Blue Nile

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Blue Nile

5 Forces

Moderate threat of new entrants

Low bargaining power of suppliers

High bargaining power of consumers

Low threat of substitute products

Intense rivalry-competes with not only online retailers, but also stores

PEST D

Political/legal-

Economic-

Sociocultural

o better perception of online shopping, easy, non-intimidating shopping for men, people want things really quickly and jewelry stores take forever bc they don’t do it in house, so blue nile can meet this need

Technology-

o website advanced searches make it faster and easier to use; very wide variety of customization options; licensed 3rd party IT companies for financial reporting, inventory mgt, order fulfilling, and merchandising; used redundant internet carriers to reduce downtown and service interruptions

Demographic-

o targeted towards moderately towards men in mid 20’s-30’s (these men are up to date on technology and maybe

less traditional)

RBV Analysis

Primary Activities

A. Inbound logistics

Receive diamonds from suppliers within 1 business day of customer order being received

B. Operations

Inspection/work by bench jewelers

Low operating costs --> low prices

C. Service

GIA and AGSL certifications and reports

GCAL appraisal

Automatic provision of an appraisal to aid in insurance matters (value-added)

30 day return policy on anything in original condition without custom engraving

Extensive educational material on website

Extensively trained customer service reps customers could call

Facilitates comparison shopping to their own products and competitors products

D. Outbound Logistics

Free shipping in the U.S. via FedEx or USPS

$15 charge for overnight priority shipping for orders under $1000, normal overnight shipping for orders over $1000

Two day shipping for $250-$1000

Final inspection before shipping

E. Marketing

Major portion of marketing effort focused on making sure site visitors had a positive, informative experience

Most ad money went to ads on web portals

Low SG&A expense

Decreased ads during 2005 bc increased cost to buy key words on internet search engines

Support activities

A. General Administration

Lots of outsourcing of technology and business bullshit

Customer service oriented

B. HR Management

Small # of employees

Training of expert customer service reps

C. R&D

Management continuously explored avenues to improve operating efficiency, refine company’s supply chain, and leverage its investment in FC technology

D. Procurement

Large # of suppliers who can supply diamonds within one business day of customer order

Only keep very small limited inventory, make small purchases

Suppliers represent more than half of high quality diamonds in the US

Capabilities

A. From the time of customer order, have custom jewelry ready to ship in 3 days

Suppliers, bench jewelers, efficient operations, inspectors

Valuable-yes, rare-yes, imitable-maybe, substitutable-no

Sustainable CA

B. Provide skilled customer service reps and reports, certifications, and appraisal of jewelry

GIA, AGSL, people, training program

Valuable-yes, rare-no, imitable-yes, substitutable-no

Not sustainable, but a CA

**Key CA Blue Nile is trying to achieve: give customers an online experience that makes them feel as comfortable as buying diamonds from a local jewelry store while offering the convenience and lower prices associated with online shopping

Financial Analysis

CAGR of revs 38.9%

CAGR of NI 68% ’02-‘07

CAGR of gross profit 35.6% 2007 ratios:

Current ratio = 1.56 Quick Ratio = 1.37

Inventory turnover = 13.73 up from 5.67 in 2001

High cash

Low debt

Low Cap Ex

Low AR

NI flattening...
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