Rivlin, When Buying a Diamond, NYT, Jan. 2007.
“When Buying a Diamond Starts With a Mouse.”
By GARY RIVLIN
MARK C. VADON is one of the world’s top diamond retailers, but wholesalers often decline to
meet with him on the convention floor at jewelry trade shows. At the very least, many ask him to
flip over his nametag so that no one knows who he is or what company he runs.
There was a time not long ago when pundits generally dismissed Mr. Vadon’s company, the
online jewelry purveyor
, as one of the dot-com boom’s more lamebrain creations.
People might be willing to buy a book online, or a CD, and maybe a toaster, they said, but a
$3,000 diamond engagement ring? The jewelry industry — or at least the high-end jewelry trade
— seemed impervious to the Internet.
Not any more. Only a decade after it was founded in the infancy of the Web, Blue Nile ranks
and at least one other competitor, the Signet Group, in diamond ring
sales, according to industry analysts. Experts also believe that probably only Tiffany’s and the
, which operates more than 1,500 chain stores and an additional 800 kiosks,
bought more diamonds from wholesalers than Blue Nile last year.
While Blue Nile has grown — and its stock has soared 54 percent, to $38.53 a share on Friday
from $25 when it was first sold to the public in May 2004 — Main Street jewelers have seen
their profit margins shrink and many of their brethren shutter their store doors. As a
consequence, many retail jewelers refer to Blue Nile as the “evil empire” — or worse.
So far, the Blue Nile effect has been felt mainly by mom-and-pop jewelers on Main Street and in
malls; much bigger, high-end retailers like Tiffany have been affected only on the margins. And
Blue Nile’s influence is limited largely to diamond sales, particularly diamond ring sales, but
those are often the cash cow for smaller jewelers, accounting for a disproportionate share of their
“Blue Nile is just busting the chops of everybody, especially in the sale of diamonds,” said Ken
Gassman, a former Wall Street financial analyst who runs the Jewelry Industry Research
Institute. Diamond jewelry accounted for nearly half the $59.4 billion in jewelry, including
watches and costume pieces, that United States retailers sold in 2005, Mr. Gassman said.
Blue Nile and other Internet jewelers are not solely responsible for smaller profits at traditional
jewelers nor for the loss of more than 3,000 independent jewelry shops since 1999. Main Street
jewelers, after all, have faced tough competition for decades, from the Home Shopping Network