Blue nile and diamond retailing essay

1 ) What are several key accomplishment factors in diamond retailing? How do Green Nile, Zales, and Tiffany compare in those dimensions?

Key motorists of buyer purchases in diamond retailing include quality and product selection offered, standing, professional guidance offered, and customer perception and emotional bonds, together with a positive obtaining experience and customer service. Success is also based upon obtaining economies of scale through this kind of avenues while preferential usage of resources, a powerful supply string and online marketing strategy, as well as an ability to control facilities and operating costs and take care of inventory successfully.

Green Nile’s, Zales’, and Tiffany’s key accomplishment factors in dealing with customers will be related to the characteristics of their individual target marketplaces. Blue Earth, for example , presents high quality expensive diamonds and fine jewelry online which can be comparable to Tiffany’s but with markups that are below Tiffany’s and Zales’. Green Nile, which has been founded it happened in 1999, focuses on consumers who want the best value and who have prefer to store conveniently from your own home and without incurring high pressure sales tactics.

Additionally, they provide clients with easy-to-understand jewelry education, as well as the capability to design custom jewelry. Nevertheless , its clients must do away with a hands-on purchasing experience as well as the fast delivery offered by Tiffany’s and Zales’ price tag locations.

Tiffany, which exposed in 1834, is persistent, specialty jewelry salesman that offers premium-priced diamond wedding rings, gemstone and fine jewelry, wristwatches, and amazingly and gold serving items. Tiffany’s exclusivity and prestigious brand photo, extensive services, and fashionable locations allow it to preserve and gain luxury market share domestically and globally. As opposed, Zales, a specialty store of precious stone fashion rings and gemstone rings inside the U. H. since 1924, has excessive name-brand identification and appeal to value-conscious shoppers. Zales’ chain of retail sites for its middle-class target clients includes Zales Jewelers, Gordon’s, and Spear like Pagoda’s mall-based kiosks that appeal to teenagers. Zales offers more moderately costed and promotion-driven products compared to Blue Nile and Jewelry. It also competes with discounters such as Costco.

Economies of scale and sourcing happen to be achieved in another way by every single company. Green Nile has got the most cost effective business model due to exclusive provider relationships that allow the on the net retailer to provide a manufacturer’s diamonds inventory devoid of purchasing it until necessary. In addition to low factory and inventory costs, Blue Nile avoids the facilities investment charge and functioning costs of the bricks-and-mortar merchants. U. S i9000. retailer Zales is able to attain economies of scale due to the large number of retailers, but high inventory costs due to severe changes in item offerings and marketing strategy in 2006-2007 puzzled its classic customers and severely injure its final conclusion. Tiffany sustains high income through the globally distributed locations and online presence, established third- party sourcing as well as in one facility manufacturing which will provided sixty percent of its products, through utilizing centralized inventory supervision to maintain tight control over the supply string and reduce functional risk.

2 . What do you think of the truth that Blue Nile holds over 30, 000 rocks priced at $2, 500 or higher while practically 60 percent of the products sold through the Tiffany Internet site are priced at around $200? Which in turn of the two product groups is better suited to the talents of the on-line channel?

Green Nile can successfully give diamonds listed up to $1,000,000 or more online by focusing the large number of certified premium quality stones available and a markup that is certainly significantly below that of their store-front competition. The main way to obtain Blue Nile’s competitive advantage over classic, store-based selling jewelers is the fact it has reduced facilities expense and products on hand expense. Only 1 central factory is needed to share its entire inventory though outbound transport costs happen to be high because it provides clients free immediately shipping. Additionally , through distinctive supply relationships, the company is allowed to display on the market the inventory of a few of the world’s greatest diamond manufacturers/wholesalers. Selling high-priced diamonds on the web works for Blue Nile because its competitive technique is based on the priorities of its target market customers. These kinds of online consumers want premium quality diamonds, but place solid emphasis on obtaining good value for the cost and product selection, are willing to wait for their earrings, and often want to customize all their purchases.

In comparison, Tiffany successfully uses a mixture of over 180 exclusive around the world retail stores and an online route to benefit from the strengths of both programs. Approximately forty-eight percent with the company’s net sales are derived from products that contains diamonds, with more than half of price tag sales coming from high-end jewelry with a normal sale price of more than $3, 500. Its on the net offerings, however , focus on non-gemstone, sterling silver jewelry with a typical price of $200. The company offers lots of these low demand things with high demand uncertainty, and so they account for more than half of the online sales. Online sales are caused by Tiffany’s already-in-place central inventory management system, in-house manufacturing, and strong supply sequence and info infrastructure. These lower-priced items increase the firm’s potential customer basic and increase margins by simply reducing functioning costs.

Tiffany’s sales of pure silver silver rings priced about $200 are usually more suited for the strengths from the online route than are Blue Nile’s thousands of pebbles priced at $2, 500 and above. While using growing popularity of e-business, competition with Blue Nile’s sole business model is usually increasing. Additionally , with its well-to-do but price-conscious customer base, the organization is more troubled by the effects in difficult economic times about purchasing tendencies than is definitely Tiffany having its less price-sensitive global customers who require luxury products at any value. Blue Earth is also more susceptible to the rising costs of gemstones and of labor because it would not purchase the many its diamonds until a client decides on a selection.

3. Provided that Tiffany stores have thrived with their give attention to selling sophisticated jewelry, what do you think of the failure of Zales with its high end strategy in 2006?

