Blue Nile goes brick-and-mortar

FinancialsFeb 10, 2015

Blue Nile goes brick-and-mortar

The Seattle-based e-tailer plans to open a standalone store in one of the country’s “top malls” where customers can see and try on its rings, though they will still have to buy them online.

Seattle--Blue Nile is moving its showcase experiment from Nordstrom into its own storefront. 

CEO Harvey Kanter announced during the company’s earnings call Tuesday morning that the Seattle-based e-tailer would be opening a standalone showcase store in one of the country’s “top malls,” though he declined to say specifically when and where. 

The store will mirror the brick-and-mortar presence Blue Nile launched in recent years in two Nordstrom locations: Customers can see and try on rings from Blue Nile’s inventory and consult with one of its employees, but won’t be able to walk out of the store with a purchase. Any buying that happens in the store will be done on a tablet computer via Blue Nile’s website, and the ring will be delivered just as it is when customers order online.

“Like the Nordstrom test this also is a test from which we will learn and leverage to grow,” he said.

Though Kanter called the showcase experience in Nordstrom a “success” during Tuesday’s call, other remarks he made indicated that Blue Nile did not get everything it wanted out of the in-store experiment. 

When asked by an analyst later in the call about the Nordstrom test, Kanter allowed that the bridal salon where Blue Nile’s showcase was located was not the highest traffic area. He said having its own freestanding store in a leading mall where there’s more foot traffic will provide Blue Nile with a “materially bigger” opportunity to drive brick-and-mortar shoppers onto its website and grow its revenue base. 

He said Blue Nile will not keep the showcases in either Nordstrom store. 

Blue Nile is not the first online-only retailer to experiment with having a brick-and-mortar presence. Amazon has done the same, as has Boston-based Gemvara

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Kanter’s announcement came as the e-tailer reported disappointing fourth quarter sales. 

Net sales were up 8 percent year-over-year to $157.4 million, though $5.9 million of that was due to the fiscal fourth quarter having an extra week this year. Taking out those sales, fourth quarter revenue grew only 4 percent year-over-year. 

Fourth quarter net income was down slightly, from $4.9 million to $4.8 million. 

“This quarter’s results are below our expectations, as the general slowdown that affected the industry also affected our performance,” Kanter said during the call. 

Despite what he termed a “challenging” quarter for the jewelry industry, Blue Nile

reported record engagement ring sales in the U.S. in Q4. They increased 8 percent to $85 million, $2.9 million of which came in that additional week. 

Non-engagement ring sales in the U.S. were up 6 percent to $48.8 million, $1.8 million of which were in the additional week. 

International sales for the fourth quarter were up 16 percent on a constant-exchange-rate basis and including the additional week. Kanter said on the call that China is Blue Nile’s largest market outside the U.S., and that the company is opening a fulfillment center in Canada. 

For the full fiscal year ended Jan. 4, Blue Nile’s net sales were up 5 percent, from $450.0 to $473.5 million. Net income declined year-over-year from $10.9 to $9.7 million. 

In the second quarter Blue Nile, which already has exclusive lines with fashion designers Monique Lhuillier and Zac Posen, plans to add another exclusive line with a brand ambassador, though Kanter did not provide any more details on who he, or she, is. 

Michelle Graffis the editor-in-chief at National Jeweler, directing the publication’s coverage both online and in print.

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