CASE

STUDY
Blue Nile and Diamond Retail:
Distribution network and strategy
based comparison

PREPARED BY DHEERAJ KUSHWAHA

COURSE: SUPPLY CHAIN PLANNING & CONTROL
PROGRAM: BBA IN TRANSPORTATION MANAGEMENT
ROLL NO.: 2220007
GATI SHAKTI VISHWAVIDYALAYA 1
 THE DIAMOND
RETAILING
INDUSTRY
THE DIAMOND RETAILING INDUSTRY FACED SIGNIFICANT CHALLENGES IN 2008, AFFECTING BOTH
WHOLESALERS AND RETAILERS. HERE ARE THE KEY POINTS HIGHLIGHTED IN THE CASE:

1.Oversupply Issues:
The diamond industry experienced oversupply, prompting the World Federation of
Diamond Bourses to appeal to producers to reduce supply. De Beers, the largest
producer, did not commit to curtail production despite market conditions.

2.De Beers' Control:

Historically, De Beers had significant control over diamond supply. However, its
refusal to reduce production and the opening of the Voorspoed mine in South Africa
exacerbated the oversupply problem.

3.Bankruptcies and Store Closures:

Traditional jewelry retailers faced difficulties, with major players like Friedman's and
Whitehall filing for Chapter 11 bankruptcy protection. Zales announced plans to close
more than 100 stores in response to the challenging market conditions.

4.Impact on Retailers:
High-cost purchases, such as diamond jewelry, were heavily impacted as consumers
cut back on discretionary spending during the economic downturn. This led to
declining sales and share prices for retailers like Blue Nile, Tiffany, and Zales.

5.Intense Competition:
As the number of customers decreased and competition intensified, it became
challenging for jewelry retailers to succeed. The economic environment made it
difficult to determine the factors that could contribute to their success.

CASE STUDY 2
 BLUE NILE
Blue Nile is an online retailer of fine jewelry and
certified diamonds. Founded in 1999, Blue Nile is
headquartered in Seattle, Washington. The company offers a
wide range of jewelry, including rings, wedding bands,
earrings, necklaces, pendants, bracelets, gifts, and
accessories.

BLUE NILE:

Blue Nile emerged as a disruptor in the

diamond retailing industry, offering high-
quality diamonds at competitive prices
through an online platform.
The company differentiated itself by providing
educational resources and a low-pressure
buying experience, appealing to customers
who preferred value and convenience over
traditional retail experiences.
Blue Nile's strategy focused on maintaining
lower markups compared to traditional brick-
and-mortar jewelers, leveraging its online
model and streamlined operations to offer
competitive pricing.
International expansion and diversification
into non-engagement jewelry categories
contributed to the company's growth and
revenue diversification.

CASE STUDY 3
 ZALES
Zales Corporation, also known as Zales, is an American
jewelry retailer and one of the largest fine jewelers in
North America. The company was founded in 1924 in Wichita
Falls, Texas by Russian-Jewish brothers Morris and William
Zale, along with Ben Lipshy. Zales sells fine jewelry,
watches, diamonds, small appliances, cameras, and cookware

ZALES:
Zales, a long-standing player in the diamond
retailing industry, faced challenges due to
changing market dynamics and consumer
preferences.
Attempts to reposition the brand towards a
more upscale and fashion-conscious image
encountered difficulties, leading to losses and
market share erosion.
The company underwent strategic
transformations, including store closures and
inventory reductions, to improve profitability
and competitiveness in a challenging retail
environment.

CASE STUDY 4
 TIFFANY’S
Tiffany and Company, also known as Tiffany's, is an
American luxury jewelry and specialty retailer. It is known
for its high-quality and stylish jewelry, including
engagement rings, necklaces, bracelets, and watches.

TIFFANY’S:
Tiffany's strong brand image and association
with luxury positioned it as a leader in the
diamond and jewelry market.
The company maintained a focus on high-end
products and exceptional customer
experiences through its retail outlets and
online channels.
Tiffany's vertical integration, including
manufacturing facilities and diamond
processing operations, provided control over
product quality and sourcing.
The brand's emphasis on quality, luxury, and
exclusivity contributed to its higher margins
compared to competitors.

CASE STUDY 5
STUDY
QUESTIONS
1. WHAT ARE SOME KEY SUCCESS FACTORS IN DIAMOND
RETAILING? HOW DO BLUE NILE, ZALES, AND TIFFANY
COMPARE ON THOSE DIMENSIONS?

