Blue Nile Case Study

Case Study: Blue Nile

Blue Nile is an online diamond retailer that offers superb quality diamonds to customers at a lower cost than its competitors. This causes retailers to feel the pressure to lower prices in order to compete with the company. With E-Commerce increasing in popularity, customers are turning to the convenience of designing their dream engagement ring from the comfort of their couch without the hassle of sales people.

The company offers a selection that its competitors can’t beat, and allows customers to get exactly what they want within their price range. The company is able to educate its customers, offer assistance over the phone for customers with questions, and extends a 30-day money back guarantee. This lowers the risk and apprehension of customers wanting to buy a diamond online. Blue Nile is seeing remarkable profits from their business practices despite a mere 20-30% mark-up in price, compared to the typical 50% of their competition. They attribute this to holding a lower inventory than other jewelry stores, and only having one warehouse that services the entire United States. This company may have an unconventional business model, but it has proven to be successful despite a depressed economy.

1. What are some key success factors in diamond retailing? How do Blue Nile, Zales, and Tiffany compare on those dimensions?

Diamond retailing relies on staying consistent with their brand image. When you develop a brand image for your company, people will expect a certain quality to come with your products. For Blue Nile, they offered their diamond jewelry at lower prices than the competition. They only used a single warehouse in the U.S. to decrease inventory costs. Zales offered a great credit plan to allow people of lower incomes to purchase their products. Tiffany’s offered only the highest quality products and got rid of anything that didn't meet their standards. Tiffany’s also never cut their own diamonds until 2003, and they sold...