Blue Nile and Diamond Retailing Essay

1.What are s ethereally key success factors in rhomb retail? How do dirty Nile, Zales, and Tiffany compare on those dimensions?Key drivers of client purchases in rhombus retailing include quality and range of convergences catered, reputation, professional advice offered, and customer perception and activated bonds, including a positive buying experience and customer service. Success is similarly dependent upon obtaining economies of scale through such avenues as electential opening to resources, an effective supply dra deriveg string and marketing system, as well as an might to control facilities and in operation(p) lives and manage disceptation effectively. soft Niles, Zales, and Tiffanys key success factors in circleing with customers are connect to the characteristics of their individual commit markets. Blue Nile, for example, offers elevated quality baseball fields and fine jewellery online that are compar adequate to(p) to Tiffanys merely with markups tha t are none than Tiffanys and Zales. Blue Nile, which was founded in 1999, focuses on customers who want good honor and who prefer to shop conveniently from home and without incurring high pressure sales tactics. They alike provide customers with easy-to-understand jewellery education, as well as the ability to design custom jewelry. However, its customers must forego a hands-on buying experience as well as the instant delivery offered by Tiffanys and Zales retail locations.Tiffany, which opened in 1834, is an independent, effectiveness jeweler that offers premium-priced diamond rings, gemstone and fine jewelry, watches, and crystal and sterling funds serving pieces. Tiffanys exclusivity and prestigious shuffle image, massive service, and fashionable locations allow it to maintain and get together extravagance market share domestically and globally. In contrast, Zales, a specialty retailer of diamond fashion jewelry and diamond rings in the U.S. since 1924, has high shap e- flaw recognition 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-based kiosks that appeal to teenagers. Zales offers to a greater extent moderately priced and promotion-driven products compared to Blue Nile and Tiffany. It also competes with discounters such as Costco.Economies of scale and sourcing are achieved differently by apiece company. Blue Nile has the most cost-effective line of credit model because of grievous bodily harm supplier relationships that allow the online retailer to offer a manufacturers diamond livestock without purchasing it until needed. In addition to low warehouse and stock-taking costs, Blue Nile avoids the facilities investment expense and operational costs of the bricks-and-mortar retailers. U.S. retailer Zales is able to obtain economies of scale because of its large number of retentivenesss, but high inventory costs due to extreme changes in product offerings and marketing scheme in two hundred6-2007 confused its traditional customers and severely hurt its bottom line. Tiffany sustains high profit margins through its globally dispersed locations and online posture, established third- party sourcing as well as in-house manufacturing which provided 60 per centum of its products, and by utilizing rallyized inventory vigilance to maintain tight control everyplace its supply chain and reduce operational risk.2.What do you think of the fact that Blue Nile carries oer 30,000 stones priced at $2,500 or higher while almost 60 percent of the products sold from the Tiffany Website are priced at around $200? Which of the two product categories is better suited to the strengths of the online tune?Blue Nile is able to successfully offer diamonds priced up to $1 one thousand thousand or to a greater extent online by punctuate the large anatomy of certified high-quality stones available and a markup that i s significantly lower than that of its store-front competitors. The main source of Blue Niles warring advantage everywhere traditional, store-based retail jewelers is that it has lower facilities cost and inventory expense. Only one central warehouse is needed to stock its entire inventory although outbound back breaker costs are high because it provides customers free overnight shipping. Additionally, through exclusive supply relationships, the firm is allowed to display for sale the inventory of some of the demesnes largest diamond manufacturers/wholesalers. Selling high-priced diamonds online works for Blue Nile because its competitive system is based on the priorities of its target market customers. These online customers want high-quality diamonds, but place strong emphasis on receiving good value for the cost and on product variety, are willing to wait for their jewelry, and often prefer to customize their purchases.In comparison, Tiffany successfully uses a combination o f over clxxx exclusive worldwide retail stores and an online channel to benefit from the strengths of twain channels. just about 48 percent of the companys net sales make sense from products containing diamonds, with more than half of retail sales coming from high-end jewelry with an mean(a) sale price of over $3,000. Its online offerings, however, focus on non-gemstone, sterling silver jewelry with an average price of $200. The company offers a wide 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 strong supply chain and information infrastructure. These lower-priced products increase the firms potential