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Blue Nile Inc.

Blue Nile Inc. By: Henrik Oiseth Jason J. Casey Lars Isaksaetre. Intro. Company profile Industry profile SWOT Financial ratios Strategies EVA . Company profile. Online retailer of fine diamonds and jewelry Headquarter in Seattle, WA 178 employees Founded in 1999

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Blue Nile Inc.

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  1. Blue Nile Inc. By: HenrikOiseth Jason J. Casey Lars Isaksaetre

  2. Intro • Company profile • Industry profile • SWOT • Financial ratios • Strategies • EVA

  3. Company profile • Online retailer of fine diamonds and jewelry • Headquarter in Seattle, WA • 178 employees • Founded in 1999 • Went public May 20th, 2004 • IPO $20.50

  4. Retail jewelry industry • $40 billion of annual revenue in the U.S. • Mature market • Discretionary consumer goods • Vulnerable to economic downturns • Seasonal sales cycles • Kimberley Process

  5. Porters 5 forces • Supplier bargaining power • Barging power has shifted • Easier to find new suppliers today • Barriers to entry • Capital intensive • Supplier dependent • Buyer bargaining power • Customers have some • Low switching costs

  6. Porters 5 forces cont. • Threat of substitutes • Other luxury goods • Synthetic gemstones • Degrees of rivalry • Competitive market • Tiffany & Co. • Zale Corporation • Signet Jewelers Limited • Costco, Wal-Mart, Amazon

  7. Threats • Intense competition • Counterfeit goods • Hacking and spoofing • Declining demand of diamonds

  8. Weaknesses • Lack of brand recognition • Profit margins • Concentrated supplier base • 70% of revenues from engagement rings and wedding bands

  9. Strengths • Unique business model • Mass customization • Inventory system • Price leader • Customer service • Call centers • Informative website • Company structure • Only 178 employees

  10. Opportunities • Growth in online sales • Diversify product portfolio • International expansion

  11. Financials for 2008

  12. Blue Nile vs. DJUSRS

  13. Strategy one • Merger and acquisitions • Blue Nile is in good financial shape • $54 million cash on hand • In a position to take on new debt • Horizontal or Vertical expansion • Greater market power • Increased diversification • Acquired by a larger organization • Risks • Integration difficulties • Loss of entrepreneurial ability

  14. Strategy two • Improvement of international operations • Half of the world market for diamonds is outside USA • Blue Nile’s international sales accounted for 9% of total revenue in 2008 • Mostly generated from the UK, Canada, Australia, and New Zealand • Shipping to 40 countries in the Asian Pacific region and Europe • More user friendly websites and payment options • Risks • Fluctuation of exchange rates

  15. Strategy three • Concentrated Supplier Base • Weakness • Rely too heavily on top suppliers • 25% from top three suppliers • Renegotiate new long-term contracts with existing suppliers • Acquire more suppliers • Risks • Jeopardize relationship with current suppliers

  16. Strategy four • Improve brand awareness • Increased advertising • Magazines, Billboards, Product placements • Exclusive Blue Nile collection • Artist in mind is Theo Fennel • Customer referrals discounts • Risks • Diluting the Blue Nile brand name • Campaign does not meet expectations • Could be costly

  17. Implementation • Outsource creative advertising • Company in mind BBDO • Advertising expenses • From $11.9 to $29.4 million • Increased market share • 6.3% to 6.9% of online jewelry sales • Increased revenue • $322 to $352 million • ROI • 63% • This strategy is also the least invasive…

  18. EVA All numbers in thousand EBIT (1-t) $169,400 (WACC) (11,690) EVA $157,710 • Based on expected increase in revenue and related costs

  19. Thank you for your time Questions? “the special question to the special girl deserves a special ring…” create yours at www.bluenile.com

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