Is Blue Nile Hurting Your Engagement Ring Business?
If you are a brick and mortar jewelry store, is Blue Nile hurting your diamond engagement ring business? Would you like to know about the BlueNile.com strategy, what they are doing, how much money they are spending, where they are advertising and what you should do about it to save your business? If so, then this blog post is for you because I am about to pull the curtain back so you can see why and how BlueNile.com is hurting your business.
1) Who is Blue Nile, Inc.?
Much of the information provided in this section comes from the BlueNile.com 10K report found at http://investor.bluenile.com/sec.cfm .They are publicly traded on the Nasdaq as NILE.
As of January 3, 2016, they employed 335 full-time employees and 17 part-time employees and stated “We believe that we will influence the shift to purchasing jewelry online by providing more compelling reasons to buy from us through enhancements in the online user experience”.
2) Their Competitive Advantage
If you have inventory in your store, BlueNile.com has a competitive advantage in that their “exclusive diamond supplier relationships allow us to display suppliers’ diamond inventories on the Blue Nile website for sale to consumers without holding the diamonds in our inventory until the products are ordered by customers.”
The report further states: “We generally purchase diamonds on a “just in time” basis from our suppliers when a customer places an order for a specific diamond. We then assemble the diamond with a ring, pendant or earring setting from our inventory into customized diamond jewelry according to our customer’s specifications. The finished jewelry is delivered to the customer generally within three to seven business days from the order date and within one business day for diamonds held on consignment in our fulfillment facilities.”
If a customer is in a hurry, three to seven business days may be too long to wait and the advantage may shift back to the brick and mortar retailer. But if the customer has plenty of time to plan the proposal, three to seven days may not be an issue.
3) What is Their Target Category?
BlueNile publicly states: “Our merchandise consists of engagement and non-engagement products. The engagement product category includes gold or platinum engagement rings with a diamond center stone and loose diamonds. Our non-engagement product category includes rings, wedding bands, earrings, necklaces, pendants, bracelets, gifts and accessories containing precious metals, diamonds, gemstones, or pearls. Our core business is the engagement category.” If you’re engagement ring sales have slowed over the last year, it could be because BlueNile.com is attracting and engaging (no pun intended) your prospects before they walk into your store.
For the engagement ring market, the primary demographic is 25-35 years old and about 55% male. In our informal survey, the sales funnel nearly always consisted of Pinterest (do you have Pinterest account?), sometimes Facebook and nearly always Google.
4) Who Does BlueNile.com See as Competitors?
While BlueNile.com correctly identifies a number of possible competitors, at the top of the list is independent jewelry stores. They may be as as worried about you as you are of them. If I were BlueNile.com, I would be concerned that brick and mortar retailers would make some kind of counter-move to woo potential engagement ring customers into the local stores where the rings and diamonds can be seen, touched and sized before the prospect logs onto the bluenile.com website.
5) What Are the Threats to Their Business?
In the 10K report, bluenile.com lists the following as threats to their business:
> Concerns about buying luxury products such as diamonds and fine jewelry online without a physical storefront, face-to-face
interaction with sales personnel and the ability to physically handle and examine products;
> Delivery time associated with Internet orders;
> If Google changes its algorithms or if competition increases for advertisements on Google, we may be unable to cost-effectively drive qualified consumers to our website.
While these are some legitimate concerns, they have still enjoyed success and have made a huge impact on the American market for engagement rings. In their drive to capture more market share, the Cost Per Click in Google adwords has increase significantly in the last 24 months, and as other online retailers enter the market, such as www.jamesallen.com, the cost will continue to increase. This may be a “last man standing” contest similar to what we saw when Amazon first entered the market.
6) How Big Is Blue Nile?
Net sales in the U.S. increased by 1.5% to $398.2 million for the fiscal year ended January 3, 2016 compared with $392.4 million for the fiscal year ended January 4, 2015 . http://investor.bluenile.com/sec.cfm. That’s a big number, nearly $400 million.
7) How Much Does Blue Nile Spend on Marketing?
Marketing expenses for the fiscal years ended January 3, 2016, January 4, 2015 and December 29, 2013 was approximately $27.1 million, $25.0 million and $24.3 million, respectively. With a marketing budget of $25 million for print, radio, paid online ads and organic search engine rankings. So in 2016, their budget was about $2.25 million per month. You can see from the chart above, which is from SEMRush.com, BlueNile.com is getting about 100,000 visitors per month.
8) What is Their Marketing Strategy?
BlueNile.com has started as a pure online retailer, but they have opened a couple of physical locations. Their main online strategies include search engine optimization, online videos, online display advertising, affiliate programs, direct online marketing, e-mail marketing, social networking/advertising and public relations.
