September 22, 2010, 4:45 PM

Blue Nile works to build repeat business

Engagement rings account for 70% of online jeweler Blue Nile’s business.

Lead Photo

Engagement ring sales account for 70% of online jeweler Blue Nile Inc.’s business, but non-engagement jewelry holds the key to future growth, says CEO Diane Irvine.

Engagement rings sell for the highest prices but have the lowest margins, Irvine told analysts at the recent Goldman Sachs 17th Annual Global Retailing Conference. Engagement rings at Blue Nile sell on average for $6,000. In contrast, non-engagement jewelry such as earrings sell for lower prices but produce higher margins, she says.

Blue Nile, No. 58 in the Internet Retailer Top 500 Guide, has been successful in generating repeat business, with those sales accounting for 25% of revenue during the last quarter, Irvine told attendees. The retailer has grown to about $300 million in annual sales since the company launched 11 years ago, she said.

“While we’re very much about new customer acquisition, our goal is to be the jeweler for life for our customers,” she said.

The purchase of an engagement ring often marks the beginning of a long-term relationship with customers, Irvine said. “There’s a great loyalty when a customer buys an engagement ring from us because we’re dealing with those customers at a very emotionally significant time in their lives,” she said. The purchase of the ring often is followed by purchases of wedding gifts, anniversary gifts and other jewelry in later years.

To build customer loyalty, Blue Nile offers a large selection of high-quality diamonds at significantly lower prices than other jewelers, Irvine said. It also ships products by Federal Express Priority within one to three business days.

The retailer also continues to enhance the features and functions of the web site to give customers a better shopping experience, she says. A recent addition is the “Recently purchased rings” feature which showcases custom-ordered engagement rings. “The more information we give our customers, it really helps build the bond,” Irvine said.

Blue Nile also is looking to international markets as a future source of increased sales, but still is learning to operate in regions with different taxes, customs rules, cultures and e-commerce penetration, Irvine said. The jewelry retailer sells in 40 markets outside the U.S.

“We believe international could approach one half of our business,” Irvine said. “That’s going to be a great growth engine for us over the years.”

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