What are some key factors in diamond retailing? How do Blue Nile, Zales, and Tiffany compare on those dimensions?
All the companies involved in the diamond market want to have a big share of that market. And, the bigger the share, the company makes bigger revenue. It is very interesting that all three companies (even though they are in the same ‘business’) have different approaches in ‘taking market share’. An important fact is that the companies have a different clientele. The market population is different.
The first 2 paragraphs of the case study state a common concern in any industry: do you reduce prices in order to compete with the competition? [research is needed to see and predict the implications of discounts]
2008 is a good year to analyze the situation from all aspects (and to see how our three companies handled the ‘meltdown’). “As customers tightened their belts and cut back on discretionary spending, high-cost purchases such as diamond jewelry were often the first to be postponed.” Responses are needed. Adjustments are needed.
We can segregate the industry in two parts: wholesale and retail sales. Moreover, the price, selection and customization of services are other dimensions that differentiate the companies.
Blue Nile – internet base
Zales – mall based kiosks (teenagers); working-class mall shoppers; fancier locations (upscale market) Tiffany – high-end products
Blue Nile has an advantage due to lower ‘location’ costs. These funds (that would be placed for renting space) can be allocated to additional inventory. This would in turn signify that the company would have a higher selection. Also, having lower markup percentages lowers the price of the diamonds. Moreover, when purchasing from Blue Nile (besides having a low-pressure selling approach), you are also not buying a name/brand (in comparison with buying from Tiffany).
It must also be noted that Tiffany started its business in 1837; Zales in 1924; and, Blue Nile in 1999. This history (and all the aspects that the latter comes with) provides different advantages (competitive, brand, customers, types of customers….)
[A greater description of the manner in which the three companies are different and differentiate each other is provided in the answers to the following questions]
What do you think of the fact that Blue Nile carries over 30,000 stones priced at $2,500 or higher while almost 60 % of the products sold from the Tiffany Web site are priced at around $200? Which of the two product categories is better suited to the strengths of the online channel?
It must be taken in consideration that Blue Nile is an internet based business. It has not choice but to provide its high priced items on the internet. In comparison, Tiffany also provides a shopping (in store) experience (something that Blue Nile does not have).
In order to increase its market share, Tiffany provides lower priced items on the internet. It is true that the client does not have the in-shop experience, but he/she is buying a Tiffany item. [More information is needed, but it is my assumption that Tiffany is focusing a lot on the in-store experience]
Which of the two product categories is better suited to the strengths of the online channel?
Blue Nile is only on online. Hence, it has no choice but to increase all the aspects/strengths of online purchasing.
The Tiffany’s online ‘department’ is only a small aspect of the company’s business. Even if a customer does not want to have (to purchase) the in-store Tiffany experience, he/she still has the possibility of having a Tiffany item. [These type of customers are not the ‘regular’ ones. Personally, if I do not have the money – purchase as well as travel – and I would like to buy my lady ‘something special’, I would do an internet Tiffany purchase. My lady would be happy (impressed and grateful)……..because it is Tiffany.]