World's biggest online diamond retailer to open more stores

Image from Wikimedia.

The truism about internet business being a cycle of unbundling and bundling was again proven by Blue Nile that announced a decision to add more physical stores in its latest quarterly call.

Blue Nile, a business started in the '90s by Doug Williams who thought diamond shopping could be much better online, is opening three to four "webrooms" in 2016 after the success of its first brick-and-mortar store which opened in June in New York. Harvey Kanter, Blue Nile's CEO, made the announcement during a quarterly earnings call on Thursday.

The phenomenon of unbundling and bundling was noted by venture capitalist and Internet pioneer Marc Andreessen who observed how internet services would pull apart traditional businesses but then rebundle them again because both the demand was there and the business case is compelling. Music is one example.

"It made sense in the LP and CD era to put eight or 10 or 12 or 15 songs on a disc and press the disc and ship it out and have it sit in storage until somebody came along and bought it," said Andreessen in an interview with Harvard Business Review.

"But, when you have the ability online to download or stream individual tracks, then all of a sudden that bundle just doesn’t make sense. So it collapsed apart into individual MP3s. And I think now it makes sense that it’s kind of re-bundling into streaming services like Pandora and Spotify."

Blue Nile had good financial news to report with just under $110 million, an increase of 4% and an EPS of $0.17 per share, a double-digit increase across net income and EPS. The company's stock is up 18% this month to $38.01.

Blue Nile's emphasis is on education, helping first time buyers to navigate diamond buying for the first time. Kanter explains that the webrooms are another way to help its customers.

"For the first time in our history, we opened a freestanding physical location where shoppers can try a jewelry in person, browse our entire selection using an in-store iPad and speak to one of our non-commission diamond jeweler consultants face-to-face."

Kanter would only speak generally about the new brick and mortar outlets stating the long lead time to get a store up and running. Kanter did recoil from the word "store" preferring the designation "webroom".

"What we are not going to do is open stores, Web Rooms for the sake of opening. We are very exacting in what we believe are the critical requirements and we want to see if we can replicate the success of the first Web Room concept materially, it’s in the same regard of the financials."

Amazon also opened its first physical store this year in Indiana.

Hat tip, Raparport.