Online jewelry sales in the US market reached $2.45 billion in 2006, up nearly 20% from 2005, according to new data from IDEX Online Research.

Online sales accounted for 3.9% of total jewelry industry sales of $63.0 billion in 2006.

In the early days of e-commerce, some Internet analysts thought that jewelry could never achieve critical sales mass on the Internet. Experienced online buyers now buy a greater range of merchandise than the books and CDs that dominated sales in previous years, and they also spend more per purchase.

Online jewelry sales have become widespread, as evidenced by the slowing growth rate usually associated with a maturing market. At the current growth rate, sales are expected to represent just over 8% of the industry total by 2010, up just over 100% from 2006.

Diamond sales — especially diamond engagement rings — have an interesting effect on jewelry sales, since they are such high-ticket items.

Diamonds account for about half of the average specialty jeweler's sales. Blue Nile, which is the largest online jeweler in the US, sells about 90% diamonds. The firm's 2006 sales totaled $252 million. It also sells more than double the amount of engagement rings as most specialty jewelers. The average price of a ring from the company is $5,700, compared to the $2,750 average for most specialty jewelers.

Online jewelry sales really popped in the fourth quarter of 2006, according to comScore Networks. The online sales growth rate of jewelry purchases outpaced all other retail categories during the 2006 holiday season compared with the year before.

Online jewelry merchants can prepare now for the 2007 holiday season by considering what promotions to run. Free shipping invariably rates as a favorite with customers.

ForeSee Results analyzed consumer attitudes toward free shipping promotions using the methodology of the University of Michigan's American Customer Satisfaction Index (ACSI). Web sites without free shipping earned an aggregate score of 84. Sites with restricted free shipping (with conditions) received a score of 85, deriving a limited benefit in the minds of consumers. Sites with unconditional free shipping earned a score of 89.

It may seem odd to think that customers would balk at shipping costs on a $3,000-plus ring, but based on the ACSI ratings, Blue Nile's free FedEx shipping is one of the things driving its success.