E-commerce Project

Topic: Blue Nile Inc. Case Study

Name ID
Shehab Eldin Mohamed 20207550
Habiba Hatem Ibrahim 20207570

Instructor: Dr. Mohamed Khairy

Blue Nile Jewelry Case Study
 The history of Blue Nile Inc.

• Blue Nile is an online jewelry retailer founded in 1999. It is based in Seattle,

Washington.
• The company that became Blue Nile began in 1995 when Doug Williams of Williams &
Son Inc. of Seattle started a website to sell diamonds online
• In 1999, Vadon raised $6 million to purchase 85% of the company and improve the
website.
• Blue Nile Inc. changes their shop from physical store to online shop. Using the B2C EC
model knocking out expensive stores and intermediaries and then slashing prices they
captured a high market share in a short time, making a sizable profit by inducing more
people to buy online.
Physical Store Highly-Interactive Website
 Blue Nile Inc Before using E-commerce technologies:

• Blue Nile at when first introduced had physical stores which like any physical
marketplace had tax issues, high labor costs, high operating costs, lack of
communication with customers online who knew nothing about Blue Nile Inc.
which led to Poor Customer Relationship, Poor accessibility.

But Only after establishing an online website in 1999,

• They captured a high market share in a short time, making a sizable profit by
inducing more people to buy online, Blue Nile Inc. changes their shop from
physical store to online shop. Using the B2C EC model knocking out expensive
physical stores and intermediaries and then slashing prices. And providing
discounts up to 35%.
 What made Blue Nile Inc. Grow?
• Blue Nile used B2C EC Model which eliminated the need for physical stores.
• Blue Nile Offered Discounts up to 35%.
• The Website provided highly interactive interface with quality ratings for
every stone so that the customer can look over a rating scale for the cut,
clarity and color.
• They used a website for comparing prices which was Bizrate.com
• They Made a 30-day money-back guarantee (which is now and online
industry standard).
• For Additional Accessibility and interaction they made a mobile app for
IPhone and Android users.
 What were the results Of Blue Nile Inc. Using E-
Commerce?

• Blue Nile’s sales reached $129 Million in 2003 with an increase of 79%
over 2002 with a net income of 27$ in 2013.
• As a result 465 small jewelry stores closed in 2003 alone.
• The company became the 8th largest specialty jewelry company in the
united states and went public in 2004.
• A significant increase in the Sales as illustrated in the figure below:
 Advantages Of Making Your Company Operate
Electronically through E-commerce Technologies:

• Maximizes Companies revenues by decreasing the operating costs.

• Faster Buying Process
• Reduced Information misunderstanding between buyers and sellers.
• Reduction in the time gap between purchase and possession of physical
products purchased online.
• The ability to conduct transactions with a rapid execution of procedures at
any time 24/7 from any place with a provided network
• Lowers the search time for information and cost to buyers.
• Improves Business’s communication and facilitates globalization
 The Components and Participants in E-Marketplaces:
Applied on Blue Nile Inc.
• Customers: Potential Buyers Of Diamonds and Jewelry.
• Sellers: Millions Of E-Stores Like Blue Nile that are advertising and offering
a huge variety of items trying to compete against Blue Nile Inc. such as:
Tiffany Company.
• Products And Services: One the major differences between the
marketplace and marketspace is the possible Digitalization of products and
services in a marketplace. In digitalization most of the costs are fixed with
very low variable costs. (Not Applicable In Blue Nile Inc, because the
products (Diamonds and Jewelry) are physical.)
• Infrastructure: Blue Nile’s Infrastructure in 1999 was based on electronic
networks, databases, hardware such as Servers and computers and
Software, as well as having Mark Vadon Continually improving its website.
• Front End: Customers Interacted with Blue Nile Inc. Via their website
www.bluenile.com the website includes: seller’s portal, electronic catalogs,
shopping cart and a search engine with various filters for price, stone’s type
and clarity. A payment gateway is provided with various payment methods.
 The Components and Participants in E-Marketplaces:
Applied on Blue Nile Inc. (Continued)

• Back End: The Process of orders aggregation, inventory management,

purchasing raw materials from suppliers, accounting and payment
processing, insurance on the purchased items finally, packaging an
delivery. All of these processes are the back end of the business.
• Intermediaries: Intermediaries are a 3rd party that operates between
sellers and buyers through an Escrow offering them a service which can be
done manually or electronically. such as: Instead of purchasing diamond
inventory and reselling it on their site, Blue Nile lists diamonds virtually
directly from the diamond manufacturer and wholesalers.
 Tiffany & co and Blue Nile Inc. ,
What made Blue Nile Inc. Special?
• When it comes to online convenience, diamond education, price and benefits,
Blue Nile is ahead of Tiffany & Co.
• Through Blue Nile’s website, you can design and build your own diamond
engagement ring or take advantage of their pre-made Blue Nile offers.
• Blue Nile's primary advantage is that it offers diamond rings online at prices that
are as much as 35% lower than traditional retailers.
• Blue Nile eliminated the idea of physical stores because it provided the Customers
with a highly-interactive website which saves the customers times and money .
• Blue Nile's reputation as the leader in the online market has made them an ideal
place to buy diamonds.
• Tiffany & co has got only physical stores which makes it not reachable by the
customers who prefer shopping Diamonds and Jewelry Online.
• Blue Nile is the largest and most well known internet jewelry seller. They have a
very large exclusive online inventory. Their high quality images are catchy and
helps customers to choose among their online collections.
 Brick-and-Mortar Vs E-commerce

• According to the Case of Blue Nile Inc. large traditional companies

compete with Blue Nile by offering online merchandise, becoming click-
and-brick multi- channel organizations, and by streamlining their supply
chain and customer service.
• Tiffany&Co by staying a brick-and-mortar has lost the competition with
Blue Nile which is now the largest Jewelry –selling website.
 References:

• Turban, E., King, D., Lee, J. K., Liang, T. P., & Turban, D. C. (2015). E-
commerce: mechanisms, platforms, and tools. In Electronic Commerce (pp.
51-99). Springer, Cham.
• Turban, E., King, D., Lee, J. K., Liang, T. P., & Turban, D. C. (2015).
Business-to-business E-commerce. In Electronic Commerce (pp. 161-207).
Springer, Cham.