Online Retailer of Diamond - Essay Example

 A. Description of the problem Blue Nile has grown to become the world's largest online retailer of diamond and other fine jewelry. Although Blue Nile has maintained its position over the past few years with most of its good management practices, changes in the industry and the competitive environment do not guarantee the company's position in the market. The company has to be proactive in addressing these strategic issues in order to maintain its leadership in online retail of fine jewelry; it has to expand its customer base while keeping the current profitable ones in its effort to acquire a larger share of the market. This requires an analysis of the company's competitive position as well as recommendations in order to defend and strengthen this position in the jewelry industry. B. Analysis of the problem Strengths. The company's strengths, or the sources of its competitive advantages include its brand strategy which is grounded on competitive pricing as well as its promise on excellent customer shopping experience. This promise of competitive pricing is grounded on the company's lean operations and supply chain efficiency, which are also included in the company's sources of competitive advantages. Blue Nile's strong ties and protective agreements with a variety of suppliers is also one of its strengths, which makes its supply chain efficiency less dependent on certain huge suppliers. The company's logistics system, more specifically its information technology infrastructure is a huge source of strength that enables the company to keep its promise of superior customer shopping experience through helpful information, support and excellent customer service constantly delivered. With regard to financial management, the company's long positive cash float is another competitive advantage. This enables the company to reinvest the cash for some revenue-generating activities such as marketing communications without incurring problems about liquidity when the time to pay its suppliers come. Weaknesses. The company's major weakness is its business model, of being an e-commerce company. Although a lot of people have been increasingly starting to shop diamonds over the Internet, the huge portion of the jewelry market are captured by huge brick-and-mortar companies, with several stores all over the country. Among the larger segment of the market, they have more exposure when it comes to brand recognition. Opportunities. There are plenty of opportunities available to Blue Nile. For one, the market for jewelry locally has been growing. While online jewelry retail serves one segment of the total jewelry market, growth in this segment comes from converting customers who prefer to shop in traditional brick-and-mortar jewelers to buying online. Aside from this, the overseas market also provide a lot of opportunities for expansion. The reason why the UK and Canada share of the company's sales is low is due to its lower marketing communications spending and efforts on these markets. Threats. Although the company is growing as well as the industry, the online jewelry industry is becoming more cluttered. As seen in other companies' activities where they have adopted a business model similar to Blue Nile in order to gain cost advantages, the barriers to entry to the online jewelry industry is low. A newcomer does not even have to invest huge amounts of capital due to the agreements with the suppliers, as well as the design of the supply chain model. Aside from this, although there are prospects outside the US, most of the global demand for jewelry is located within the country. Market leaders under the brick-and-mortar segment of the jewelry are starting to adopt e-commerce platforms as well. Their strong brand equity can pose greater dangers to the operations of Blue Nile, especially when it comes to shoppers of traditional stores who can be converted into shoppers online. C. Alternative courses of action i. Alternative 1: Address the threats by investing in brick-and-mortar stores. In order to compete head-on to large brick-and-mortar competitors, the company can have both store layouts. Because Blue Nile will also have more street presence than its online competitors, the company will gain higher recognition among customers-at-large. The major disadvantage to this is that the company will have to re-design its whole business model, and it will have to lose the advantages that it enjoys with its lean operations and efficient supply-chain system. The company has to invest huge amount of money in physical stores; all these can affect the company's ROI, and possibly the company's stock price if the company fails to generate value through these efforts. ii. Alternative 2: Address the threats by increasing advertising of the Blue Nile brand over the Internet. In order to fight its brick-and-mortar competitors who have also adopted an e-commerce layout, as well as other online competitors, Blue Nile can invest in promoting its brand over the Internet. However, as stated in the case, because of the congested searches, investment in advertising over the Internet becomes less beneficial and cost-effective. iii. Alternative 3: Address the threats by changing marketing communications strategy. The company will have to change its approach in terms of marketing communications, widening its target market from the online shoppers, to traditional shoppers. With this, Blue Nile has to invest in increasing its brand awareness as well communicating the benefits of shopping online for luxury jewelry through marketing communication. By widening the target market and acquiring new customers from the traditional shoppers segment by converting them, the company can fight the threats of its brick-and-mortar competitors without having to invest in physical store facilities. This will also bring the company street presence; but all efforts must be directed to converting traditional shoppers to becoming online shoppers, at the same time making these customers prefer Blue Nile as their online retailer, and increasing visit to its website through brand management. D. Recommendation Blue Nile is a strong brand, which provides customers very high value in their purchases in the form of convenience, competitive pricing, customer service and support, etc. in many ways in order to maintain the customers' satisfaction and loyalty. Everything has also been present in order for it to continue thriving in the online jewelry segment—lean operations, efficient supply chain system, strong ties and protective agreements with a variety of suppliers, long positive cash float and virtually debt-free balance sheet. What it needs to do is to leverage all these. This can be done by extending the company's marketing efforts from online shoppers of luxury items to traditional shoppers. Instead of promoting Blue Nile, the company will have to promote the idea of buying online versus buying in traditional stores. This will have to be the company's goal and focus. While larger competitors can leverage their brand names through their websites, since Blue Nile offers the same, if not higher level of service quality to customers, it does have a lot of competitive advantages over them. Since it has been in the e-commerce business for long, it can improve its service quality in such a way that larger competitors who are more used to traditional facilities will have a harder time to catch up with Blue Nile's service quality. The company's target market must be expanded from the shoppers, to buyers in traditional stores. The company can launch a marketing communications campaign using the AIDA framework: the marketing communications mix can be part advertising, part publicity in the form of publicity stunts to create awareness of the brand Blue Nile among street shoppers. Blue Nile can use public relations in order to educate buyers about the benefits of buying online, as well as to direct buyers to the company's website to create their purchases. Because buyers can search and look for their desired diamonds or fine jewelry in the site, direct marketing will increase their desires. Lastly, in order to prompt them into action, the company can utilize some sort of sales promotion in order to reward buyers for immediately buying on the site. These are all aimed in order to acquire new customers, while the current system that is in place which is excellent in keeping old profitable customers should be maintained. Read More