Blue Nile Gets Physical In Bid To Boost Brand Name

The award for the most ironic piece of news of the slow summer months should perhaps go to that in which online diamond and jewelry retailer Blue Nile said it was creating a physical presence in order to enable potential clients to get a see and a feel for its goods. After taking the online charge forward for the past 15 years, the leading diamond and jewelry e-tailer has an agreement with leading U.S. department store chain Nordstrom to give potential buyers the opportunity to look at goods before placing an order online.

Diamond rings on show at Nordstrom stores in Seattle and New York cannot be bought in-store, but shoppers can try them on and inspect them up close. Buyers must then go online to Blue Nile's website to execute the purchase. The move aims to bring new customers to Blue Nile's site and the reason for that, say analysts, is that U.S. national jewelry chains now an online presence as well as tens or hundreds of stores. And since these companies now have both a physical and an online presence, Internet retailers such as Blue Nile have been left somewhat naked and feeling a chilly draft through not being able to physically present goods.

Now that all other retailers are online, Blue Nile’s relative advantage, it appears, has been reduced. For all the hullabaloo regarding Internet sales, it appears that most consumers still build a brand in their minds as a result of seeing the name repeatedly on Main Street, in malls and endless advertising on traditional media. Amazing. Who would have thought?

The costs involved in having a chain of stores are huge, but consumers at least recognize leading jewelry retailers, such as Kay Jewelers, Jared and Zale Corp, before it was snapped up by Signet. With Blue Nile’s stock price plunging by 40 percent or so this year, and Signet soaring 30 percent, Blue Nile clearly felt the time for drastic action had arrived.

Although Blue Nile is reportedly able to offer goods at a discount of 20-40 percent, there is a reduced benefit if consumers do not know the company or what it has to offer. And while online can offer a strong price benefit, customers usually have to wait a day or two to receive the item unlike store-based purchases that allow them to walk out with the item in hand.

Furthermore, like it or not, people – even the young and Internet-savvy section of the population – more often than not want to touch and see the ring that is going to symbolize their engagement or wedding.

The idea of creating a brick-and-mortar base, of course, goes totally against the trends of the past decade or so. Without traditional overheads of rent, utilities, large staff numbers and other expenses, online sellers are able to provide the type of discounts that are simply unavailable to physical store owners.

Malls in the United States, apart from around 100 leading such shopping centers, are increasingly being seen as dinosaurs. Not only is online shopping increasing, but the use of smartphones, tablets and other portable devices is making Internet purchasing something of a no-brainer for a wide range of goods.

In Britain, one research company found that one in seven shops in the U.K. are standing empty. While the vacancy rate in London is almost one shop in 10, in the northwest it is 20 percent, while in some smaller centers, up to one in three shops are vacant.

Indeed, the future does not look very rosy for traditional forms of shopping in which people actually leave their homes or office and enter malls and stores. So-called Millennials are forecast to account for close to one-third of retail sales by 2020. And they are not generally looking for a mall ‘experience’, but rather an intimate, non-ostentatious way of searching for highly personalized brands, available at so-called ‘village lifestyle centers’, for example, that provide a more authentic feel. They were also born into the Internet age and see the speed and efficiency of online shopping as a given. In that case why would shopping malls be of any interest to them?

The financial crisis of late 2008 and the recession that followed have changed shopping behavior, with online spending a clear favorite, while trips to the local mall being seen increasingly as simply tiring, irritating and time-wasting.

But is online shopping all it’s cracked up to be? From the hype, one would assume that a large percentage of overall sales are taking place online. In reality, only around six percent of total sales are estimated to be of the online variety.

Furthermore, research by consulting firm A.T. Kearney found that that 61 percent of consumers in the U.S. and U.K. spent their shopping time in stores.  In addition, the study found that two out of five shoppers spent more than they initially planned while shopping in brick-and-mortar stores, while just 25 percent of online shoppers did likewise.

Turns out that consumers want to try out the products and to socialize with friends and family but also want the instant gratification of taking newly bought goods home with them. 

The move by Blue Nile again raises the eternal question of how do you build a brand. Can it be done ‘on the cheap’ by only being online? Seems that companies are going to need both an online and physical presence to keep themselves relevant to shoppers. However, many brick-and-mortar stores are going to have to drastically alter the shopping experience that they offer. For the diamond jewelry business, that means empathetic and well-informed store assistants who can provide information that goes far beyond what shoppers can read online.

If stores selling kayaks and mountain bikes insist that staff have solid experience of using those products on a regular basis so that they can provide an honest appraisal of their qualities, would it be too much to expect jewelry stores to have assistants who can provide information that goes beyond a standard rehashing of the 4Cs?