Blue Nile, Inc.

Key Ratios 2013

1. How does Blue Nile create trust in buying an expensive item like an engagement ring?

2. How does Blue Nile educate potential customers?
3. How does Blue Nile get users to buy expensive diamonds on a mobile device?
4. How does Blue Nile make the diamond buying process hassle free?
5. How can Blue Nile grow internationally if the Internet is not always available?
6. Can Blue Nile expand its product offerings beyond diamonds and jewelry?
7. Is Blue Nile “Stuck in the Middle?”

Blue Nile, Inc. is an online retailer of diamond engagement rings. The company was created after an unsatisfying shopping experience for engagement ring. With the use of technology, streamlined inventory and the educational features, Blue Nile has created a hassle-free shopping experience for customers. In the niche market of high-quality diamond engagement ring online retail, Blue Nile Inc. is gaining substantial market share. The problem is that this niche is in the middle of the market.

Blue Nile creates trust in buying engagement ring by offering a 30-day return policy, insurance, professional appraisals and grading reports. The traditional way of selling diamonds is through a jewelry store, while Blue Nile Inc. does not have any physical stores. In traditional stores, the salesmen handle the diamonds and let customers try on the products. If customers do not want the ring, they can hand it back. This can be done simply and easily in the stores, but not on mobile website. Blue Nile recreates the similar experience with the free shipping and return policy.

Two-way shipping is provided with insurance, for customers to feel safe in buying from online retailers. Diamond rings are very expensive products, so customers would worry about customs and loss in transportation. By offering the insurance, this concern is eliminated. Customers can have confidence in the shipping of the products to and from Blue Nile.  Customers get the same high quality diamonds from Blue Nile as they can get in stores, but with all the conveniences of buying online. Customers do not have to leave the house to shop, and the products are delivered right to their doors.

Technology makes their websites educational for potential customers. The websites have large images of the entire inventory. Explanation is available to help customers understand the descriptions of each item. This is not something that the in-store salesclerks can offer because they do not know everything about all inventory. The Blue Nile’s websites are like database of catalogues of diamond rings. Customers can easily browse, sort and learn from the websites. This makes the websites and the purchasing experience truly educational. The Build-your-own feature allows customer to customize the ring design to fit their needs. This is something they cannot do in stores. Buying something is very different from making the product. By giving the customers the power and tools to choose and customize, Blue Nile allows customers to participate in the making process of the diamond rings. Hence, customers will have more confidence and connection with the products

In order to get customers to buy from the mobile website, Blue Nile has to offer confidence in shopping and delivery. With the free returns policy and insurance, the company provides customers some confidence. Some traditional stores do not accept returns of the products, especially the customized products.  For products over $1000, there are grading reports, certifications and professional appraisals. Some stores offer one or some of these certifications, while Blue Nile went above and beyond to provide extra confidence to customers. However, due to the international supply chain and operation, Blue Nile faces some international risks. Some countries do not have reliable Internet connection, so Blue Nile will have a hard time reaching these customers. Blue Nile’s sales are also affected by world economy and foreign exchange rates, because they allow customers to buy products with 22 foreign currencies.

Blue Nile is an online only retailer, so they rely on a good Internet connection. Customers will not get to see the websites without access to Internet. Some public Internet locations may be available, but not secured enough for buying diamonds. Moreover. in many countries corruption still exists. Blue Nile cannot control or completely mitigate the impact of thefts and corruption. Blue Nile has insurance and 30-day return policy, but the products could be held at customs for longer than that. Customers may be stuck with the customs issue and will not be able to use the return policy. It is very difficult to overcome issues of international trading and lack of Internet connections. There is no current information on any solution to these problems. These are issues, which Blue Nile have to overcome to expand internationally.

Blue Nile should look into the possibility of offering beyond diamonds and jewelry.

They should look in to the educational parts of the business. Since they are big on educating their customers on diamonds, why not include a certification course for anyone to become a professional in diamonds. Blue Nile can include more customization options and complement products to make the products wholesome. Set of gifts, gift-wrap and packaging can be offered to give that high-end look and quality in delivery. Blue Nile can also capture other occasions for buying jewelry besides engagement. In order to survive, a business must grow and sell new products to attract new customers.

However, Blue Nile is stuck in the middle of the diamond ring market. The high-end retailers such as Tiffany’s and DeBeers are a market above Blue Nile’s niche. Amazon and Overstock are two online retail giants, who dominate the jewelry but also household items, books and digital products. Blue Nile is stuck in this niche of lower-priced high-quality jewelry.  Their products are not quite cheap enough to compete with Amazon, and not quite high-end enough to compete with Tiffany’s. Blue Nile is stuck because the competition from both sides is giving pressure. Both the low-end and high-end retailers want to take the middle market, where they can access easily with existing infrastructure and resources. Blue Nile is being squeezed by competition from both directions, so they have to find a way out sooner or later. Otherwise, competitors will absorb their middle market position.

In conclusion, Blue Nile Inc. has enjoyed success in their niche market, as an online retailer of diamond ring. Their customers service, education and shipping policy have given customers confidence in shopping. Blue Nile is successful in disrupting the traditional jewelry industry by offering a new method of shopping. However, they face competition in the online retail industry because there are existing major market share holders. Meanwhile, the high-end diamonds retailers are advancing to the middle market. Hence, Blue Nile is stuck in the middle of the online retailers and the high-end retailers.