Blue Nile Case Analysis

Topics: Customer service, Diamond, Sales Pages: 5 (1401 words) Published: August 2, 2012
The brilliance of diamonds and its rarity make the gem highly desirable. Although diamonds serve no significant usefulness to an ordinary person, in a lot of cultures, diamonds are not only fashion accessories but it also symbolizes a person’s standing in society and financial noteworthy. Diamonds are not manufactured, they are gift of nature and mining diamonds in the depths of the Earth’s mantle requires a complex and expensive process. The famous slogan, “Diamonds are forever” solidifies the degree of commitment required in the union of marriage. To be given a diamond for an engagement ring is the ultimate symbol of love. According to the World Diamond Council, approximately US$13 billion worth of diamonds are produced each year. An estimated ten million people worldwide are employed in the diamond industry. The United States Geological Society reported that in 2010, the United States was one of the world’s leading markets. Blue Nile was considered the largest online jeweler. Sanjay and Amy Bhargave were on the market for an engagement ring. After their disappointing experience of shopping for a ring in New York City and in the local jewelers in their hometown, one of Sanjay’s clients suggested for the couple to visit Blue Nile’s website. After the great length Sanjay subjected himself to the diamond purchase process and with the help of Blue Nile’s diamond consultant, he finally decided to place an order for a 2.2 carat princess cut in Platinum Trellis platinum setting for $20,000. As stated in the case, Blue Nile experienced significant growth between 2005 and 2007, annual revenues grew close to 40%. The company also considered to be one with the healthiest net profit margin in the industry at 4.2%. Blue Nile’s outstanding financial performance is a result of the company’s long-standing strategy of providing high quality diamonds to its customers, exceptional customer service centered on empowering customers to make informed decisions about their diamond purchase and selling diamonds in competitively low prices. In the height of the US economic recession, the company was not able to escape from the heat of the consumer’s declining desire to spend on luxury goods. This phenomenon caused deteriorating sales performance. In 2008 the company’s income statement reflected a 7.4% decline in revenues from the prior year that resulted to a 33% decline in net income. Decision Maker

The Chief Executive Officer (CEO) of Blue Nile Company. The position of the CEO is responsible in making the decision concerning the direction to take to ensure the future of the organization. Problem Statement

Blue Nile needs to establish strategies the company could adopt to defy the effect of the economic recession and secure the company’s financial strength. Diamond is considered a luxury good to ordinary consumers. During a recession it can be expected that consumers would curtail their spending on luxury goods and limit their purchases on basic needs. The diamond industry all-together is vulnerable to this precarious market environment. The declining sales performance is the solid evidence of consumer’s declining desire of luxury goods during an economic recession or consumer’s inability to afford them such purchases. Continued decline in sales would eventually lead to unprofitability, therefore, could not be left unattended. The Blue Nile Company has to combat and diminish the adverse-effect of the economic recession.

Identify Alternatives
A.1) Sell more to former or existing customers
A.2) Offer discount coupons through online discount sites
A.3) Reinvent product(s) offering
A.4) Combination of Alternatives One and Two: Customized Sales and Value-Added Service Analysis of Alternatives
The first alternative: Sell more to former or existing customers entails reaching out to former or existing customers. This is an effort to capitalize on customer’s loyalty. A brief Strength, Weakness, Opportunity, Threat...
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