1. What are some key success factors in diamond retailing? How do Blue Nile, Zales, and Tiffany compare on those dimensions?

Key drivers of customer purchases in diamond retailing include quality and range of products offered, reputation, professional advice offered, and customer perception and emotional bonds, including a positive buying experience and customer service. Success is also dependent upon obtaining economies of scale through such avenues as preferential access to resources, an effective supply chain and marketing strategy, as well as an ability to control facilities and operating costs and manage inventory effectively.

Blue Nile’s, Zales’, and Tiffany’s key success factors in dealing with customers are related to …show more content…
Tiffany’s sales of sterling silver jewelry priced around $200 are more suited for the strengths of the online channel than are Blue Nile’s thousands of stones priced at $2,500 and above. With the growing popularity of e-business, competition with Blue Nile’s sole business model is increasing. In addition, with its well-to-do but price-conscious customer base, the company is more affected by the effects on difficult economic times on purchasing behavior than is Tiffany with its less price-sensitive global customers who demand luxury goods at any price. Blue Nile is also more susceptible to the rising costs of diamonds and of labor because it does not purchase the majority of its diamonds until a customer decides on a purchase.

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? Tiffany’s upscale strategy, affluent customer base, and business model evolved over a period of more than 100 years, and changes such as adding an online distribution channel were made gradually and as an extension of Tiffany’s current business practices. Zales, on the other hand, handled a strategic shift to upscale retailing within a time period of one year and failed drastically as shown by the following chain of events.

Feeling the pressure from discounters Wal-Mart and Costco, Zales decided to give up its long-time strategy of selling