Editor’s Note: Christine Magee is an editor for CrunchBase.
Venture capitalists love markets where consumers spend exorbitantly for services that are extortionately priced, and no market exemplifies that better than the wedding market.
In 2014, the average American wedding cost $31K, according to a report compiled by TheKnot — that’s the engagement ring, the wedding dress, and all event-related expenses combined. The global wedding market is a $300 billion industry, and the U.S. wedding market accounts for $55 billion of that total.
The millennial generation driving today’s wedding spending is more dependent on tech than ever. Last year, 61 percent of engaged couples used their phones to access wedding planning sites on the go. Wedding registry startup Zola even launched an Apple Watch app last month after passing a million swipes on its Tinder-style mobile app.
“This generation of couples is getting married at an older age than before — they’re professionals and they have busy lives, so they want tools and services that are easy to use on mobile and online,” says Zola founder Shan-Lyn Ma.
Ma started Zola in 2013 with a team of Gilt Groupe execs after they realized that the wedding industry wasn’t catering to the evolving needs of consumers. Since the majority of couples today are living together before marriage — 80 percent of Zola’s 70K users fall into this category — the old-fashioned wedding registry just doesn’t cut it anymore.
“Whereas before couples were setting up their first homes and really needing the basics, now they’re looking to upgrade to things they can’t afford themselves, or they want cash for honeymoon funds,” Ma says.
Zola raised $5.8 million from Thrive Capital to build an all-encompassing registry site — and they’re just one of the 44 startups in the wedding industry that raised venture funding in 2014.
This year, venture investments in wedding-related tech are at an all-time high, with $189 million in capital committed in the first four months of 2015. This is a significant pickup over the $128 million raised last year and the $85 million tracked in 2013.
“Over the last 10 years, over a third of all existing independent retailers in the jewelry industry have gone out of business. The reality is that this millennial customer is coming of age and has a driving need that’s different,” says Brian Watkins, Ritani’s CEO.
Using Ritani’s online platform, customers can virtually build engagement rings specific to style and price point. Instead of purchasing the ring immediately, users can have it shipped to a local retailer, free of charge, to examine in person.
“This is an industry where the product has a certain level of touch,” says Jed Kleckner of Cantor Ventures.
“Even though online has advantages, it will never replace certain elements of offline, like service, cleaning, and the trust and reputation factor that a local vendor provides,” Kleckner says.
Ritani has partnered with over 200 local jewelry retailers, which are happy to showcase Ritani products so they can tap into the online-focused customer base.
“After buying an engagement ring, 50 percent of the time that consumer buys their wedding band from the same store — so you have an immediate follow-up purchase,” says Watkins.
“And quite frankly, most guys are pretty lazy, so they’ll go back to the same store for each anniversary,” he says.
If a customer decides not to purchase the ring, Ritani sends the diamond back to its manufacturing facility and melts down the metal — a minimal cost compared to the profit margins on engagement rings averaging $8K. Ritani brought in $50 million in sales in 2014, and they’re up 100 percent through Q1 of this year.