Tiffany’s upscale strategy, rich customer base, and business model evolved over a period of more than 100 years, and changes including adding an online distribution channel were made steadily and as an extension of Tiffany’s current organization practices. Zales, on the other hand, managed a strategic change to high end retailing in a time period of 1 year and failed considerably as shown by the next chain of events.

Feeling the pressure from discounters Wal-Mart and Costco, Zales decided to quit its long-time strategy of selling promotion-driven diamond vogue jewelry and diamond wedding rings in order to go after high-end buyers. In this june 2006 ambitious move to become more upscale, Zales put in heavily in higher-priced diamond and rare metal jewelry with higher margins and dumped its products on hand of lower-value pieces. Led by an ambitious CEO, this new approach initially seemed as if it would work. Nevertheless , trying quickly to undo-options an 81-year-old strategy and brand status for providing moderately-priced products was condemned to fail.

The business lost most of its traditional customers who were put off by the suddenly larger prices, and it did not win the modern ones it had targeted. Because of this, Zales deserted its fresh strategy 5 years ago, hired a new CEO, and began shifting a return to its classic strategy of attracting the value-oriented client. This transform involved providing off almost $50 , 000, 000 in discontinued upscale products on hand and spending nearly $120 million upon new moderately-priced inventory. The actions seriously affected Zales’ bottom line for at least the next two years, not to mention powerful its middle-class customer base. The case was further more compounded simply by rising gas prices and falling house prices in 2007 which usually caused a decrease in customer discretionary spending.

4. What do you think of Tiffany’s decision to open small retail outlets, concentrating on high-end items, to reach small affluent areas in the United States?

Beginning small , stylish retail outlets in smaller affluent cities is a great move intended for Tiffany. Doing this provides the organization a more rapidly, more cost-effective way to grow its retail store base as well as its target-market reach in the United States. A compact store formatting offers lower operating costs and a shorter repayment period on capital purchase, both of that assist increase margins and results. With it strong brand equity attracting well-to-do customers and with efficiencies when it comes to a high-margin product blend, lower arrays are required, more quickly turnover benefits, sales every square foot are higher, and total store efficiency is increased.

5. Which will of the three companies do you consider was finest structured to manage the downturn in 2009?

Zales was most affected by the 2009 economic downturn in the U. S i9000. which seriously damaged the country’s full jewelry industry. The Texas-based company, with retail stores located only in North America, was more vulnerable to adverse U. S. industry conditions compared to the geographically-dispersed Jewelry and Blue Nile. The company was still looking to regain market share among it is middle-class consumers and deal with merchandising problems in light of its failed strategy started several years previously to go high end. Additionally , a new CEO in 2006 who started the company’s go back to its traditional strategy based on diamond fashion jewelry and moderately-priced precious stone rings, had not been able to bring back the company to profitability.

Green Nile, with its already low operating costs and tiny inventory loge, was in an improved position than Zales to weather the economic the downtown area. Because Blue Nile would not purchase the most its diamond jewelry until a customer places a great order, its bottom line was not as significantly impacted by buyers who started out purchasing more affordable jewelry through those who ceased buying entirely because of strong price-sensitivity.

Prior to the downturn, the corporation had already increased their international Internet site presence by launching sites in Canada as well as the United Kingdom and opened an office in Dublin. The Dublin office provided free shipping to several western European countries, while the U. S. workplace handled shipping to Asian-Pacific countries. Inspite of the above, Blue Nile found its first decline in sales inside the third one fourth of 08.

Tiffany, like a jeweler and specialty merchant, was the finest structured from the three businesses to deal with the 2009 U. S i9000. economic downtown. There is not while strong a correlation between its revenue and consumer confidence levels as there is certainly with Blue Nile’s clients. With above 100 stores in intercontinental markets, Tiffany’s operations are more worldwide diversified than Blue Nile’s. In addition to its comprehensive global and domestic retail outlets, Tiffany also has the benefit of their e-business circulation channel associated with catalog sales. With its good business model and high margins on a wide range of offerings, tightly managed supply cycle, and the outstanding power of its brand picture, Tiffany fared better than Zales and Green Nile throughout the economic downturn.

6. What guidance would you share with each of the three companies with regards to their strategy and framework?

In light of the previous answers, I would recommend the following:

1) Zales needs to expand to market segments in other than North America to reduce the severity of the associated with future economic downturns in the U. H. With its longstanding presence in the U. S i9000. retail charms industry, it will also give attention to reinforcing the significance of its company with consumers in its marketplace. Zales will need to increase their marketing initiatives and still expand its e-commerce business. This will create revenue and improve their margins by simply lowering operating costs.

2) Blue Earth should continue focusing on its low price to get high-quality gemstones and on its unique online customer experience to further differentiate on its own from Tiffany’s and other retail jewelry rivals. It definitely should expand its international existence by starting more country-specific Web sites, and also continue enhancing its current Web site. Just like importantly, it takes to mix up its promoting efforts to online communities and the public in general to increase the brand name recognition and charm.

3) Tiffany should continue to increase its small-store platforms in the U. S. and develop a more powerful presence in the direct offering channel. It needs to increase its substantial international operations, particularly the quick-progress Asian luxury market, moreover to entering untapped growing markets. While using increasing cost of diamonds and gold, it may assess the advisability of engaged in sales marketing promotions which it has never before done. Above all, Tiffany should continue elevating its source chain productivity and protecting its manufacturer equity for call costs.

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