Blue Nile Case Study
Blue Nile Inc. Strategy
2011 Blue Nile Inc. Strategy
2011
Introduction
In 2009, the U.S. jewelry and watch market was 42% of the worldwide market, which was estimated to be as much as $140 billion. Industry revenues had grown 5.5% annually for the 20 years prior to the recession in 2008. Despite the recession and intense competition in this highly fragmented market, Blue Nile Inc. (NILE) capitalized on the industry growth rates and grew to become the world’s largest online retailer of certified diamonds and fine jewelry. In order to remain a leader in the industry, Blue Nile’s management must remain conscious of industry pressures resulting from the continued poor economic conditions in the U.S.; the encroachment of brick-and-mortar competitors into the online space; consumer reluctance to shop online for jewelry; international opportunities; and other weaknesses in the firm’s strategies. The ensuing analyses detail Blue Nile’s current strategic approaches, the competitive forces confronting Blue Nile, SWOT and financial analyses, and recommendations to strengthen the company’s position and future strategic and financial performance.
Blue Nile’s Strategy
Blue Nile’s strategy was developed around the Best Cost Provider strategy, a hybrid strategy that uniquely combines elements of differentiation and low-cost strategies. The two core elements of Blue Nile’s strategy were to 1) offer high-quality diamonds and jewelry at attractive prices and 2) provide its customers with educational information, in-depth product information, grading reports, and trusted guidance throughout the purchasing process. In addition to these two core components, Blue Nile employed other strategies focused on marketing, customer service and support, order fulfillment, and product line expansion. The first component of Blue Nile’s strategy aimed at building a lower-cost competitive advantage.
Competitive Prices, Lean Costs, and Supply Chain Efficiency
2011 Blue Nile Inc. Strategy
2011
Introduction
In 2009, the U.S. jewelry and watch market was 42% of the worldwide market, which was estimated to be as much as $140 billion. Industry revenues had grown 5.5% annually for the 20 years prior to the recession in 2008. Despite the recession and intense competition in this highly fragmented market, Blue Nile Inc. (NILE) capitalized on the industry growth rates and grew to become the world’s largest online retailer of certified diamonds and fine jewelry. In order to remain a leader in the industry, Blue Nile’s management must remain conscious of industry pressures resulting from the continued poor economic conditions in the U.S.; the encroachment of brick-and-mortar competitors into the online space; consumer reluctance to shop online for jewelry; international opportunities; and other weaknesses in the firm’s strategies. The ensuing analyses detail Blue Nile’s current strategic approaches, the competitive forces confronting Blue Nile, SWOT and financial analyses, and recommendations to strengthen the company’s position and future strategic and financial performance.
Blue Nile’s Strategy
Blue Nile’s strategy was developed around the Best Cost Provider strategy, a hybrid strategy that uniquely combines elements of differentiation and low-cost strategies. The two core elements of Blue Nile’s strategy were to 1) offer high-quality diamonds and jewelry at attractive prices and 2) provide its customers with educational information, in-depth product information, grading reports, and trusted guidance throughout the purchasing process. In addition to these two core components, Blue Nile employed other strategies focused on marketing, customer service and support, order fulfillment, and product line expansion. The first component of Blue Nile’s strategy aimed at building a lower-cost competitive advantage.
Competitive Prices, Lean Costs, and Supply Chain Efficiency