ASSIGNMENT II- SUPPLY CHAIN MANAGEMENT

Made by

• Priyam Mehrotra(2101147)

• Priyansh Singh(2101148)

• Lingeshwaran R(2101149)

• Rahul Datta(2101150)

• Raja Aditya(2101151)
Q1 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, customer
perception and a positive buying experience.

•Economies of scales through such avenues effective supply chain, marketing strategy, control facilities and operating cost.

•Blue Nile offers high quality diamonds than other but with markups lower than Tiffany and Zales. Focuses more on customers who want good value and
prefer to shop conveniently from home without incurring high pressure sales tactics.

•Tiffany is a specialty jeweler that offers premium priced diamond rings, gemstone and fine jewellery. It’s exclusivity and brand image, extensive service
and fashionable locations allow it to maintain and gain market share

•Zales chain of retail venue for its middle-class target customers incudes Zales Jewelers, Gordon’s and Piercing Pagoda’s kiosks which appeal to teenagers
as well. It is more moderately priced compared to competitors and also competes with discounters such as Costco.
 Q2 What do you think of the fact that Blue Nile carries many stones priced at $2500 or higher whereas a large
fraction of the products from the Tiffany website are priced around $200. Which of the two products categories is
better suited to the strengths of online channel?

• Blue Nile is able to offer high priced diamonds by emphasizing the large variety of certified high-quality stones and
markup significantly lower than it’s competitors
• Main source of advantage lies in its lower facilities and inventory expense. Only one central warehouse is needed to
stock entire inventory even though outbound transportation costs are high.

• Tiffany uses combination of 180 exclusive worldwide retail stores and online channel to benefit from strengths of both
channels. 48% of net sales come from diamonds.
• Its online offerings however focus on non-gemstone, sterling silver with an average price of $200. Company offers wide
variety of these low demand items with high demand uncertainty which account 50% of their sales called “D” items.

• Conclusion is Tiffany’s $200 product is better suited for online purpose because with growing popularity of E-business
we have more price-conscious customer base who believes in touching the product before buying it. Blue Nile is also
more susceptible to the rising costs of diamonds and of labour because it does not purchase the majority of diamonds
until customers decides on a purchase
Q3 WHAT DO YOU THINK OF TIFFANY’S DECISION TO NOT SELL
ENGAGEMENT RINGS ONLINE? WHAT DO YOU THINK OF BLUE NILE’S
GROWTH INTO THE NON-ENGAGEMENT CATEGORY?

1. Reasons for Tiffany not selling engagement rings online

• Prevent brand dilution by competing online
• Sustain margins since going online requires reducing price
• Already invested in retail stores with 275 stores and boutiques
• Increase footfall in retail stores to increase sales of high price items
• If engagement rings are sold online existing items lower priced might lose customers

2. Analysis of Blue Nile’s growth in non-engagement category

• Increases target customers
• If margins are kept low like engagement rings then it has potential to capture significant market share
• Has potential to boost sales by marketing bundled items like engagement ring, wedding bands and pendants
Q4 Given that Tiffany stores have thrived with their focus on selling high end jewellery, what do you think caused
the failure of Zales’ upscale strategy in 2006? What products should Zale focus on?

Zales background and brand image

• Middle America was its main target market since it was founded
• Most of the revenue of the company came from value oriented customers who visited the malls frequently.
• Customers had a value for money perception of Zales brand
• Also Zales should focus on getting the inexpensive tag

Reason for failure of Zales upscale strategy

• The firm drastically change its product portfolio creating confusion among its customers
• There were 15% new suppliers in the supply chain network
• The strategy to bring high end jewellery to its store raised inventory costs
• Low margin strategy did not earn higher profit even though sales were higher than Tiffany’s.
Q5 Which of the following 3 companies do you think is best structured to deal with weak economic times

I think Blue Nile is best suited to deal with low economic times
• Blue Nile has lower fixed cost(inventory)
• Both Tiffany and Zales are involved in medium and long term
• leases
• It has low investment as compared to others
• It has low cost structure that is well suited if demand shrinks.

Situation of other two companies is worse comparatively as

• Zales cant handle weak economic times since its high end strategy failed because of inventory write-downs.
• Tiffany is stronger company but high inventory will be severely affected if there is a significant drop in sales as costs
will not be recovered
Q6 What advice would you give to each of the 3 companies regarding it’s strategy and structure? How can they best use omni
channel retail

Blue Nile

• Centralized structure properly aligns strategy to focus on lower price on a large variety of high end stones

• Marketing focus on convincing customers as it uses 4C and 3rd party validation when valuing a diamond

• Significant cost advantges and customer tendency to save money during hard times

• It can take an aggressive position emphasizing its lower prices with similar quality to vey high-end diamond retailers
Q6 What advice would you give to each of the 3 companies regarding it’s strategy and structure? How can they best use omni
channel retail

Zales

• From financial perspective, Zales needs to get control of its inventories. One way to do it is to centralize expensive
diamond inventory and order when required
• Lower value diamonds can be stocked and sold from retail stores

• For Higher end diamonds, rings with imitation stones could be used to help customers select a style, followed by having
real diamond installed later at central location and shipped to the stone for customer pickup

• Its move to the wholesale part of diamond business has potential + it gives company wholesale margin and could give it
some form of exclusivity on its stones.
Q6 What advice would you give to each of the 3 companies regarding it’s strategy and structure? How can they best use omni
channel retail

Tiffany

• Cannot centralize high end stones because it would conflict its brand image

• Pricing pressure at retail is likely to continue with the growth of Blue Nile at the high end and retailers such as Walmart
and Costco at the lower end. As a result, Tiffany has to continue working hard to maintain brand image

• It sources of stones are very similar to competitiors.

Thank You