Blue Nile's Dare

When Blue Nile CEO Diane Irvine said in a press release this week that she wants to be "a disruptive force" in the jewelry industry, what kind of disruption did she have in mind? Her company, by far the largest online diamond retailer, has just released an app for Apple devices, something she said could be a "game changer."

The shareholders of a public company usually want their CEO to be hungry, combative and competitive, someone that is out there fighting for larger market share and growing profits. So far, while the company is doing well, Wall Street did not reward it with a whole lot of appreciation, and that may explain her statements this week.

But beyond protecting share value, what can the average retailer learn from this statement? We have been hearing a lot of grumbling from Independents in the U.S. about online sales in general and Blue Nile in particular. Most of it centers on price and loss of sales.

Blue Nile and Irvine know that a basic tenant of a successful business is to keep evolving. The business environment is in constant flux, competitors are growing, consumers are looking for something new, and those that do the same without changing, often find themselves left behind.

Irvine's statement, “We feel the Blue Nile App will be a game-changer in the way consumers shop for diamonds and will be a disruptive force in the diamond industry moving forward," is a dare. She is challenging the independents in an arena where she is doing well. And jewelers can't afford to ignore it. She is confidently sending consumers into jewelry stores with price information and images so they can comparison shop live. Is that the game they want to change?

In the past few years we have seen the number of independents shrink, while the number of specialty jewelry doors remain pretty much constant. At the same time, sales at stores are declining. This means that for every independent that folds, a regional or major opens a new store, but the loss in revenue is going elsewhere. Some is spent on gadgets and vacations, but some is going to the growing online segment.

Is this something to fear? Not necessarily. One independent jeweler told me this week that he can beat Blue Nile's prices any day, and still protect his margin. He has a number of tactics to protect his store and grow its business, and all of them are innovative, and that is the key.

Analyst Ken Gassman says, "Show them your tattoo." Not that you need to run out for some skin ink, but that you must recognize that in a culture where people modify their body to underscore that they view themselves as unique beings, your store and jewelry should be unique too.

Our research shows that most first time diamond buyers, even if they first go online, stop in a store to learn more and see first hand what is it that they are shopping for. If a large segment of them goes back online to make their purchase, it's a missed opportunity for a retailer – they had a "hot" customer in the store, and s/he walked out with their money in their pocket, instead of a diamond. This is where the change needs to be made.

If Diane Irvine is sending the hordes to the stores – that is great. Get the App, study the options, and be ready for the questions. Maybe it's time for independents to be a disruptive force in her business.