What do you think of the fact that Blue Nile carries many stones priced at $2,500 or higher, whereas

a large
fraction of the products sold from the Tiffany website are priced at around $200? Which of the two product
categories is better suited to the strengths of the online channel?
Blue Nile Tiffany

 Blue Nile is able to successfully offer diamonds priced up to $1 million or
more online by emphasizing the large variety of certified high-quality stones
available and a markup that is significantly lower than that of its store-front
competitors. For reference blue Nile sold at 20% markup and store fronts sold
at 50% markup.
 The main source of Blue Nile’s competitive advantage over traditional, store-
based retail jewelers is that it has lower facilities cost and inventory expense.
Only one central warehouse is needed to stock its entire inventory although
outbound transportation costs are high because it provides customers free
overnight shipping.
 Through exclusive supply relationships, the firm is allowed to display for sale
the inventory of some of the world’s largest diamond
manufacturers/wholesalers. Selling high-priced diamonds online works for
Blue Nile because its competitive strategy is based on the priorities of its
target market customers.
 These online customers want high-quality diamonds,but place strong
emphasis on receiving good value for the cost and on product variety, are
willing to wait for their jewelry, and often prefer to customize their purchases.
 Tiffany successfully uses a combination of over 180 exclusive
worldwide retail stores and an online channel to benefit from the
strengths of both channels. Approximately 48 percent of the
company’s net sales come from products containing diamonds,
with more than half of retail sales coming from high-end jewelry
with an average sale price of over $3,000.
 Its online offerings, however, focus on non-gemstone, sterling silver
jewelry with an average price of $200. The company offers a wide
variety of these low demand items with high demand uncertainty,
and they account for more than half of its online sales.
 Online sales are facilitated by Tiffany’s already-in-place centralized
inventory management system, in-house manufacturing, and
strong supply chain and information infrastructure. These lower-
priced products increase the firm’s potential customer base and
improve margins by reducing operating costs.

 Tiffany’s sales of sterling silver jewelry priced around $200 are more suited for the strengths of the online channel than are Blue Nile’s
thousands of stones priced at $2,500 and above. With the growing popularity of e-business, competition with Blue Nile’s sole business model
is increasing.
 In addition, with its well-to-do but price-conscious customer base, the company is more affected by the effects on difficult economic times
on purchasing behavior than is Tiffany with its less price-sensitive global customers who demand luxury goods at any price.
 •I think that Tiffany’s decision to not
sell engagement rings online has a
What do you think lot to do with wanting the customer
to see the rings in-store when it
of Tiffany’s comes to engagement in order to
decision to not sell get the full Tiffany’s experience.
Their engagement rings line up with
engagement rings their brand image of luxury and
exclusivity, from the products they
online? What do sell to their in-store salespeople.
you think of Blue •More than half the retail sales
Nile’s growth into came from high-end products such
as diamond rings and gemstone
the non- jewelry with an average sale price in
2007 higher than $3,000.Hence
engagement most of Tiffany customer were
category? accustomed and comfortable with
current system which supported the
inertial nature of the company.
•I think Blue Nile’s growth into
the non-engagement category
again stems from their ability to
hold more low holding cost
inventory, allowing them to
have a larger variety of
inventory.
•In 2012, the company had sales
of about $400 million with a net
income of $8.4 million.
Although sales had risen,
income had dropped relative to
2011.
•Hence to create more sources
of revenue to improve
profitability it made sense to
create better supply chain for
non- engagement category.
Q.4 Given that Tiffany stores have thrived with their focus on selling high-end jewellery, what do you think caused
the failure of Zales’ upscale strategy in 2006? What products should zales focus on?

1.) The repositioning of a strategy that they had used since the beginning of their
existence caused this failure.

2.) Zales generally catered to working class individuals for the longest time, and changing the
strategy completely just lost them customers to other stores such as Walmart and Costco.

3.) Also, When you have delays in the delivery of the new merchandise, this failure in supply
chain can only had fuel to the fire.
Q.5 Which of the three companies do you
think is be structured to deal with weak
economic times?
• Blue Nile would deal best with the weak economic time
• Blue Nile has a low Operating cost and small inventory holding
• Keep the cost down and mitigate the losses caused by
decreasing in demand
• Blue Nile does not purchase most of its diamond until a
customer places an order
• Company already had increased the international website
presence by launching site in Canada and UK