9) BlueNile.com Target Cities
What cities is BlueNile.com targeting with search engine optimization (SEO)? The sitemap on their website shows they are targeting 10 cities with SEO. Here is a screenshot of their site map found at http://www.bluenile.com/sitemap.
10) Going Mobile
BlueNile.com offers a great mobile experience. How is the user experience on the mobile version of your website? If it’s not up to the standards of a user who is mostly on their smart phone, age 25-35, then the mobile version of your website may have a high bounce rate… and those users may bounce over to BlueNile.com
11) What Should You Do?
BlueNile.com has a very large budget for paid ads and the CPC continues to increase. With the CPC getting into the $10-12 ranges, how many clicks can you afford? And those are just clicks. BlueNile.com has a whole staff of programmers optimizing the user experience to maximize the conversion rate of those clicks. If you do not know your conversion rate in terms of phone calls, contact form submittals or walk-ins, Adwords can get very expensive.
Here is a basic strategy to combat the big online retailers:
Optimize your site for Google Maps and Local Search. To compete with BlueNile.com and JamesAllen.com, local retailers must come up first in the local search results, especially Google Maps. While many in the 25-35 target demographic look to websites like Pinterest to get ideas and inspiration, they nearly always go to Google to find either local or online retailers.
Get ranked in the top 3 for Google Maps in your city so you show up in the local maps results. While there are a lot of elements to this, having a complete Google My Business page is a good start.
Review the mobile experience. Up to 70% of users will be on smart phones, so if your site does not provide an exceptional user experience on mobile, visitors will click off your site. Do you know about AMP (accelerated mobile pages)?
Set up your sales funnel for your target demographic, including:
Optimize for conversions to drive prospects to contact you or visit your store. Most local diamond stores do not have an ecommerce site like BlueNile.com, and that is perfectly fine. BlueNile.com is set up as a shopping experience, whereas your site should entice prospects to contact you and visit your store. Optimizing a site for conversions is critical because there is not use driving visitors to your site if they are not impressed enough to call you, fill out a form, schedule an appointment or visit.
Measure results in several ways:
Google Analytics is a free tool from Google you can install on your site to measure visitors to your site and the source, such as organic search traffic, social media sites, direct traffic and paid traffic, such as Google Adwords.
Call tracking is critical to measuring conversions. Some prospects will drive directly to your store, some will fill out a web form and some will call. Set up separate call tracking numbers for Adwords if you are running paid ads, print ads or doing other advertising. That way you can tell how many calls you are getting from each source and determine the best place to spend your money. We like making decisions on data, not guesswork.
Keyword ranking is another key metric to track. While ranking for a particular keyword or set of keywords does not necessarily translate into more business, ranking for the right keywords usually has a direct correlation to visitors to a website and it is easy to measure progress in moving up the search engines to the top of page 1. There are a number of free or cheap tools you can use, such as SERPS.com or SEMRush.com.
Website form completion, such as a “Contact Us” or “Schedule An Appointment” form.
Make adjustments based on data:
> If your keyword ranking is not improving, check your site using a SEO Audit Tool to help diagnose problems with your site. Also check Google Webmaster Tools for messages and warnings about broken links, etc. We have found clients had their site set to “no index”, which is an obvious problem.
> Check your bounce rate in Google Analytics. Very low bounce rates are below 30%, but if your bounce rate is much more than 50%, users are not having a good experience on your site and are leaving after a single page visit. This goes back to Optimizing for Conversions. Make changes and then see how the bounce rate is affected.
Fair Warning: We are often contacted by companies who hired a SEO agency or individual to get their site ranked for a certain keyword, but the site does not get ranked because all the links are built with the same anchor text. So beware of agencies that simply outsource the link building (although they may not tell you that is what they are doing) and have no idea what is really being done. If you end up with a bad backlink profile, your site may never make it past page two and you may end up submitting multiple “disavow” files to Google Webmaster Tools (now called the Search Console) and finally creating a new site on a new domain.
Unless you have deep enough pockets to keep up with the cost of competing with BlueNile.com and JamesAllen.com in Google Adwords, the best long term strategy is to be ranked as one of the top 3 businesses for “engagement rings” in your target market, such as Philadelphia, Houston, Chicago, Boston, or any one of the cities targeted by BlueNile. As you are making your way to the top of Google, be sure to measure your results and make adjustments.
If you would like to discuss how to successfully attract and engage new clients online, and have a steady flow of new customers on auto-pilot, contact us, call us at 678-520-9925 or schedule a no-obligation 15 minute consultation on my calendar.