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Blue Nile: Internet Disruptor Makes the Virtual, Real

Founded in 1999, Blue Nile set out to disrupt the way people buy diamonds, with a special focus on the engagement ring bridal market, skimming the cream off of traditional jewelry stores’ business.

The idea of selling engagement rings online grew directly from founder Mark Vadon’s personal experience trying to buy an engagement ring.  After doing preliminary research into the 4Cs, the traditional gold standard for buying a diamond, Vadon went to a well-known jewelry store to make his purchase and was stymied by the fact that two seemingly identical diamond rings had a $5,000 difference in price.  “Why the difference?” he asked, and got a mealy mouthed non-answer from the sales clerk.

From that bad experience a business plan was hatched around the idea of providing in-depth and non-intimidating education on the diamond buying process. He created a marketplace where the pricing was fully transparent, all without the operational overhead of a brick-and-mortar store.

Blue Nile offered customers a revolutionary new way to buy diamonds:

  • To tap an inventory of GIA-certified diamonds that take much of the guesswork out of the selection process
  • To offer those diamonds at a significantly reduced price thanks to the efficiencies of an Internet-only business
  • To use new Internet-powered marketing tools to spread the Blue Nile message virally.

That business concept has grown into a half-a-billion dollar company, which claims to be one of the world’s largest online retailers of engagement rings.

But after 16 years, Blue Nile is reaching a tipping point that now requires solutions to new business challenges. Blue Nile needs to transform from a transactional retail model, following the traditional ‘Price it low, watch it go!’ retailing model, into a branded, market-driven business.

Why?  Very simply, the market for diamond engagement rings is changing.

Diamond engagement market is changing, so Blue Nile must change

The diamond engagement ring market, the platform on which Blue Nile’s business was based, is very different today than it was back in 1999 when it was founded.

Today, the marriage rate stands at a historic low of 6.8 marriages per 1,000 people, down from 8.6 in 1999. Not only are fewer people choosing to marry, but many are deciding to forgo the diamond tradition all together in favor of other stones or other symbols to mark their engagement.

marriage rates

What’s a diamond ring retailer to do? Blue Nile decided to make the leap from virtual Internet retailer into the real world with a store front they call a Webroom.  The whole concept is to help customers navigate the vast online diamond inventory and design options Blue Nile offers in a personal one-on-one setting.  They are testing their first concept at Roosevelt Field Mall in Garden City, NY.

But the Webroom is not a traditional jewelry retail store by any stretch of the imagination.  For example, the product samples on display are CZs, not real diamonds, but features in authentic settings.  The Blue Nile Webroom is designed to help customers select across the vast diamond inventory and design options Blue Nile offers online.   So in the Webroom customers can see, touch and try on actual ring settings, but they must still buy online.

While the Blue Nile Webroom concept is to facilitate the customer in the buying process online, question is whether today’s inter-savvy shoppers need such navigation help.

Blue Nile must transform from a transactionally-based retail model into a branded, market-driven business

The challenge for Blue Nile to take that step from a virtual Internet marketer into the real hard-knock retailing business is that it must build a connection with customers.  It must build a real brand.  It must build trust. But they are taking a big risk. Millennial customers that Blue Nile targets are already quite confident buying online, even an expensive purchase like a diamond ring.

The real opportunity is to establish Blue Nile as a brand that means more than just diamonds for less.  It’s got to connect with the customers in emotional and meaningful ways. It’s got to become a partner in the purchase process.

The Webroom is Blue Nile’s big bet that a face-to-face, person-to-person experience will lead to more online sales.  It’s working for Warby Parker. Let’s see if Blue Nile can realize the same success.

Learn how you can connect with millennial jewelry customers

Unity Marketing leads with research to help jewelry marketers pivot to the next generation of customers:  Millennials.  Our study, Marketing to Millennials: How to Sell Luxury Jewelry to the Next Generation of Affluents,probes this generation’s attitudes about jewelry and where it fits in their lifestyle and value system.

While marketers often talk about these young consumers as ‘aspirational,’ the challenge for luxury brands is to become ‘inspirational’ to the next generation who bring a unique functional and practical approach to their shopping behavior.

Partner with Unity Marketing to understand your future customers — Millennials on the road to affluence

Unity Marketing is expert at giving marketers access and understanding of the millennial-generation customer that is their best and brightest prospects today and tomorrow.  We provide both qualitative and quantitative research, made available in off-the-shelf reports, as well as customizing the research to particular brand’s needs.

Call us at 717.336.1600 or email to meet the millennials on the road to affluence. key to your brand’s future.  Learn more about our custom research services in this prospectus entitled What-So-What-Now What?

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