Blue Nile and Diamond Retailing Case Study

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Executive Summary
The purpose of this case study is to measure the success of Blue Nile against Tiffany and Zales success in diamond retailing by comparing retail strategies and structures. Blue Nile is an online jewelry retailer that was founded in December 1998 only selling products in the United States, with one warehouse facility in Seattle, WA. In 2007, their e-business expanded to Canada and United Kingdom, opening another facility in Dublin, servicing Western Europe and the Asia-Pacific region. Their lower warehouse and inventory expenses allow them to have a 20%-30% markup on their products compared to 50% from their competitors with retail stores. The company’s sales revenue was $322 million and their net income was $22 million. However, they saw its first decline of 2.9% in third quarter sales for 2008 compared to the same quarter in 2007. Zales Jewelers was established in 1924, and primarily deals in the lower-end jewelry market, targeting middle class shoppers. Their growth strategy involved buying small chain retail stores, and as of 2005 they have around 2400 stores across multiple divisions for different jewelry lines. The company had to file bankruptcy for a year, in 1992, after the buyout by Peoples Jewelers and Swarovski International, causing them unmanageable debt. Three consecutive years of losing market share to discounted retailers lead them to an inventory make-over of high-end jewelry that failed. This cost them around $26 million by the end of the third quarter in 2006, inventory and staff reductions, store closings, and loss of customers. Tiffany was established in 1837, as fancy goods and stationery emporium, and went public in 1987. By 2008, the company operated about 180 stores all over the world with 70 of them in the United States. This same year they planned to establish smaller stores in smaller U.S. cities selling high-end jewelry to target new markets. They use their stores to sell high-end jewelry along with...
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