CASE STUDY: BLUE NILE AND DIAMOND RETAILING

Although there are many phases in supply chain and it can be designed in various ways, in the end, the main focus should be satisfying the customer needs. Therefore, any retailing, including diamond retailing all the entities should be evaluated by the customer’s perspective and should be configured according to the company’s strategy. In overall the strategies should be complied with firms competitive strategy and each unit of supply chain.

There are several factors influencing diamond retailers, Blue Nile, Zales and Tiffany in terms of cost and services  such as inventory, information, response time, product variety, availability, order visibility and return ability.

1)Blue Nile, the largest retailer online, their competitive strategy is selling high end products with outstanding prices.  From the customer perspective, it should be noted that they offer a large variety and availability of products. In 2008 Blue Nile offered more than 75000 diamonds on its site. Blue Nile also let their customers to build their own products. It means they have flexibility and let their manufacturers to postpone customization for their supply chain.  Moreover it shows that Blue Nile serves a great information flow between manufacturer and customers.  

In terms of response time, customers are much more tolerated to wait for their orders. Therefore, they do not need to hold inventories but their suppliers provide them very quickly and it just took only three days until it transported to the buyer. This ability comes from good suppliers relationship, strong information flow and also flexibility. Therefore, customer experience is great in Blue Nile. Although, return ability is hard to provide for online retailers, they even offer a 30-day money back guarantee on some items.

Zales, unlike Blue Nile, they could not able to combine their competitive strategy with supply chain strategy. Although they started as affordable and modest quality diamond retailer, they had to change their strategy because of declining market shares. Their new strategy was to sell more from fashion and upscale items. It is certain that if there is inconsistency between the competitive strategy and the supply chain, it should be redesigned or the core strategy should be revised. However, Zales could not adapt their strategy and control their inventories. In order to diminish costs, they have tried to exploit inventory from upscale strategy but the result was huge loss. In the coming years they tried to control inventories by closing some stores and decreasing staff however, even it could not be prevent them to lose $200 million in 2008. It is apparent the problem of decision making about their supply chain strategies and inconsistency of positioning reflected customer experience and made them unsatisfied. In addition to this, they could not able to manage their inventories, in addition to a high number of stores and labor cost caused them to suffer a lot. They never serve product variety and availability, customer experience; return ability options that Blue Nile served successfully.

Tiffany has always become customer-oriented   retailer and determined their strategies by focusing their needs. They both offer high end products and also non-gemstone sterling silver jewelry variety is great in their portfolio.  Not only product variety, they also serve availability in their stores, which may be more expensive compared to Blue Nile. Tiffany gained these abilities through vertical integration. Unlike the other retailers, Tiffany has manufacturing facilities, a retail service center that supplies stores, and diamond processing centers in seven countries that led them to have more control and power. Although for Blue Nile customers have to wait for their orders, response time immediate pick up possible in their stores. For return ability, it is much more easier rather than online retailing. Besides, information flow and customer experience is direct with customers, which can be used to receive feedback from customers and designing the products and strategies based on their requirements. Within these abilities they experienced high margins more than any other retailer.