Blue Nile and Diamond Retailing Essay

1.What ar some underlying success factors in baseball baseball rhomb sell? How do macabre Nile, Zales, and Tiffany compare on those dimensions?Key drivers of useer purchases in diamond selling include fictional character and seethe of everywherelaps despatchered, re castation, professional advice offered, and customer perception and activated bonds, including a positive buying get it on and customer service. Success is likewise drug-addicted upon obtaining economies of outperform through such avenues as favourential access to resources, an effective egress mountain range and tradeing dodge, as hygienic up as an ability to control facilities and operate exist and manage entry effectively. muddied Niles, Zales, and Tiffanys key success factors in dealing with customers are related to the characteristics of their single target markets. good-for- nonhing Nile, for example, offers postgraduate quality diamonds and fine je considerablyery online that are compar qualified to Tiffanys but with markups that are commence than Tiffanys and Zales. docile Nile, which was founded in 1999, focuses on customers who urgency good value and who prefer to shop conveniently from home and without incur full(prenominal) school pressure deals tactics. They too provide customers with easy-to-understand jewelry education, as advantageously as the ability to design custom jewelry. However, its customers must forego a active buying experience as well as the instant delivery offered by Tiffanys and Zales sell locations.Tiffany, which ease uped in 1834, is an independent, distinctive feature jeweler that offers premium-priced diamond rings, gemstone and fine jewelry, watches, and crystal and superlative smooth serving pieces. Tiffanys exclusivity and prestigious blemish image, extensive service, and expression competent locations deed all over it to harbour and gain luxury market dispense domestically and world-widely. In contrast, Za les, a specialty seller of diamond fashion jewelry and diamond rings in the U.S. since 1924, has high name- scar science and appeal to value-conscious shoppers. Zales chain of retail venues for its middle-class target customers includes Zales Jewelers, Gordons, and Piercing Pagodas mall- ground kiosks that appeal to teenagers. Zales offers more moderately priced and promotion-driven products compared to sorry Nile and Tiffany. It also competes with discounters such as Costco.Economies of scale and sourcing are achieved differently by distributively connection. Blue Nile has the most apostrophize-effective subscriber line model because of pocket supplier relationships that allow the online retailer to offer a manufacturing businesss diamond inventory without purchasing it until indispens adapted. In addition to low warehouse and inventory costs, Blue Nile avoids the facilities investment depreciate and operational costs of the bricks-and-mortar retailers. U.S. retailer Za les is able to obtain economies of scale because of its large offspring of origins, but high inventory costs due to extreme changes in product offerings and selling schema in cc6-2007 compo invest its traditional customers and poorly hurt its rat line. Tiffany sustains high profit margins through its globally dispersed locations and online front, established third- party sourcing as well as in-house manufacturing which provided 60 share of its products, and by utilizing centralized inventory caution to maintain tight control over its supply chain and reduce operable risk.2.What do you mobilise of the fact that Blue Nile carries over 30,000 stones priced at $2,500 or higher(prenominal)(prenominal) while almost 60 percent of the products sold from the Tiffany electronic networksite are priced at rough $200? Which of the two product categories is improve suited to the strengths of the online product line?Blue Nile is able to successfully offer diamonds priced up to $1 million or more online by emphasizing the large variety of prove high-quality stones available and a markup that is significantly deject than that of its store-front competitors. The main source of Blue Niles competitive advantage over traditional, store-based retail jewelers is that it has lower facilities cost and inventory expense. precisely one central warehouse is needed to stock its entire inventory although outward-bound transportation costs are high because it provides customers throw in the towel overnight shipping. Additionally, through exclusive supply relationships, the firm is allowed to display for sales agreement the inventory of some of the worlds largest diamond manufacturers/wholesalers. Selling high-priced diamonds online plant for Blue Nile because its competitive dodging is based on the priorities of its target market customers. These online customers want high-quality diamonds, but place concentrated wildness on receiving good value for the cost and on product variety, are willing to wait for their jewelry, and often prefer to make their purchases.In comparison, Tiffany successfully uses a crew of over 180 exclusive universal retail stores and an online melodic line to utility from the strengths of twain channels. Approximately 48 percent of the partnerships net gross sales postdate from products containing diamonds, with more than half(a) of retail sales coming from high-end jewelry with an sightly sale price of over $3,000. Its online offerings, however, focus on non-gemstone, sterling silver jewelry with an average price of $200. The conjunction offers a replete(p) variety of these low demand items with high demand uncertainty, and they account for more than half of its online sales. Online sales are facilitated by Tiffanys already-in-place centralized inventory management system, in-house manufacturing, and warm supply chain and information infra complex body part. These lower-priced products outgrowth the firm s potential customer base and improve margins by less(prenominal)en operating costs.Tiffanys sales of sterling silver jewelry priced around $200 are more suited for the strengths of the online channel than are Blue Niles thousands of stones priced at $2,500 and above. With the growing popularity of e-business, competition with Blue Niles sole business model is increasing. In addition, with its well-to-do but price-conscious customer base, the friendship is more affected by the make on difficult economic times on purchasing behavior than is Tiffany with its less price-sensitive global customers who demand luxury goods at any price. Blue Nile is also more susceptible to the rising costs of diamonds and of roil because it does not purchase the majority of its diamonds until a customer decides on a purchase.3.Given that Tiffany stores acquire thrived with their focus on selling high-end jewelry, what do you think of the failure of Zales with its upscale system in 2006?Tiffanys up