This document provides information about three major diamond retailers: Blue Nile, Zales, and Tiffany. It discusses their business models, product offerings, target customers, and financial performance from 2007-2011. Blue Nile is an online-only retailer that offers high-quality diamonds and jewelry at lower markups. It targets men with a no-pressure sales approach. Zales operates stores targeting various customer segments but has struggled with changing strategies. Tiffany focuses on high-end products through global stores and sourcing, maintaining strong profit margins.

1. Case Study:
Blue Nile &
Diamond
Retailing
National Institute of Industrial Engineering (NITIE),
Mumbai
Faculty: Prof. Ashok Pundir
Group No.: 4
Group Members:
Name Roll No.
Narendra Kumar Chaudhary 2101130
Nikita Patel 2101131
Nirgude Shubham Kailas 2101132
Om Vinod Patil 2101133
Pankaj Kumar Sahu 2101134

2. Blue Nile
• Seattle jewellers Doug Williams was running Internet Diamond Company.
• Mark Vadon joined and Company name changed from Internet Diamonds to Blue Nile in 1999
• Offer high quality diamonds and fine jewellery at outstanding prices
• Builds customer awareness on Four C’s – cut, colour, clarity and carat
• While retail jewellers marked up diamonds by 50%, blue nile kept tower markup of around 20%
• To counter quality issues, company offered 30-day money back guarantee on items in original
• Condition
• By February 2014, company offered more than 140000 diamonds of these 50000 were one carat
• Or larger priced up to $2.9 million and 76000 were priced around $2500
• Started offering non-engagement products like wedding bands, necklaces, pendants but
• Maintains engagement category as its core business
• In November 2016, Bain Capital & Bow Street L.L.C acquires Blue Nile for $500 mn

3. Zales
• Established by Morris &William Zale and Ben Lipshy in 1924
• Marketing strategy to offer credit plan of “a penny down and a dollar a week
• By 2005, operates in nearly 2400 stores under teenage, working class and upscale
• Categories
• Tried restricting firm to upscale market alone but ended up losing customers in
• Other categories without much growth in upscale
• Aransitions back to all categories in 2006 with loss of $50 milion in upscale
• Discontinued jewellery and $120 million expenditure on new inventory
• Rise in fuel prices, drop in home prices led to drop in customer spending which led
• To dosing of 105 stores and reduction in staff by 20% to cut costs and improve
• Overall effectivenes

4. Tiffany
• Opened in 1837 as stationery and fancy goods emporium in New York
• Received tremendous success with its silver designs
• In 1886 introduced now famous, “tiffany setting” for solitaire engagement rings
• Offers high end products including diamond rings, wedding bands and gemstone jewellery
• By 2012 expanded to 275 stores worldwide (90% stores operate in Us)
• High end products, including jewellery, were sold primarily through retail stores
• Direct channel focused on non-gemstone sterling silver jewellery with average price tag of $200
• Were sold online
• In 2003, it established diamond-processing operations in several countries
• By 2007, it sourced almost 60% of its jewellery from internal manufacturing facilities

5. Revenue Growth History of Blue Nile, Zales and Tiffany from 2007 to 2011

6. Q1. What are some key success factors in diamond retailing? How do Blue Nile, Zales,
and Tiffany compare on those dimensions?
Factors Blue Nile Zales Tiffany
Product
offering
Engagement Rings,
wedding bands, necklaces,
bracelets, gifts jewelry
accessories
Earlier they had gold now
only Diamond fashion
jewelry & diamond rings
High end products like diamond rings,
wedding bands, gemstone jewellery &
bands, non-gemstone gold, platinum
& sterling silver jewellery, crystal &
sterling silver serving trays
Target
Customers
Men who prefer low
pressure sales tactics
Teenagers, Working Class
Mall Shoppers & upscale
Gordons
High Income Customers
Product type
& cost
High end products with
lower markups (-20%)
Moderately priced
promotion driven products
High end products with higher
markups
Mode of
selling
Only online
Initially offline stores, but
later omnichannel
Offline stores + online
Inventory Low High High
Cost,
Marketing &
operations
strategy
Exclusive supplier
relationships, Low
warehouse & no facility &
operating expense of brick
& mortar store
High inventory costs,
suffered due to change in
product offerings &
marketing strategy in 2006-
07 & hurt its bottom line
High profit margins due to global
presence, established 3d party
sourcing, in-house manufacturing
providing 60% of its centralized
inventory management with control
on its supply chain & with low

7. Q2. What do you think of the fact that Blue Nile carries about 30,000 stones priced at
$2,500 or higher while almost 60 percent of the products sold from the Tiffany Web
site are priced around $200? Which of the two product categories is better suited to
the online channel?
• Blue Nile – The Reasons are:
• • Savings in inventory holding cost due to lower safety stocks.
• •The broad product variety and product availability that the firm can offer
customers.
• •Stones priced at $2,500 or higher are unique, high-value items with relatively
low demand and high demand variability. The high demand variability
necessitates carrying larger safety stock in order to meet required customer
service levels.
• •Cost of holding high price stones is proportionally higher.
• •Aggregating inventory reduces the amount of safety stock required since the
demand variability is less than in a disaggregated scenario.
• • By aggregating the inventory in the online channel, Blue Nile also broadens the
product availability and variety available to customers which is a smart move

8. Q.3 What do you think of Tiffany's decision to not sell engagement rings online? what do you
think of Blue Nile's growth into the non-engagement category?

9. Q.3 What do you think of Tiffany's decision to not sell engagement rings online? what do you
think of Blue Nile's growth into the non-engagement category?

10. Q5 which of the three companies do you think is best structured to deal with weak
economic times?
• Blue Nile is better equipped to deal with economic crisis because
• 1. Lower inventory and warehousing expense. Other jewellery retailer have to maintain stores in
high-priced areas which increase expenses and make aggregration of inventory impossible.
• Blue Nile has a low-cost structure, that is well suited if demand shrink.
• Zale's core customer are middle-class people who are first to get affected by the macro-economic
phenomenon like rise in fuel price, uncertainty in market.
• Tiffany has omni distribution channel which also increases its expense along with the advantages
they possess.
Reference: Financial data of 2012 (in millions of dollars)
Blue Nile Zales Tiffany
Total asset 145.9 1187.3 4630.9

11. Q6. What advice would you give to each of the three companies regarding its strategy and
structure? How can they best use omni-channel retail?
• Blue Nile
• Core competence is available of huge variety at low prices. The only problem is lack of feel and
touch of the item worth thousands of dollars. To counter this along with 30-day money-back
guarantee, they should also increase brick and motor stores and should hold products that do not
have uncertain demand.
• Zales
• Lower-value diamonds could be stocked and sold from retail stores. For higher-end diamonds
rings with imitation stones could be used to help customers select a style followed by having the
real diamond installed later at a central location and shipped to the store for customer pick-up.
• Tiffany
• No other brand enjoys margin anywhere near to that enjoyed by Tiffany. So major risk factor is
dilution in its brand image and it should protect its brand image. It should manage the logistics of
the daimond that does not meet the quality standards of Tiffany so that it can reduce the losses.