Blue Nile Essay

Question 1. What are some key factors in diamond retailing? How do Blue Nile, Zales, and Tiffany compare on those dimensions? All the companies involved in the diamond market want to have a big share of that market. And, the bigger the share, the company makes bigger revenue. It is very interesting that all three companies (even though they are in the same ‘business’) have different approaches in ‘taking market share’. An important fact is that the companies have a different clientele. The market population is different. The first 2 paragraphs of the case study state a common concern in any industry: do you reduce prices in order to compete with the competition? [research is needed to see and predict the implications of discounts] 2008 is a good year to analyze the situation from all aspects (and to see how our three companies handled the ‘meltdown’). â€Å"As customers tightened their belts and cut back on discretionary spending, high-cost purchases such as diamond jewelry were often the first to be postponed.† Responses are needed. Adjustments are needed. We can segregate the industry in two parts: wholesale and retail sales. Moreover, the price, selection and customization of services are other dimensions that differentiate the companies. Blue Nile – internet base Zales – mall based kiosks (teenagers); working-class mall shoppers; fancier locations (upscale market) Tiffany – high-end products Blue Nile has an advantage due to lower ‘location’ costs. These funds (that would be placed for renting space) can be allocated to additional inventory. This would in turn signify that the company would have a higher selection. Also, having lower markup percentages lowers the price of the diamonds. Moreover, when purchasing from Blue Nile (besides having a low-pressure selling approach), you are also not buying a name/brand (in comparison with buying from Tiffany). It must also be noted that Tiffany started its business in 1837; Zales in 1924; and, Blue Nile in 1999. This history (and all the aspects that the latter comes with) provides different advantages (competitive, brand, customers, types of customers†¦.) [A greater description of the manner in which the three companies are different and differentiate each other is provided in the answers to the following questions] Question 2. What do you think of the fact that Blue Nile carries over 30,000 stones priced at $2,500 or higher while almost 60 % of the products sold from the Tiffany Web site are priced at around $200? Which of the two product categories is better suited to the strengths of the online channel? It must be taken in consideration that Blue Nile is an internet based business. It has not choice but to provide its high priced items on the internet. In comparison, Tiffany also provides a shopping (in store) experience (something that Blue Nile does not have). In order to increase its market share, Tiffany provides lower priced items on the internet. It is true that the client does not have the in-shop experience, but he/she is buying a Tiffany item. [More information is needed, but it is my assumption that Tiffany is focusing a lot on the in-store experience] Which of the two product categories is better suited to the strengths of the online channel? It depends. Blue Nile is only on online. Hence, it has no choice but to increase all the aspects/strengths of online purchasing. The Tiffany’s online ‘department’ is only a small aspect of the company’s business. Even if a customer does not want to have (to purchase) the in-store Tiffany experience, he/she still has the possibility of having a Tiffany item. [These type of customers are not the ‘regular’ ones. Personally, if I do not have the money – purchase as well as travel – and I would like to buy my lady ‘something special’, I would do an internet Tiffany purchase. My lady would be happy (impressed and grateful)†¦Ã¢â‚¬ ¦..because it is Tiffany.] Question 3. Given that Tiffany stores have thrived with their focus on selling high-end jewelry, what do you think of the failure of Zales with its upscale strategy in 2006? New market, new challenges. One important aspect (from the perspective of the customer) is the brand association. Zales already had a name made for itself: working-class clientele and teenagers (â€Å"lower-end reputation†). Once the brand is made, it is very hard to change the perception of it. A lot of energy, time and money need to be allocated in order to change the nature of the brand. Tiffany already had a brand that was associated with high-end jewelry. Tiffany did not need to change its brand (or the perception of it). In order to ‘fix’ the problem, the transition to promotional retailer (discounting inventory), Zales lost a considerable amount. Even though in the long run the fix was beneficial, it was an answer to a problem that the company should not have. Another problem that Zales had was that deliveries were not on time. Question 4. What do you think of Tiffany’s decision to open smaller retail outlets, focusing on high-end products, to reach smaller affluent area in the United States? I believe that this move was beneficial for Tiffany. Having a strong brand, a world known brand, people know what to expect from the company. If a potential client wanted to have the Tiffany experience, the former was able to have it. It is true that the selection was not the same as in the company’s flag store. However, having also the catalog, the smaller retail outlets could very easily have access to the entire inventory. What the clients wants, this is what he/she will have. Also, as stated before, the Tiffany experience is essential to Tiffany’s business. Therefore, having more stores (even though the inventory is not ‘full’) (potential) clients may be drawn to come in and make a purchase. Question 5. Which of the three companies do you think was best structured to deal with the downturn in 2009? Tiffany. The market sector was appropriate for it (high-end). As the case study states: â€Å"As customers tightened their belts and cut back on discretionary spending, high-cost purchases such as diamond jewelry were often the first to be postponed.† However, this is applicable to lower-income customers. The lower the income, the higher the chance that a client would not spend on jewelry. Even though the 2009 downturn affected everyone, the priorities of lower income customers shifted drastically. The higher income customers, (I am making the assumption), were not affected as much. Therefore, instead of buying a 10,000$ ring/bracelet/etc, they could afford a 5,000$ purchase. Moreover, Tiffany had also its own manufacturing facilities. If the rough diamonds (after process) did not meet the desired standards, they were sold to third parties, ensuring additional revenue for the company. Question 6. What advice would you give to each of the three companies regarding their strategy and structure? All three companies were affected by the economic crisis. This is normal. They have to wait for the economic come-back. As stated in the answer of the first question, the three companies have different clientele, different products and different customer experience. Blue Nile I was very impressed by how Blue Nile handled the 1.5 million purchase. Having an internet base company, it reduces certain costs. The 30 days money back guarantee is essential in order to gain (and attract) customers. The lower marked-ups also contribute to lower prices for the clients (thus, attracting even more). Blue Nile brand is already established. It should not have any strategy that could influence negatively the name that it made for itself. Zales Due to its type of customers (lower and middle class), and to the economic problems, Zales has the most to ‘loose’. Moreover, its transit strategy was not appropriate (the reasons were explained earlier). There was a commercial that stated â€Å"Don’t change horses in mid-stream.† Even though adaptability to the environment is crucial in today’s economic system, not knowing how to adapt, and change just for the sake of change, can be (and in Zales’ case was) very destructive. The Zales’ brand was already established. Changing the products without hard work to change the brand, the company will loose ‘face’; clients are disoriented. Tiffany The company is well established. The band is strong. People associate with the brand. They take pride saying that they purchase from Tiffany’s or have goods from Tiffany’s (this is one of the most important aspects). The (majority of the) clientele is more well-off (in comparison with that of the other companies). When buying from Tiffany, a customer does not only buy a good; he/she also buys the experience and the brand. Tiffany should also include higher-end items on their website. However, extensive research on this must be done. The company does not want to ‘dilute’ its brand by providing internet orders. If the brand is not touched by this strategy, then Tiffany should go through with it (by incremental increase of item provided on the internet). All three companies should have a catalog, an internet site (that can receive orders), provide from time to time discounts. Yet, for any strategy (whatever it may be), the specific company should do extensive research in order to calculate the different impacts that a (potential) strategy might have on the company.