Amazon CEO Jeffrey P. Bezos, who jumped into the business on Apr. 22, says he can buy a diamond wholesale for $500 and resell it for $575. Never mind that Tiffany (TIF ), Zale (ZLC ), and neighborhood stores are used to getting $1,000 for the same stone. Five-year-old Blue Nile Inc. has proved that this strategy can be very profitable. The online jeweler made $27 million on $129 million in sales last year. The upstarts "are going to kill everyone," says analyst Ken Gassman of New York-based Rapaport, which publishes a diamond industry newsletter.
In the jewelry biz, Blue Nile offers loads of educational information on diamonds so lovestruck men feel comfortable buying gems based on a collection of independent ratings on color, cut, clarity, and carat size.
The industries under assault have other more subtle characteristics in common, as well. Several, including jewelry and hotels, have long supply chains with many middlemen, each of whom takes a cut of the profits, driving up retail prices. A South African white diamond can pass through five different hands, including rough-diamond brokers, cutters, and jewelry and diamond wholesalers. Blue Nile connects over the Internet to its key suppliers, who buy their stones directly from South Africa''s powerful DeBeers Consolidated Mines Ltd. That eliminates three middlemen or more.
In the jewelry biz, Blue Nile offers loads of educational information on diamonds so lovestruck men feel comfortable buying gems based on a collection of independent ratings on color, cut, clarity, and carat size.
The industries under assault have other more subtle characteristics in common, as well. Several, including jewelry and hotels, have long supply chains with many middlemen, each of whom takes a cut of the profits, driving up retail prices. A South African white diamond can pass through five different hands, including rough-diamond brokers, cutters, and jewelry and diamond wholesalers. Blue Nile connects over the Internet to its key suppliers, who buy their stones directly from South Africa''s powerful DeBeers Consolidated Mines Ltd. That eliminates three middlemen or more.
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