Answer to Question 1
After years of slow online sales, jewelry sales have grown rapidly in recent years. Retailers such as Blue Nile and Ice.com operate highly successful online jewelry stores. Even general retailers such as Costco offer 50,000 diamond rings online. Helping these stores overcome resistance is the general availability of independent appraisal certificates for diamonds and other high-priced jewelry items. Another important factor is the stores well-advertised no questions asked return policies.
Answer to Question 2
It can be profitable to offer a digital product to a large number of customers for free, and then charge a small number of customers for an enhanced, specialized, or otherwise differentiated version of the product. If you can charge the small number of customers enough to cover the cost of developing the digital product and yield a profit, you can give away many copies of the product, especially if those free copies entice more paying customers for the enhanced product. For example, Yahoo offers free e-mail accounts to site visitors. This draws visitors to the Yahoo site and allows the company to sell some advertising on the pages that display the e-mail service.
But some e-mail users will want an enhanced version of the service. Perhaps they want pages with no advertising, the ability to send large attachments with their e-mails, or more storage space for their e-mails. Yahoo charges for a premium version of its service that offers these features. It costs the company very little to offer this service, but it generates considerable revenue.
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