Who are the biggest sellers of engagement rings?
There’s Wal-Mart, Zales, and at the high end, it’s Tiffany and ourselves. There are 29,000 retailers of diamonds in the United States. What physical retailers do is mark it up 100 percent. Running a jewelry store is expensive. The basic model is “buy for $1, sell for $2.” At Blue Nile, gross margins are 22 percent. We buy for $1,000, and sell for $1,300. That’s why we’re scaling to be what we are. We’re offering high-quality products, and we’re offering a lot of information. At physical stores, you’re selling customers products made up of commodities. There’s so much of a markup, you don’t want to tell them too much. You avoid answering any questions about the product and appeal to the romance of the product. Q: Where do you get your diamonds? A: We have a distribution arrangement. We’re taking from the inventories of large manufacturers in New York and Los Angeles. We’re assembling the engagement ring. At your normal jewelry store—45 cents of every dollar goes to paying overhead. We g