customer base and improve margins by reducing direct costs.Tiffanys sales of sterling silver jewelry priced around $200 are more suited for the strengths of the online channel th an 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 increase. In addition, with its well-to-do but price-conscious customer base, the company is more affected by the effects on difficult scotch multiplication 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 journey up costs of diamonds and of labor because it does not purchase the majority of its diamonds until a customer decides on a purchase.3.Given that Tiffany stores have thrived with their focus on selling high-end jewelry, what do you think of the failure of Zales with its upmarket scheme in 2006?Tiffanys upscale strategy, feeder customer base, and business model evolved over a item of more than 100 years, and changes such as adding an online distribution channel were do gradually and as an extens ion of Tiffanys current business practices. Zales, on the different hand, handled a strategic shift to upscale retailing indoors a time period of one year and failed drastically as shown by the succeeding(a) chain of events.Feeling the pressure from discounters Wal-Mart and Costco, Zales decided to grant up its long-time strategy of selling promotion-driven diamond fashion jewelry and diamond rings in order to pursue high-end customers. In this 2005 ambitious move to become 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 sassy strategy initially sounded as if it would work. However, trying abruptly to undo an 81-year-old strategy and brand reputation for selling moderately-priced items was doomed to fail.The company lost many of its traditional customers who were put off by the suddenly higher prices, and it did not win the new ones it had targeted. A s 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 $ great hundred million on new moderately-priced inventory. The actions severely affected Zales bottom line for at least the next two years, not to mention disaffect its middle-class customer base. The situation was further compounded by upgrade fuel 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 small retail outlets, focusing on high-end products, to reach smaller affluent areas in the United States?Opening small, fashionable retail outlets in smaller affluent cities is a good move for Tiffany. Doing so provides the company a quicker, more cost-effective way to rarify its store base and its target-market reach in the United States. A smaller store format offers lower operating(a) costs and a shorter payback period on capital investment, both of which help increase margins and returns. With it strong brand equity attracting well-to-do customers and with efficiencies in terms of a high-margin product mix, lower inventories are required, straightaway turnover results, sales per square foot are higher, and overall store productivity is change magnitude.5.Which of the three companies do you think was best structured to deal with the downturn 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 only in North America, was more defenseless to adverse U.S. market conditions than the geographically-dispersed Tiffany and Blue Nile. The company was still trying to cure market share among its middle-class customers and handle merchandising issues in light of its failed strategy begun several 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 better 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 wedge by customers who began purchasing less expensive jewelry and by those who stop buying completely because of strong price-sensitivity.Before the downturn, the company had already increased its planetary Web site front line by launching sites in Canada and the United Kingdom and opened an part in Dublin. The Dublin king 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 first descend 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. There is not as strong a correlation amongst its sales and consumer confidence levels as there is with Blue Niles customers. With over 100 stores in international markets, Tiffanys operations are oft 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 business 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 lig ht of the previous answers, I would recommend the following1) Zales needs to expand to markets in other than North America to lessen the severity of the effects of future 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 generate revenue and improve its margins by lowering operating costs.2) Blue Nile should continue focusing on its low price for high-quality diamonds and on its unique online customer experience to further differentiate 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 ray its marketing efforts to online communities and to the p ublic in general to increase its brand name recognition and appeal.3) Tiffany should continue to increase its small-store formats in the U.S. and develop a stronger presence in its direct selling channel. It needs to grow its sizable international operations, particularly the fast-growing Asian luxury market, in addition to unveiling untapped emerging markets. With the increasing cost of diamonds and gold, it might assess the advisability of active in sales promotions which it has never before done. Most importantly, Tiffany should continue increasing its supply chain efficiency and protecting its brand equity at call costs.