Blue Nile Discusses Amazon and Other Competitors (NILE 3Q05 Conf Call Quotes; AMZN, ZLC)

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Includes: AMZN, NILE, ZLC
by: David Jackson

Blue Nile CEO Mark Vadon was asked about competition in the online jewelry market on his November 8th conference call. Look carefully at this extract from his answer, in which he explicitly discusses Zale's online effort (ticker: ZLC) and seems to refer to Amazon:

… not much competition left from… pure-play online jewelers. There's really one other company in that space and they're… stumbling along at best right now.

Physical store retailers… are inherently conflicted with going on the Web. They're running… their physical stores at roughly 50% gross margins; if they come online, they… have to come online at full price, and for multi-thousand dollar items people comparison shop and it's hard really with 50 gross margin to compete with somebody at 22 or 23 gross margin. So… they're pretty inherently conflicted...

…the latest call from Zales: they said that their online business was roughly $18 million in revenue… that's less than 1% of their revenue's going on over the Internet. And it's not from a lack of trying …there's so many categories where multi-channel is the appropriate business model; …in the jewelry category the online and offline economics are so different that I think it's tough.

…the online mass merchants… we're seeing a lot of activity or a lot of effort and… people might be having some success at much lower price points…

…if you look at our revenue … and… growth… we feel we're just pulling away from anybody else...

(Quotes are from the CCBN StreetEvents transcript.)

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