KEY SUCCESS FACTORS IN DIAMOND RETAILING INCLUDE:

1. Brand Reputation and Image:

A strong brand reputation and image play a crucial role in attracting customers and building trust
within the industry.
Tiffany has established itself as a premier luxury brand with a long history and association with
quality and exclusivity.
2. Product Quality and Selection:
Offering high-quality diamonds and a diverse selection of jewelry products is essential for meeting
customer preferences and needs.
Blue Nile and Tiffany both focus on offering high-quality diamonds and jewelry products, while
Zales has undergone transformations to enhance its product offerings.
3. Customer Experience and Service:
Providing excellent customer service and a positive buying experience can differentiate retailers
and drive customer loyalty.
Blue Nile's online platform emphasizes educational resources and low-pressure sales tactics, while
Tiffany offers personalized service and a luxury shopping experience.
4. Price Competitiveness:
Maintaining competitive pricing while ensuring product quality is critical in attracting price-
sensitive customers.
Blue Nile differentiates itself by offering competitive prices with lower markups compared to
traditional retailers, while Zales and Tiffany may target different market segments with varying
price points.
5. Innovation and Adaptation:
Staying abreast of industry trends and embracing innovation are vital for remaining competitive in
the evolving retail landscape.
Blue Nile's online model represents an innovative approach to diamond retailing, while Zales has
undergone strategic transformations to adapt to changing consumer preferences.

CASE STUDY 6
STUDY
QUESTIONS
1. WHAT ARE SOME KEY SUCCESS FACTORS IN DIAMOND
RETAILING? HOW DO BLUE NILE, ZALES, AND TIFFANY
COMPARE ON THOSE DIMENSIONS?

COMPARISON TABLE FOR BLUE NILE, ZALES, AND TIFFANY BASED ON KEY
SUCCESS FACTORS IN DIAMOND RETAILING:

CASE STUDY 7
STUDY
QUESTIONS
2. 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?

Tiffany's decision not to sell engagement rings online aligns with its brand strategy centered
around exclusivity, luxury, and personalized customer experiences. By restricting the sale of
engagement rings to its brick-and-mortar stores, Tiffany maintains control over the
presentation of its high-end products and ensures that customers receive exceptional service
during the significant purchase process of an engagement ring. This approach helps Tiffany
preserve the prestige and allure associated with its brand, catering to clientele seeking a
luxurious and immersive shopping experience. Furthermore, by emphasizing the importance of
physical retail outlets, Tiffany underscores the value of in-person interactions and the tangible
aspects of luxury retailing.

On the other hand, Blue Nile's expansion into the non-engagement category reflects its
strategic diversification aimed at capturing additional market segments and revenue streams.
By offering a broader range of jewelry products beyond engagement rings, Blue Nile can appeal
to customers at various stages of their lives and cater to different preferences and occasions.
This expansion allows Blue Nile to leverage its existing infrastructure and customer base to
drive growth and profitability in adjacent markets. Furthermore, Blue Nile's emphasis on online
retailing complements contemporary consumer trends, offering convenience and accessibility
to a wide range of customers seeking quality jewelry products.

In conclusion, Tiffany's decision to focus on the in-store experience for engagement ring sales
and Blue Nile's expansion into non-engagement categories both reflect strategic approaches
tailored to their respective brand identities and market positioning. While Tiffany prioritizes
exclusivity and personalized service through physical retail outlets, Blue Nile capitalizes on
online retailing and product diversification to expand its market reach and appeal to a broader
customer base. Each approach carries its unique advantages and considerations, underscoring
the importance of aligning strategic decisions with overarching business objectives and
customer preferences.

CASE STUDY 8
STUDY
QUESTIONS
3.WHICH OF THE THREE COMPANIES DO YOU THINK IS
BEST STRUCTURED TO DEAL WITH WEAK ECONOMIC
TIMES?

Based on the information provided in the case study, Blue Nile indeed appears to have a distinct
advantage in dealing with weak economic times due to its lean and nimble structure. Here are
some key points supporting this view:

CASE STUDY 9
STUDY
QUESTIONS
3.WHICH OF THE THREE COMPANIES DO YOU THINK IS
BEST STRUCTURED TO DEAL WITH WEAK ECONOMIC
TIMES?

This table provides a clear comparison of Blue Nile, Zales, and Tiffany across various aspects
related to their ability to handle weak economic times. Blue Nile emerges as the most
advantaged due to its lean and nimble structure, allowing it to adapt more effectively to changing
market conditions and capitalize on opportunities for growth.

CASE STUDY 10
THANK
YOU!
In summary, the case study highlights the complex dynamics
within the diamond retailing industry, characterized by shifting
consumer behaviors, competitive pressures, and strategic
responses from key market players. Understanding these
dynamics and adapting to changing market conditions are crucial
for companies to sustain growth and profitability in the highly
competitive diamond retailing landscape.

GATI SHAKTI VISHWAVIDYALAYA

(A CENTRAL UNIVERSITY SPONSORED BY THE MINISTRY OF RAILWAYS, GOVERNMENT OF INDIA)

Lalbaug, Vadodara, Gujarat 390004

CASE STUDY 11