Big article in New York Times about Blue Nile

[pricescope]

"MARK C. VADON is one of the world’s top diamond retailers, but wholesalers often decline to meet with him on the convention floor at jewelry trade shows. At the very least, many ask him to flip over his nametag so that no one knows who he is or what company he runs."

"...many smaller jewelers have been threatening to boycott wholesalers that supply online retailers. At the same time, consultants have been earning a handsome living advising retailers struggling to compete with Blue Nile — teaching them to “romance the stone,” as one consultant, Shane Decker, put it, using industry-speak for stressing the whole diamond-buying experience over merely the price."

Three pages article on Blue Nile in New York Times: When Buying a Diamond Starts With a Mouse

Nice picture of their shipment center. (photo from NYT site: http://www.nytimes.com/imagepages/2007/01/07/business/07nile_CA1_ready.html)

 

[avlis]

interesting article. I thought it was interesting that initially the article equated BN to WalMart and Costco, perhaps trying to incite a feeling of inferiority in the BN product.

the lack of a discussion of the QUALITY of diamonds sold was also a blatant omission.

 

[pricescope]

Date: 1/6/2007 9:48:56 PM
Author: avlis

the lack of a discussion of the QUALITY of diamonds sold was also a blatant omission.

You're right, Avis, quality of the diamonds and jewelry available is a big factor too. Although for a business section, I think it was pretty good summary...

 

[Serg]

"The overabundance of cash engendered bad habits. The company, which at the end of 1999 switched to the more exotic Blue Nile name, booked $44 million in revenue in 2000, its first full year under Mr. Vadon, but managed to lose $30 million, largely because it spent $40 million advertising on television. "

 

[finerthings]

Thanks for sharing this article. Blue Nile has created a very positive name for itself, and I''m sure that we''ll be seeing more continued growth from this company as long as they continue to provide quality diamonds and service to the public. A big improvement to their business however would be to add actual diamond photographs. My friend recently purchased a beautiful engagement ring fom BN, after first trying the local jewellers and becoming frustrated with their sales tactics and poor quality, he learned as much as he could from Pricescope and took the plunge. So kuddos to the Pricescope community!

 

[San Francisco]

I shopped many Internet sites, including Blue Nile and in the end have bought my diamonds from Niceice.com and Whiteflash.com . But the article on Blue Nile is very interesting and worth the read as they apparently are not only the dominant force on the Internet in the world of diamonds but becoming so in the entire diamond industry in the US as well.

Here are the statements I found most interesting in the article. What is interesting is not the Blue Nile statistics but the industry wide ones stated in the article. Anyone else know of the validity of these statements?

“Diamond jewelry accounted for nearly half of the $59.4 billion in jewelry, including watches and costume pieces, that United States retailers sold in 2005.”

Tiffany & Company is the largest marketer of diamonds rings in the country (presumably on dollar volume not quantity) and Blue Nile is now second.

Independent Jewelry stores are down by over 3,000 to 27,000 since 1999.

“The average diamond ring bought at the Blue Nile site costs $5,500, twice the industry average of $2,700.”

“the typical jewelry store sold its rings for 48.7 percent above cost in 2005, though that is down from 51.6 percent in 2002, an annual survey by Jewelers of America found.”

Blue Nile bought $170 million in diamonds from wholesalers last year.

Blue Nile sells its diamonds at 20 percent over cost.

Blue Nile’s success is due to its founder, Mark Vandon, who knew nothing about diamonds in 1999 when he got into the business. What he did know (he is a Stanford MBA) was how to raise money in the Dot.com explosion going on and was able to raise $50 millions in venture capital funding and manage his way through the Dot.com bust as well as his own mistakes.

San Francisco

 

[pricescope]

San Francisco, these numbers are in accord with other sources cited in this regard.

Ee: $170M. It's not clear from the article whether they bought it for stock or this was the cost of the goods they sold (I think latter is more likely).

 

[Modified Brilliant]

It's an interesting commentary on how the jewelry industry has evolved. Mark Vadon had luck and timing on his side as well as intelligence.

In the 1980's, big catalog showrooms like Service Merchandise drove many independents out of business.
Twenty-plus years later, the internet is contributing to the same situation and some independents are suffering.
My family owned two retail jewelry stores until 1987.
There will always be a need for human interaction to clean and polish a ring, check and tighten prongs, change a watch battery, etc.
Independents and internet vendors can co-exist peacefully. Each has carved out their niche in the industry.
Blue Nile is NOT a one size fits all jewelry store.

www.metrojewelryappraisers.com

 

[ademello]

Date: 1/7/2007 6:26:35 PM
Author: Modified Brilliant
It''s an interesting commentary on how the jewelry industry has evolved. Mark Vadon had luck and timing on his side as well as intelligence.

In the 1980''s, big catalog showrooms like Service Merchandise drove many independents out of business.
Twenty-plus years later, the internet is contributing to the same situation and some independents are suffering.
My family owned two retail jewelry stores until 1987.
There will always be a need for human interaction to clean and polish a ring, check and tighten prongs, change a watch battery, etc.
Independents and internet vendors can co-exist peacefully. Each has carved out their niche in the industry.
Blue Nile is NOT a one size fits all jewelry store.

www.metrojewelryappraisers.com

Well Said Jeff,
The Retail Jeweler will always have a customer. In fact many of my clients that have made a sizeable purchase from Blue Nile as well as other E-tailers bring in Semimount settings and weddingbands which were later purchases from local jewelers. A common request is that the appraiser appraise it while they wait and a jeweler reset it many times in a semimount while they wait. I can see a market for the jewelry designer as well as the retail full service store in this area. Also by the way it was great bumping into you the other day.

Arthur DeMello GG (GIA)
Boston, MA