Overstock CEO Patrick Byrne gave more details about his company's positioning in the online jewelry market. The comments are critical reading for owners of NILE. Here they are:
Overstock's view of market segmentation in diamond retailing:
- Wal-Mart, Zales and other mall jewelers dominate the up to $1000 price range;
- Blue Nile's average order size is about $5,500;
- Ovestock intends to dominate the $1,000 to $5,000 range for diamond rings.
Purchasing strategy? To purchase liquidation lots of diamonds. According to Byrne, Overstock just purchased $7.5 million of diamonds at a price that he called "the steal of a lifetime".
Quick observation: If Blue Nile's average price is $5,500, then a lot of its business - and a larger percentage of customers and transactions - must fall in the $1,000 to $5,000 range.
Of note: Byrne didn't mention Amazon.com, which also offers build-an-engagement-ring functionality. Amazon seems to be most focused on the lower end of the jewelry business.
Question: Does anyone have data about Amazon's success in the build-a-ring market?
Full disclosure: at the time of writing I'm short TIF.