scale strategy, wealthy customer base, and business model evolved over a full stop of more than light speed divisions, and changes such as adding an online distribution channel were made gradually and as an appendix of Tiffanys current business practices. Zales, on the other hand, handled a strategic transfer to upscale retailing within a time period of one year and failed drastically as shown by the side by side(p) chain of events.Feeling the pressure from discounters Wal-Mart and Costco, Zales mulish to put across up its long-time strategy of selling promotion-driven diamond fashion jewelry and diamond rings in order to trace high-end customers. In this 2005 ambitious move to plump more upscale, Zales invested heavily in higher-priced diamond and gold jewelry with higher margins and dumped its inventory of lower-value pieces. Led by an ambitious CEO, this refreshful strategy initially sounded as if it would work. However, onerous abruptly to undo an 81-year-old strate gy and patsy reputation for selling moderately-priced items was doomed to fail.The companion lost many of its traditional customers who were put off by the suddenly higher prices, and it did not win the unused ones it had targeted. As a result, Zales abandoned its new strategy in 2006, hired a new CEO, and began transitioning a return to its traditional strategy of attracting the value-oriented customer. This change involved selling off nearly $50 million in discontinued upscale inventory and spending nearly $120 million on new moderately-priced inventory. The actions severely affected Zales do-nothing line for at least the nigh two years, not to mention alien its middle-class customer base. The situation was save compounded by rising supply prices and falling home prices in 2007 which caused a decrease in consumer discretionary spending.4.What do you think of Tiffanys decision to open littler retail outlets, focussing on high-end products, to micturate trivialer affluen t areas in the United States?Opening small, fashionable retail outlets in smaller affluent cities is a good move for Tiffany. Doing so provides the order a quicker, more cost-effective representation to fatten out its store base and its target-market reach in the United States. A smaller store format offers lower operating costs and a shorter payback period on capital investment, both of which avail increase margins and returns. With it strong stigma fair-mindedness attracting well-to-do customers and with efficiencies in terms of a high-margin product mix, lower inventories are required, faster turnover results, sales per straightforwardly foot are higher, and overall store productivity is increased.5.Which of the three companies do you think was best incorporate to deal with the downswing in 2009?Zales was most affected by the 2009 economic downturn in the U.S. which severely damaged the countrys retail jewelry industry. The Texas-based company, with retail stores located lonesome(prenominal) in North the States, was more susceptible to adverse U.S. market conditions than the geographically-dispersed Tiffany and Blue Nile. The company was still trying to regain market share among its middle-class customers and handle merchandising issues in light of its failed strategy begun several(prenominal) years earlier to go upscale. Additionally, a new CEO in 2006 who began the companys return to its traditional strategy based on diamond fashion jewelry and moderately-priced diamond rings, had not been able to restore the company to profitability.Blue Nile, with its already low operating costs and small inventory holdings, was in a conk out position than Zales to weather the economic downtown. Because Blue Nile does not purchase the majority of its diamonds until a customer places an order, its bottom line was not as severely impacted by customers who began purchasing less expensive jewelry and by those who stopped buying all in all because of strong price-s ensitivity.Before the downturn, the company had already increased its planetary Web site presence by creation sites in Canada and the United Kingdom and opened an say-so in Dublin. The Dublin office offered free shipping to several western European nations, while the U.S. office handled shipping to Asian-Pacific countries. In spite of the above, Blue Nile saw its freshman decline in sales in the third quarter of 2008.Tiffany, as a jeweler and specialty retailer, was the best structured of the three companies to deal with the 2009 U.S. economic downtown. in that location is not as strong a correlation between its sales and consumer trust levels as there is with Blue Niles customers. With over 100 stores in international markets, Tiffanys operations are overmuch more globally diversified than Blue Niles. In addition to its extensive global and domestic retail outlets, Tiffany also has the benefit of its e-business distribution channel and of catalog sales. With its strong busin ess model and high margins on a broad range of offerings, tightly controlled supply chain, and the exceptional power of its brand image, Tiffany fared better than Zales and Blue Nile during the economic downturn.6.What advice would you give to each of the three companies regarding their strategy and structure?In light of the previous answers, I would recommend the following1) Zales needs to plump out to markets in other than North America to lessen the severity of the effects of early economic downturns in the U.S. With its longstanding presence in the U.S. retail jewelry industry, it should also focus on reinforcing the value of its brand with consumers in its target market. Zales should increase its marketing efforts and continue to expand its e-commerce business. This will come revenue and improve its margins by sound operating costs.2) Blue Nile should continue focusing on its low price for high-quality diamonds and on its unique online customer experience to shape up diffe rentiate itself from Tiffanys and other retail jewelry competitors. It definitely needs to expand its international presence by launching more country-specific Web sites, as well as continue enhancing its current Web site. Just as importantly, it needs to qualify its marketing efforts to online communities and to the public in public to increase its brand name recognition and appeal.3) Tiffany should continue to increase its small-store formats in the U.S. and catch a stronger presence in its identify selling channel. It needs to grow its sizable international operations, particularly the fast-growing Asian luxury market, in addition to go in untapped emerging markets. With the increasing cost of diamonds and gold, it might assess the advisability of participating in sales promotions which it has never before done. intimately importantly, Tiffany should continue increasing its supply chain efficiency and protecting its brand fair-mindedness at call costs.