New buyer Bain Capital looks like it will double down on diamonds

Last week, I wrote that Blue Nile needed to move away from its core business of value-priced engagement rings. For a long time, its executives seemingly agreed and embraced proprietary brands—at least until omnichannel became the big trend, and then the business moved toward webrooms.

However, in a recent interview with Axios, Ryan Cotton, a Bain Capital managing director, indicated that, along with investing in improving its marketing and site interface, the company is doubling down on discount diamonds:

[I]f you look at where consumers are moving to and want to shop, there are very few businesses more closely aligned with those trends than Blue Nile. Personalization and customization on an endless aisle with lower prices, more transparency and deeper value than bricks-and-mortar retailers. It’s really the same model as a Warby Parker or Harrys or Dollar Shave Club, in that it’s cutting out the markups related to bricks-and-mortar infrastructure and supply chain.

Cotton declined to talk with JCK. But the Dollar Shave Club example is illuminating.

Dollar Shave Club first made itself known in 2012 with a startling, now-legendary video that proved so popular that its servers crashed. It also offered an unquestionably good deal: a month’s worth of razors for about $1 (plus $2 shipping and handling). Just like Blue Nile sells mostly generic goods, Dollar Shave didn’t offer the latest and greatest brand-name multiblade items. It offered good-enough razors, and many guys thought that was good enough for them.

Deliberately or not, Blue Nile’s recent marketing has echoed Dollar Shave Club’s. In 2014, Dollar Shave Club came out with a TV commercial mocking how razors were traditionally sold at grocery stores; a year later, Blue Nile released a similar ad, bashing brick-and-mortar jewelers. Dollar Shave Club calls itself the “smarter way” to buy razors; Blue Nile used to tell buyers they were “too smart” to shop at jewelry stores.

Last year, Dollar Shave Club was gobbled up by consumer giant Unilever for $1 billion. That’s twice the price Blue Nile went for, even though Dollar Shave Club was not profitable and did only $150 million in sales (one-third the business Blue Nile does). Yet analysts suggested the deal was a “defensive move.” While Unilever does not deal in razors, it needed to understand how other consumer goods could be disrupted. Dollar Shave Club also had terrific marketing. Each delivery comes with reading material for its male target audience.

In fact, some feel Unilever’s purchase could be the wave of the future. Start-ups burst onto the scene with creative “disruptive” models. Bigger, more established players then snap them up, in part to prevent them from doing any more damage.

The difference here is that Dollar Shave Club is five years old. Blue Nile is about 17. Since its debut, similar web models have emerged, often with comparable (or lower) prices, and sometimes boasting higher rates of growth.

More importantly, Dollar Shave Club had the advantage of surprise. Blue Nile no longer does. The market has adjusted. Its main competitors—independent jewelers—know how to compete with it, particularly when you’re talking about the nonbranded diamonds that are Blue Nile’s bread and butter. So while e-tail is arguably still a huge force in the jewelry business, jewelers no longer consider it an invincible one. Disrupting is a lot harder when people know what’s coming.

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