "because we know where our customers are," she adds, "we're able to be thoughtful about where to place these showrooms, and have been expanding and seeing really strong results."

Yes, and: Because it's an appointment-driven model, Brilliant Earth is able to open locations on the upper floor of a building versus a street-facing ground floor.

  • That allows it to have locations in prime retail districts without having to pay prime real estate rents.
  • Its asset-light store model also differs from competitors by curating products to reflect the specific tastes of its visiting clients, resulting in tighter inventory.
  • And the customer experience is service oriented because sales are not based on commissions, which results in higher conversion rates, Gerstein says.
  • Return on investment is also boosted because its sales team or jewelry specialists work several channels, including physical and online. "It's not about people waiting around," she says.

Of note: "It's very much a fragmented industry. About 60% of our industry is still representative of these smaller mom-and-pop independents," Gerstein points out.

  • That provides Brilliant Earth with the opportunity to continue to gain market share with its omnichannel model, she says.

The big picture: "Our business model is really driven by omnichannel, and it allows us to tailor the experience to how customers want to shop (and) when they want to shop," Gerstein explains.

  • "What we find every time we open a new showroom is there's a huge lift in the market. And so it really unlocks a lot of pent-up demand," she says.
  • "Even knowing there's a showroom nearby will help to drive conversion," Gerstein says, referencing those who browse online.

By the numbers: Brilliant Earth's efforts appear to be paying off, with net sales growing 17.8% in Q2 to $108.8 million and gross margin increasing to 53.1% from 48.5%.

  • Adjusted EBITDA fell by 33.6%, however, to $9.6 million, though it is profitable.
  • Brilliant Earth's enterprise value is $663 million, based on long-term debt of $61 million, cash and cash equivalents of nearly $156 million, and a market cap of almost $758 million.
  • That EV is approximately 12.3x TTM EBITDA, which PitchBook estimates to be about $54 million for the trailing 12 months as of March.

The bottom line: "We were founded 17 years ago really to be able to offer a responsibly sourced, transparent, sustainable offering," Gerstein says.

  • "And really the underpinning of our company is centered around sustainability, transparency, inclusivity, giving back," she says, pointing to blockchain-enabled diamonds and fair-mined gold.
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