Blue Nile Case Questions

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Blue Nile Inc. in 2010: Will its Strategy to Remain Number One in Online Diamond Retailing Work? 1. How strong are the competitive forces confronting Blue Nile and other online retail jewelers? Do a five-forces analysis to support your answer.  Rivalry among competing sellers: Rivalry among competing sellers is very strong. For one, the firms in the industry have high fixed costs. Jewelry is meant to be expensive, it’s a luxury item. According to the text, the diamond and fine jewelry retail market was intensely competitive, with sales highly fragmented among locally owned jewelry stores and other retail stores. There are many ways to purchase jewelry. Second, competitors are numerous and are roughly equal size and competitive strength. There are 27,000 jewelry stores in the United States. With the top 40 jewelry chain stores operating about 6,405 stores. In this case, Blue Nile had to compete with online and offline traders. The recession hit the jewelry business real hard but Blue Niles business model kept them functioning through the hard times. In addition, many of the online retailers employed Blue Niles business model purchasing stones from suppliers only when an order for a specific stone was received and quick delivery when purchased.  Suppliers: Supplier bargaining power is weak in this industry. Blue Niles economical supply chain and comparatively low operating costs allowed it to sell comparable-quality jewelry at substantially lower prices than the leading competitor. Blue Nile found a way to exclusively make arrangements that allowed diamond and gem supplier’s products on the website. These arrangements included multi-year agreements where only designated diamonds were offered only on their website. Second, they didn’t purchase a diamond or gem from suppliers until a customer placed an order. In contrast, traditional jewelers had far bigger

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