Blue Nile Experimenting With Online To Offline Model

According to a Research and Markets report, the global jewelry market is projected to grow 5% annually to be worth $257 billion in 2017. The online fine jewelry market accounts for 4%–5% of this market and is expected to grow at a much faster rate to be worth 10% of the market share by 2020.

Blue Nile’s Financials

Online jeweler Blue Nile’s (Nasdaq: NILE) Q1 revenues grew 0.1% over the year to $113.8 million. It ended the quarter with earnings reducing 8.75% over the year to $2.13 million and an EPS of $0.18. The market was looking for revenues of $113.9 million with an EPS of $0.21.

During the quarter, sales in the US for engagement products fell 4% to $62.6 million. The non-engagement jewelry sales grew 6% to $30.4 million. Blue Nile’s conscious effort to diversify into the non-engagement sector has stood it in good stead. According to a report by the Demographic Intelligence, 2015 had a marriage rate of 6.74 per 1,000 people in the US – the lowest ever. But the number is expected to fall slightly lower over each of the next two years. Compare that with 2008, when the marriage rate in America was 7.09.

International sales grew 6% over the year to $20.8 million. Excluding impact of foreign exchange fluctuations, international net sales would have grown 9% over the year.

For the current quarter, Blue Nile expects revenues of $107 million-$111 million, compared with the Street’s projections of $109.4 million. It expects to end the quarter with an EPS of $0.88-$0.95, compared with the market’s estimate of $0.88 per share. Blue Nile projected the year’s revenues at $465 million-$495 million with an EPS of $0.88-$0.95 compared with the Street’s estimates of revenues of $475.7 million and an EPS of $0.88.

Blue Nile’s Online to Offline Model

Blue Nile realizes the importance of an online–offline model in jewelry sales. To cater to the growing demand of consumers who want a seamless experience irrespective of the medium used for shopping, Blue Nile has been building Webrooms. Webrooms are brick-and-mortar stores that don’t offer complete sales, but allow consumers to talk to jewelry experts and see, feel, and touch the jewelry in a pressure-free environment before buying it. The first Webroom was opened in June last year in a New York city mall. Inspired by the success of the location, the company has opened four Webrooms already. Its next Webroom is expected to open in Bellevue by Thanksgiving this year.

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