Blue Nile

Q) How strong are the competitive forces confronting Blue Nile and other online retail jewelers? Which one of the five competitive forces is the strongest? Do a five-forces analysis to support your answer.

- Rivalry: High

Reasons: Competition is viewed as fierce in the diamond and fine jewelry retail market, with sales divided among locally owned jewelry stores, retail jewelry store chains, online retailers that sell fine jewelry, television shopping retailers and all other retailers such as general merchandise, clothing stores and catalog retailers.

The primary competitors for Blue Nile involve the online market place and the major companies like diomands.com, whiteflash.com and ice.com. These primary competitors all have specific goals in offering the best value for customers. Blue Nile has also created some advantage by exceeding in the areas of product selection, quality, price, customer service, website features and functionality, and speed of delivery.

Rivalry is considered the strongest of all the five forces in this industry.

Ease of Entry: Low

Reasons: Online retailers such as Blue Nile can enjoy some advantages in entering because of the minimal amount of resources they need to carry, but there is a considerable amount of knowledge of diamond quality and the processes such as setting and sizing that a new entrant would need to fully know in order to be successful, there is also the fierce competition and the large number of competitors is enough to eliminate new entrants if they did not possess the proper skills to survive in this industry.

Substitutes: Low

Reasons: When it comes to jewelry and diamonds, it is hard to find substitute products that will offer the customer the same quality and authenticity, there are substitutes like synthetic diamonds, manmade jewels and other jewelry alternatives but in our society they are not considered viable, especially engagement and wedding rings. They tend to have heavy social cost if they are not real diamonds.

Since Blue Nile has most of its operation in the engagement and wedding rings sector, the threat of diamond substitutes is very low.

Buyers: Moderate

Reasons: There are some buyer bargaining power since there are many companies competing and viable sources to purchase jewelry from, it is easy to go to any big chain department store or a locally owned jewelry shop, and it is also easier to search for other jewelry websites on the web. But overall, the price of a diamond ring cannot be negotiated with and companies compete over a small variance in price.

It is price and quality that customers look for when buying jewelry and they don't care about the brand or the designer name, therefore if they can pay a little less and receive the same quality product, then they would rather choose that product.

Suppliers: Moderate

Reasons: In the online jewelry industry, companies normally have exclusive partnerships with suppliers which gives them the ability to showcase their products only on their website. This allows online retailers like Blue Nile to sell to their customers without having to hold actual merchandise, instead they would order it directly from the supplier once the customer has made the purchase. The Supplier doesn't have much bargaining power because there are many suppliers in the diamond industry considering the large number of companies operating in this type of market.

Q) What key factors will determine a company's success in the online jewelry business in the next