Blue Nile Co. Case Study

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Executive Summary

Blue Nile, Inc. is the largest on-line diamond retailer. They specialize in diamond engagement rings. Blue Nile’s primary focus is perfecting the online experience for shoppers by providing resources and extraordinary jewellery at competitive prices.

Blue Nile’s vision is to become the “the Tiffany, for the next generation”. Their mission is to provide education to its customer base, while at the same time make the entire buying experience easy and hassle-free. Their value proposition is their ability to offer high quality diamonds at a lower cost, since they have limited overhead costs due to no store front locations and fewer distribution interceptions.

The key issues affecting Blue Nile Inc. include:

-   the lack of face to face interaction with its customer base.
-   the inability to build brand recognition.
-   the lack of human resources to provide opportunity for staff development to engage.
-   the lack of innovation to sustain as the top online jewelry retailer.
-   the lack of strategic direction with regards to investing and marketing.

These issues affect the overall customer satisfaction with their current approach with their customer base of no face to face interaction. Because of this, they have the inability to build long lasting business relationships with their customers due to lack of trust. Theses issues are also key contributing factors that affect the overall lack of corporate culture and employee morale.

These issues are affecting the company’s future potential profits and market growth, thus forcing them to make drastic changes to improve their market and brand, and to be able to compete on the same level with their competitors.

Options reviewed for Blue Nile Inc. include:

Five options were considered for Blue Nile’s strategic direction. These options were analyzed against key success factors and the highest-ranked option was the creation of a store-front-like environment, which would allow Blue Nile to compete with existing and establish industry players, while minimizing store costs. The strategic points of presence would have a limited inventory for sale, but would also be used to demonstrate the website, improve customer service, provide customers with comfort in having a local point-of-presence, and offer a local mailing location in the event of mail reliability concerns. A high level implementation plan has been created.

In the event that this strategy is not feasible, the contingency to be implemented is the diversification of product offerings which would maintain existing profitability, while increasing overall market share in the jewellery industry.

Company Profile

Blue Nile Inc. is the largest on-line diamond retailer. They specialize in diamond engagement rings which make up 70% of its sales. The remaining 30% is in non-engagement jewellery. Their entire operation is done primarily online and over-the-phone. Blue Nile’s primary focus is perfecting the online experience for shoppers by providing resources and extraordinary jewellery at competitive prices.

Blue Nile uses an ordering system which initiates orders directly from its supplier. This removes the middle man and helps them keep inventory costs minimal. This has allowed them to build strong and direct relationships with over forty suppliers. Blue Nile has a total of three websites:
for Canadian customers, US customers and for overseas customers.

In order to keep up with the local/foreign customer demand in over forty countries, they offer the option to purchase in twenty-two different currencies, plus the U.S. dollar.

Blue Nile’s vision is to become the “the Tiffany, for the next generation” and to be seen as the “smart” way to buy high quality diamonds. Their mission is to provide education to its customer base, to help in their decision making process, with feeling informed and confident for any special occasion they are celebrating, while at the same time making the entire buying experience easy and hassle-free.

Their value proposition is their ability to offer high quality diamonds and fine jewellery at a lower cost, since they have limited overhead costs due to no store front locations and fewer distribution interceptions. They are able to keep inventory costs down, and purchase directly from supplier at the time of purchase of their higher-end pieces such as engagement rings.

They provide unique on-line tools and resources to provide guidance on choosing the right diamond, and offer “build your own” functionality for customers to personally create their perfect piece. They also have a strong customer service approach with their own team of diamond and jewellery consultants.

Their current focus is to invest and innovate their online presence (website and mobile application) and allowing customers to shop and feel confident with their purchase.

Since they currently have less than 1% of the overall jewellery market, a key factor to their success is increasing market share.  

Industry Analysis

The primary competitors for Blue Nile in the on-line marketplace include lower-end vendors such as Amazon.com, Overstock.com and Bidz.com. High-end competitors include industry leaders such as Tiffany & Co. and DeBeers. These primary competitors have specific competitive advantages and all try to use their advantages to obtain market share.

An industry analysis was completed (Exhibit 1). The threat from industry competitors is medium-to-high. There are many rival competitors in the jewellery industry and Blue Nile does not yet have a strong reputation or brand awareness. Blue Nile has competitive advantages in product selection, quality, price, customization, delivery speed, customer service / support and their websites offering, but these advantages are not inimitable.

The threat of potential new entrants into this on-line industry is medium. Blue Nile took advantage of technology to minimize their initial capital outlay while allowing them to reach customers. This allowed for better supply-chain management and lower operational costs. One advantage that Blue Nile has is the ability to keep inventory costs extremely low, because product is only purchased when the customer orders it. This gives them a significant cash flow. Their competitors have already begun to incorporate websites along with their physical stores, which gives them the ability to compete directly with Blue Nile.