Introduction
Blue Nile was founded in 1999 in Seattle. It has grown from a company knows as Internet Diamonds Inc. and eventually became one of the largest online retailers of diamond engagement rings (Hoffman 473). The goal of Blue Nile was to address the consumers’ need for engagement diamond rings and ease their search for these products. The company offered a wide selection of rings, and also provided the clients with information to educate them about making the right choice, increase their confidence, and offer guidance and help. There are three official websites of Blue Nile for the customers from the US, the UK, and Canada, and some subsidiary websites for the clients from the European Union. Overall, Blue Nile can serve as many as 40 countries and operate in over 20 different currencies.
SWOT Analysis
Strengths
The company’s brand image, recognition, and size serve as its primary strengths. Besides, Blue Nile also has a clever strategy for dealing with its competitors in the diamond industry (using a two-horned dilemma) and addresses the competitors who operate both online and through brick-and-mortar shops. Another strong feature of Blue Nile is its wide coverage that allows it to operate in multiple countries serving a large base of the customers – this aspect makes the company more open to new clients and better known. As a result, its recognition is the key quality that will encourage new buyers to prefer the Blue Nile to the other retailers.
Weaknesses
A strong dependence of the diamond cutters, delivery services, the suppliers, and the other representatives of the supply chain creates the main weakness of the company; this includes not only partners’ operations but also their bargaining power and the ability to impact the pricing of the end products. Besides, the fact that Blue Nile operates online only was previously mentioned as one of the strengths; but it is important to mention that this feature is also a weakness of the company because its customers lack an opportunity to touch the products they choose and compare different items.
Opportunities
Improving their communication with the consumers is a significant opportunity for the company to gain a larger consumer segment in the market. Selling luxury goods such as diamond engagement rings, Blue Nile is to offer excellent customer experience and thus create its point of difference from the other diamond retailers. Perfecting their relationship with the customers and creating a better trust as a retailer is the company’s opportunity to win the clients. This approach is the most successful because in most cases engagement diamond rings are not a product bought regularly – so retailers such as Blue Nile usually have only one chance to deliver the best quality experience to a customer. The modern consumers are tech-savvy and are more likely to search for an online experience purchasing diamonds and jewelry, and that is why the Blue Nile that operates on the Internet has an opportunity to attract more buyers.
Threats
One of the threats for the Blue Nile comes from its direct competitors – DeBeers, the company that has been one of the leading diamond retailers in the industry for a long while, and Tiffany& Co., a massively popular company with a powerful brand reputation and recognition. Right now, the two competitors have Blue Nile steadily run in the middle of the competition, outperforming the companies that represent the bottom segment and at the same time, unable to break through to the top where the true behemoths operate. Besides, the additional threats are posed by the company’s potential new competitors and its substitutes (the websites focused on online retail such as eBay).
PESTLE Analysis
Political Factors
Since Blue Nile operates globally and serves customers from about 40 different countries, it is exposed to several political factors that could affect its performance. Some of them are the political situations in the countries – armed conflicts, international conflicts that restrict the international trading relationships, the sanctions imposed by the governments on the products offered by Blue Nile, international relations favoring and benefiting the company’s competitors from the neighboring countries or the domestic retailers and creating limitations for Blue Nile.
Economic Factors
Economic factors involve taxation, the terms of business development, international trading, and import. They also include supply and demand for the diamonds and jewelry and can fluctuate depending on the economic situation in the countries and the rates of inflation. Diamonds are a luxury product that will likely be purchased by fewer consumers should the economic situation in the country become worse.
Sociocultural Factors
The popularity of goods sold by Blue Nile may drop or rise due to such factors as the migration of richer consumers (in or out of the country), consumer preferences and social trends (fashion promoting or demoting diamonds), lifestyles (preference for luxury or simpler choices).
Technological Factors
Since Blue Nile is heavily dependent on the prices and terms established by the participants of their supply chain – the improvement or limitations in their fields may affect the performance of the retailer. For instance, a new technology allowing a better, faster, and more precise diamond cutting will result in a decrease in the prices of the diamond cutters and will allow purchasing their services at a lower cost.
Legal Factors
Laws affecting import and export patterns are the direct legal factors for Blue Nile. The other factors include the policies as to the consumption of the product, and rules allowing or permitting the fraud, counterfeit, and imitation of brand luxury goods.
Environmental Factors
The company’s operations may be affected by the environment. For instance, a storm may cause a delay in the product delivery, or a batch of packages may be damaged due to the environmental impacts for which the company would have to reimburse the consumers.
Challenges Faced
Just like the majority of online retailers, regardless of the products they sell, Blue Nile faced the challenges that involve the creation of a productive supply chain, costs related to the international expansion and adjustment to different markets, engaging the buyers who purchase diamonds as a form of investments (such diamonds need to be inspected physically before being cut), and self-promotion to the consumers unfamiliar with the whole process of search for rings and purchasing diamonds.
The most significant challenge is to build a supply chain and ensure the quality deliveries without having to pay an extremely high price. Being dependent on the terms established by the diamond cutters is the greatest concern for Blue Nile because good diamond cutters are rare and thus can dictate their own terms to the retailers.
Work Cited
Hoffman, Alan N. Blue Nile Inc. Case 10. 2016.