Compare the three retailers in terms of inbound transportation cost (from manufacturers to warehouse/retailer) and outbound transportation cost (from warehouse/retailer to customers). Transportation costs, as with most e-retailers, are higher at Blue Nile than at Tiffany or Zales. The outbound transportation distance and hence costs and time tend to be much higher when inventories are aggregated, as is the case at Blue Nile. In the case of Tiffany and Zales, some economies of scale can still be realized on inbound transportation at all downstream stages of the supply chain until the merchandise hits retail stores, and the customer takes care of the last mile of outbound transportation costs. (e) [10 pts] Discuss the impact of Blue Nile’s “Build your own ring” on the service factors such as product variety and product availability, and cost factors such as inventory holding cost and labor cost. As with most retailing, the key success factors in diamond retailing can be measured by customer service factors and cost factors. Given the varied supply chain components and supply chain costs. Blue Nile has a distinct advantage in product variety and product availability since customers can “build their own ring” by choosing from an inventory of about 75,000 stones. Customers purchasing at Tiffany and, until recently, at Zales have been limited to the inventory available at the store. Customers who are comfortable making large purchases online will find the low-pressure purchasing experience at Blue Nile, supported by the educational Web site, salaried sales support, and thirty-day return guarantee, appealing. Given that the jewelry is made to order, clients at Blue Nile must be willing to wait to receive their orders, unlike at Tiffany or Zales.
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