Without a question, Blue Nile has catapulted the diamond industry from almost exclusively walk-in jewelry stores to a serious online business, thus drastically changing the face of the diamond engagement ring industry all over the world.
The story goes that CEO Mark Vadon had a less than pleasant experience at Tiffany’s when he was in the market for an engagement ring back in 1998. Dissatisfied, he turned to the Internet to see if he could find an alternative. What he found was internetdiamonds.com, a newly minted diamond e-retailer operating out of Seattle. The wheels started to turn for this young MBA graduate. He took a gamble that this could be a very profitable business, and so a year later he bought the website for $6 million. Soon after, the company changed its name to Blue Nile and began doing big business, to the extent that in 2010 BN’s revenues topped out at $332.9 million.
Blue Nile prides itself on taking the heartache out of purchasing a diamond, as they say on their website: “The company is built on a unique idea: choosing an engagement ring doesn’t have to be complicated. Diamonds can be simple to understand. Making the right choice can be easy.”
While in theory this sounds great, the problem is that there really are a lot of factors to consider when buying a diamond. The process should be easy, but not devoid of knowledge. What am I talking about?
Problem #1: Blue Nile assumes that you can buy a diamond based on stats alone — in other words, without pictures. This is a mistake. Any diamond professional will tell you that you need to use the diamond’s certification in conjunction with a magnified picture or real-life look at the diamond to determine whether or not its clarity passes muster, or as we say in the industry, is clean to the naked eye.
Problem #2: BN has a vast virtual inventory of diamonds all over the world. Diamond vendors list their diamonds exclusively on the BN site. When a customer purchases a diamond, BN acts as a middleman in the process — arranging the sale — though usually not coming into direct contact with the diamond. It appears that BN even contracts out the setting and shipping of the diamonds (see link to review below). The problem is that if you call BN and request a gemologist inspection, the BN gemologist does not see the diamond in question. Instead he calls the vendor and asks the vendor to have a look at the diamond. Well how can the vendor be objective about a diamond he is trying to sell? In other words, there is no checks and balances system of inspection since BN does not have access to the diamonds that it sells on behalf of hundreds of other vendors, and the vendors are more motivated to make a sale than be be truthful about the stone’s flaws.
To see what I’m talking about, have a look at what Michael Fried, from The Diamond Pro, did to review Blue Nile. He actually called them and ordered an engagement ring to see how things transpired.
Based on the pictures in that review, I agree with Weissman that the packaging looks rather weak and the diamond sub-par due to a thick white, dead-center inclusion. Since Weissman couldn’t see a photo of the diamond before ordering, he had to take a gamble and order sight-unseen. As I discussed above, this is the primary reason that I don’t recommend ordering diamond engagement rings from BN.
So if you are in the market for a diamond, check out other options before purchasing from Blue Nile. The best alternative to Blue Nile is James Allen. They solve the problems Blue Nile presents by offering high quality magnified photos of all of their diamonds. See our Review of JamesAllen.com here. And, as always, feel free to drop me a line for free, expert advice. I’ll be happy to help!