1. What are some key success factors in diamond retailing? How do Blue Nile, Zales, and Tiffany compare on those dimensions? Blue Nile has an obvious advantage in product variety and product availability since customers can “build their own ring” by choosing from an inventory of about 75,000 stones online. The Tiffany brand is very strong and well established. It is associated with glamour, luxurious, trust, and customer service. So Tiffany can get higher margins than its competitors. Nile’s supply chain structure has major advantage in facility costs. Because items sold through the Blue Nile Web site are customized. So company can keep inventory longer and reducing safety inventory. Blue Nile has higher transportation costs than Tiffany or Zales. The outbound transportation time and costs are much higher because of aggregate inventory.
2. What do you think of the fact that Blue Nile carries about 30,000 stones priced at $2,500 or higher while almost 60 percent of the products sold from the Tiffany Web site are priced around $200? Which of the two product categories is better suited to the online channel?
In Blue Nile cases, the main reason may be lower inventory holding costs savings safety stock, the company can provide customers with a wide range of product variety and product offerings. Price of $ 2,500 or more stones relatively low demand and high demand for change is unique, high-value items. Company must carry a high demand for large changes in safety stock to meet the required level of customer service. Given the high price of the stones, the cost of holding them in inventory is proportionally higher. Blue Nile through converged network channel inventory, but also broadens the availability and variety of products available to customers.
Tiffany brand is built on a charm, luxurious, and quality of customer perception when accessing a tiffany stores. This is due to both sides of the products and services. Company inventory includes all kinds of high-end diamond jewelry items from the very basic but elegant tableware. Considering the strategic importance of brand image, the breadth of the inventory,
promotes small facilities, and lower cost, it is meaningful for tiffany positioning high-end products in storage and move the D items to the online channel. This allows it to utilize the limited facilities space emphasizes the high-end projects and customer service, and provide the low end of the online project.
3. Given that Tiffany stores have thrived with their focus on selling high-end jewelry, what do you think of the failure of Zales with its upscale strategy in 2006? To cope with fierce competition environment, Zales’ strategy about sales channels make the customers think it is a inexpensive brand
4. What do you think of Tiffany’s decision to open smaller retail outlets, focusing on high-end products, to reach smaller affluent areas in the United States? Opening the smaller retail outlet will help Tiffany to touch its customers in these areas. And customers are also easier to experience the Tiffany’s products and services. However, opening these stores will require Tiffany’s to up the inventory level and safety stock.
5. Which of the three companies do you think was best structured to deal with the downturn in 2009? Blue Nile has an obvious advantage in this regard with its very low fixed-cost structure compared to Tiffany and Zales. Property and equipment to net sales ratios are 2.38, 13.93, and 25.46 percent for Blue Nile, Zales, and Tiffany. Blue Nile also has a very low inventory investment than the other two companies. Cost of sales in the Blue Nile is higher, but this can be attributed to low profit and high cost of the outbound distribution.
6. What advice would you give to each of the three companies regarding their strategy and structure? Blue Nile can take a positive position, emphasizing its lower prices with similar quality to very high-end diamond retailers. Although this is a bad news to sell in general, it may be easier in the difficult economic environment. Tiffany has to continue working hard to maintain its brand image. It cannot centralize its high-end stones because that would conflict with its brand image. Zales need to control its
inventories. Like centralize the expensive diamond for stores. Help customers to choose higher-end diamonds by sample.