By Michelle Graff
A shot inside one of Blue Nile’s four “webrooms,” this one located in The Westchester mall in White Plains, N.Y. The company said Monday that it now plans to open a fifth physical location by year’s end.
Seattle--Blue Nile continues to sink money into “webrooms” with a fifth planned for later this year, even as sales continue to underwhelm.

During its second quarter earnings call Monday evening, President and CEO Harvey Kanter said Blue Nile has “accelerated” the launch of its fifth physical location, which will “hopefully” open by Thanksgiving.

He did not provide any details on its location.

This fifth physical space joins Blue Nile stores in New York state (White Plains and Garden City, both New York City suburbs), Fairfax County, Va. and a not-yet-open webroom in Portland, Ore.

Blue Nile’s physical locations are 500 to 700 square feet in size, employ five to six salespeople plus a general manager, and provide a place where customers can try on engagement rings and other jewelry. All sales still happen online though; shoppers do not walk out of the webrooms with their purchases.

“It’s becoming clear that a segment of our customers want our easy, educational and pressure-free experience in a physical environment,” Kanter said on Monday’s call. “We are bringing the online and offline worlds together.”

He said the company has seen a “marked lift” in sales in a “pretty contained” area around its webroom in Garden City, N.Y., which is located in the Roosevelt Field mall.

Regarding the physical locations in Virginia and White Plains, N.Y., Kanter said one is performing better than the other but did not specify which one.

Investment in more webrooms is part of an overall effort by Blue Nile to “improve the user experience” and help boost sales, which were essentially flat in the second quarter.

Net sales in the second quarter ended July 3 totaled $113.8 million, compared with $113.7 million in the same period last year. Net income dropped 9 percent to $2.1 million, compared with $2.3 million last year.

U.S. engagement ring net sales decreased 4 percent to $62.6 million, and Blue Nile executives said that the online retailer had a particularly difficult June. Sales of engagement rings priced at $25,000 and above improved as compared with previous quarters but still are lagging overall.

U.S. non-engagement net sales (which encompasses everything else the site sells) were up 6 percent to $30.4 million, led by wedding band sales.
International sales were up 6 percent (9 percent on a constant-exchange-rate basis), from $19.5 million to $20.8 million.

Commenting on the results during Monday’s call, Kanter said, “We had some meaningful wins but I will acknowledge upfront that these results are short of what we expected.”

In addition to continuing to invest in webrooms, Blue Nile is making enhancements to its website that are designed to emulate the experience customers have in its physical locations.

Executives did not elaborate on these enhancement but said they expect them to be complete by the fourth quarter.

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