From Backpacker to Internet Entrepreneur

By industry standards, Thaigem's prices are cheap. For a top-quality 2-carat ruby, Kogen charges $1,000 to $2,400 — a stone that he insists would bring at least $7,000 in Manhattan's diamond district. (His own markup on most gems ranges from 15 percent to 150 percent; his net profits are typically 20 percent to 25 percent.)

No jewel is guaranteed, though customers can return them within 30 days, no questions asked. About 3 percent of buyers send back stones, says Kogen, but 80 percent of those order replacements. He sells some 200 items a day — stones, beads, meteorites and fossils — on eBay, versus 2,000 or so on Thaigem's Web site (while the average item sells for around $9, the average order is $300).

Gems From All Over

Kogen gets his rocks from all over the world. He buys sapphires, for example, from Tongsak Jintakanrerk, a fellow Chanthaburian, who recently hosted a Guinean salesman who showed up with 5 pounds of African sapphires in a white cotton sack.

Kogen doesn't quibble with the provenance of a gem — a seemingly risky approach in this era of "blood" diamonds and emeralds that funded murderous rebels in Liberia and Colombia, as well as the deep violet tanzanites that helped subsidize al Qaeda.

"Every single person in Hollywood wants to own a ruby from Burma or a sapphire from Kashmir," he says. "At the end of the day you have to go with what your customers want."

Thaigem isn't the only outfit to sell jewels over the Net. But Kogen has some distinct advantages over his competitors. For one, he already has a worldwide customer base of 68,000 and enjoys a solid reputation online (a 99-to-1 ratio of positive to negative comments on eBay under the seller name "thaigem.com").

For another, he's got low-cost labor that's tough to beat. In Thailand secretaries earn $125 a month; skilled gem cutters, $300; and the two dozen programmers who maintain online operations, about $750 a month plus board.

"The lesson here is you must know the territory," says Linda Lim, a professor of international business at the University of Michigan. "You'd be surprised how many highfalutin dot-commers ignore this."

Elephant Marketing

Marketing? Hardly Harry Winston. Created in-house, a typical ad in a gem trade magazine or on a Thai billboard stars an elephant with the Thaigem.com logo. Cost of hiring the elephant: $7.50 — plus all the bananas it could eat.

There's plenty of room to grow, considering that online gem sales are less than 2 percent of the world's $38 billion gem trade.

But first Kogen needs to do some housecleaning. By his own admission his inventory turns too slowly — some gems went unsold for a year as he expanded his offerings last year. His goal is to turn over every six months.

That may mean tinkering with the business model. Which is why he's hoping to supply big customers like Wal-Mart, QVC and J.C. Penney. A long way, in every sense, from Chanthaburi.

For more, go to Forbes.com..

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