Blue Nile
1. How strong are the competitive forces confronting Blue Nile and other online jewelers? Which one of the five competitive forces is the strongest? Do five-forces analysis to support your answer. * Threat of new competition: Barrier to entry is moderate due to high capital requirements for technology and software application needs to ensure a customer/user friendly online purchasing experience. But I believe this will be offset by the industry profitability attractiveness to new competitors. Currently within the market several online jewelry retailer including Blue Nile have established high customer loyalty and will be able to maintain a strengthened competitive position. In overall evaluation of this force could be rated as moderate.
* Threat of substitute products or services: This is the weakest competitive force facing this industry. There is a low buyer propensity of substitute products for diamonds/fine jewelry items. Also, ease of substitute products is high within this specific industry.
* Bargaining power of customers (buyers): This can also be considered a significant force due to the volume of online jewelry retailers within the industry and brick and mortar retailers developing an online market presence to improve sale revenue. The jewelry retail market has many rivals and online jewelry retailers have a strong market presence as well. This provides increased purchasing availability and accessibility for the consumer. With increased competition within the industry the jewelry buyer can afford to be price sensitive.
* Bargaining power of suppliers: Currently the financial strength can be attributed to the free cash flow provided by its suppliers. In Blue Nile’s business model the cash-generating capability resulting from the 40-55 day positive cash float from its supplier negotiations is quite an intelligent business strategy. However, online jewelry retailers could experience devastating affects if suppliers were
* Threat of substitute products or services: This is the weakest competitive force facing this industry. There is a low buyer propensity of substitute products for diamonds/fine jewelry items. Also, ease of substitute products is high within this specific industry.
* Bargaining power of customers (buyers): This can also be considered a significant force due to the volume of online jewelry retailers within the industry and brick and mortar retailers developing an online market presence to improve sale revenue. The jewelry retail market has many rivals and online jewelry retailers have a strong market presence as well. This provides increased purchasing availability and accessibility for the consumer. With increased competition within the industry the jewelry buyer can afford to be price sensitive.
* Bargaining power of suppliers: Currently the financial strength can be attributed to the free cash flow provided by its suppliers. In Blue Nile’s business model the cash-generating capability resulting from the 40-55 day positive cash float from its supplier negotiations is quite an intelligent business strategy. However, online jewelry retailers could experience devastating affects if suppliers were