March 20, 2007, 12:00 AM

How Blue Nile sizes up new opportunities by testing the water first

Online retail`s dynamic marketplace might not wait for a traditional one-year budget time frame. To test new opportunities quickly, favors a toe dip instead of a splash.

"Online retail is a pretty dynamic place. You have to be able to react and even a one-year budget can be a long time frame," Blue Nile Inc. senior vice president of marketing Darryl Cavens tells Internet Retailer. Online jeweler Blue Nile takes a measured approach to budgeting, but given the pace of development in Internet retailing, it`s also figured out how to budget for fast-breaking opportunities that might not wait for the kind of analysis that drives spending decisions in offline businesses.

One example of what Cavens calls BlueNile`s "toe-dipping" approach to exploratory spending on new opportunities is how it`s moved into international markets over the last couple of years. "In adding other areas, it`s hard to predict what they will do, but we feel the risk/reward ratio is there and we need to place a few bets," he says. "But we spend frugally within that. We didn`t go out and say, let`s launch internationally and replicate the whole U.S. business."

In putting up dedicated web sites in the United Kingdom and Canada, Blue Nile has taken a different approach. The sites don’t yet replicate all the functionality on the U.S. site-for instance, sales are transacted in U.S. dollars rather than local currency. But now that Blue Nile, No. 52 in the Internet Retailer Top 500 Guide, has tested the market and satisfied itself that the demand is there, further investment in those sites will follow. The initial investment in the sites, though based on less research than it might have pursued in an offline environment, was a bet by Blue Nile that in view of how quickly a market can move online, the time to move was now rather than later.

“They`re not yet perfect and we are evolving them so they are perfect," Cavens says. "We felt it was more important to get out there now, and then learn and adapt to those markets. A different alternative could have been to do a year of research, open a facility over there, put a marketing team and a customer service team in place there, and hope that the demand came. We took the other way."

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