IPO slated, Blue Nile’s online showroom model meets diamond jewelry customers everywhere
Blue Nile, a market leader in online diamond jewelry, has partnered with Mudrick Capital Acquisition Corp. II, a special purpose acquisition company (SPAC), to take the public company with an expected listing on NASDAQ in early Q4 2022.
The company is valued at $873 million and is expected to raise some $450 million in capital before expenses, including $50 million in new funding from Mudrick and $80 million from sponsors Bain Capital Private Equity, Bow Street and Adama Partners and Mudrick Capital.
This isn’t the first time Blue Nile has taken this route. Founded in 1999, it first went public in 2004 and then went private again when acquired by Bain Capital and Bow Street in 2017.
With estimated revenues of $566 million in 2021, Blue Nile is expected to reach $661-773 million in 2023, according to a report by mudrick. Since 2018, the company has seen a CAGR of 17%, including a 22% increase from 2019, and a +515 basis point increase in gross margin. With gross margins currently around 30%, the target operating model aims to increase it to 40%.
According to Mudrick’s analysis, the $320 billion global fine jewelry market is primed for disruption, with Blue Nile’s track record of disrupting the market proof-of-concept $60 billion fine jewelry in the United States.
The fact that its founder Mark Vadon and the CEOs who have come after him, including current CEO Sean Kell, are not from the inbred jewelry industry has given the company a leg up when it comes to it was about disrupting the status quo.
Blue Nile believes its unique integrated digital showroom strategy is the secret sauce that will propel the company into the new world of what Steve Dennis, another Forbes.com contributor, calls “harmonized retail.”
There are currently 18 Blue Nile showrooms and two more will soon be available in Atlanta’s Lenox Square and Bloomington’s Mall of America. Showrooms are designed to take the friction out of the traditional jewelry shopping experience and make the online virtual experience real.
“Buying diamonds is a lot harder than it needs to be,” CEO Sean Kell told me. “It’s confusing and intimidating and it’s very difficult to tell the difference between one diamond and another. Our showrooms and website offer multi-touch integration in a low-pressure learning environment. »
In the showrooms, customers can touch and feel the diamonds and view them in different environments with orders placed there or later from the comfort of their own homes. “It’s a ‘no inventory’ showroom concept where you can see the differences between different sizes, fits and settings, then you can order in store, by phone or online for delivery,” he said. he continued.
Virtually all diamond buyers these days begin their journey on the internet, regardless of where they end up buying. It is almost necessary for consumers to master the 4Cs of diamonds – Cut, Color, Clarity, Carats. And because that first diamond purchase is often an individual’s or couple’s most expensive, shopping is often a stressful experience as consumers enter unfamiliar territory.
“The diamond buying journey is like the children’s game of ‘Chutes and Ladders’, where a few steps forward can set you back,” Kell said. “It’s an extremely complicated shopping journey where people can go to one or more websites, enter one or more stores, and then go back and do it all over again. But what underlies all of this is a thirst for knowledge and the confidence that they are getting a good deal.
When it comes to selection, Blue Nile is the clear favourite, with over 650,000 diamonds available, which is orders of magnitude larger than the handful offered by a typical independent jeweler and five times more than digital competitor Brilliant Earth. .
But with all this selection comes confusion. Blue Nile strives to eliminate this through its showrooms, the user-friendly website that makes it easy to select the correct diamond cut, cut and setting and virtual showrooms by appointment where a personal jeweler working in a professional studio presents carefully selected items for clients. to view and discuss online. Its call center also helps close the sale, with 35% of revenue tied to it.
“We see such a great opportunity to make buying diamonds and fine jewelry easier and more trustworthy. Our personal jewelers take a consultative approach to helping customers find the perfect piece of jewelry. It’s a very different experience than shoppers can live in a high-pressure “old fashioned” jewelry store.
And because Blue Nile started with a B2C Internet business model, it was able to keep costs low and pass the savings on to the customer. Blue Nile prices tend to be 25-50% lower than traditional retailers. And it offers a price match guarantee if the customer finds a stone of similar quality and size at a lower price.
“Everyone is looking for a fair price. Most people aren’t looking to pay the absolute lowest price, but they want a deal for really good quality. That’s what we’re trying to do,” Kell explained.
And customers can buy with confidence thanks to its 30-day return policy, lifetime warranty, and upgrade policy that allows customers to recover full value to upgrade to a more expensive diamond. “Our upgrade offer puts a new spin on the notion ‘diamond is forever,'” he joked.
Today, Blue Nile has nearly three million customers and almost a third of its sales come from loyal customers. Its customer base is 45 and under for engagement rings — the typical first purchase — with ages up to 55 and under for jewelry purchases. And income and net worth are high for both buyers, $100,000+ and $1 million+, respectively.
“After someone buys an engagement ring, they come back a year, two or three years later for an anniversary gift. Diamond stud earrings, eternity rings and tennis bracelets are our items the most gifted,” he continued.
Looking to the future, Blue Nile plans to have 26 showrooms open by the end of the year and another 10 added in 2023. The showrooms not only offer a higher closing rate high and increase average order size compared to orders on the website alone, but they increase overall sales in the trade area by 80%.
Continued expansion into international markets is also ahead as it currently ships to 44 countries including China, UK, Canada and Australia.
“We are very excited about our projects waiting to go public,” Kell concluded. “We think this is a great opportunity for our business. And raising capital gives us a great opportunity to invest in our business and expand our network of showrooms. We already have good business beyond the United States, including China, Canada and Europe, and we see a big opportunity for us outside of the United States. Everyone all over the world wants great value and beautiful jewelry.