Blue Nile CEO Sean Kell (pictured), who joined the Seattle-based e-tailer last year after heading senior-care provider A Place for Mom, talked with JCK Tuesday following his company’s announcement that it was opening three new showrooms. Here, he speaks about Blue Nile’s plans for the future, how COVID-19 has impacted its business, and his thoughts on lab-grown diamonds.

JCK: Can you explain the timetable for building out these new stores?

Sean Kell: We are targeting the top 50 cities and areas in the United States, and in some of those cities, I imagine, we’ll end up with more than one store. So our target is around 50 stores over the next several years, depending on how quickly we can open them. I would say we’re looking at more of a five-year horizon than a two-year horizon.

Has COVID delayed your plans at all?

We thought we would do three to five stores this year, and we’re doing three. So we may be delayed a little bit, but we’re right on track for our total number for the next year and the year after. I told one of the local newspapers that we hope to have 50 to 100 stores over the next few years, so we’re right on track for that.

Are the new stores the same as the ones you’ve opened in the past?

It is essentially the same concept in that it’s a small-format store where consumers can see, feel, and touch jewelry and speak with one of our diamond and jewelry experts. There is a mix of live and not-live stones in there, but the idea is that consumers are trying on and looking at jewelry with the purpose of then selecting their actual piece and then buying the diamond through our website.

What’s different is that the stores are generally a little bigger than what we’ve opened in the past. We’ve learned from our prior five showrooms that consumers want a little more space. What happens is, the stores get full, and people end up waiting outside, especially with the pandemic and restrictions on the number of people who can be in a store at one time. As we hopefully get past [COVID-19], there will be fewer restrictions, but we’ve found that a slightly larger store is a great way for more consumers to be able to look around and interact with our diamond and jewelry consultants.

Is it new that you have added live diamonds to the stores?

We’ve always had real metals for jewelry, but in the last year we have started adding more live inventory. We have set it up so you can make an appointment and if there’s a particular stone you want to look at, we can ship it to the store, so it’s there for you.

When Blue Nile was public and used to do conference calls, you said that the showrooms increased web traffic and sales. Is that still true?

That’s still true, and that’s a big reason why we’re doing this expansion. We definitely see the impact of our web and showroom together—whether you call it multi-channel or omnichannel—drives more business and revenue than just the web alone. We think two things happen: First, consumers who find us on the web like the idea of going into the store and seeing the stones in person and making sure the ring size fits. Then, there are people who happen to be in a mall and haven’t found us yet on the web and just walk into one of the stores and discover [our company].

How has the COVID-19 pandemic affected your business?

Our core business has bounced back completely from the depths of the COVID impact in March and April. So we’ve been very happy with our performance since March and April, and like many other companies we’ve seen this consumer trend continue where our consumers are using the web more and more to shop and buy things. So we’re definitely benefiting from that.

The second part is that, on the showroom side, as you can imagine, many malls and retail landlords are looking for tenants. Unfortunately, there have been a number of retail stores that have closed during COVID and others who have backed out of leases. So that’s driven vacancies in malls and other retail locations. So we think we’ve been the beneficiary of that. We think we’re a great tenant and we’ve been able to negotiate attractive deals and, more importantly, great locations in these three malls we are opening in this year. We’ve got another dozen or so we’re actively working on for next year. I think the impact has been positive for people like us who are tenants who are looking for new space right now.

 

Your recent announcement mentioned introducing a new virtual appointment concept. Is that different from how Blue Nile has done business traditionally, over the phone?

Traditionally, somewhere between a third and a half of our business happens over the phone. And these showrooms act like a phone call in some ways. Then there’s the extension of that, this virtual appointment concept, which we are going to introduce by Black Friday.

Like a lot of companies, we’ve had most of our staff working remotely. So we have some empty office space that we decided to convert into this virtual showroom space.

The virtual appointments will have a Home Shopping Network look and feel to them. The demonstrations will be in a studio and look like a cooking demonstration, where you have cameras showing our personal jeweler and then different camera angles for the jewelry. It will feel like an in-person experience, with multiple camera angles and really professional lighting. Consumers can see inventory that they might otherwise have to go to a store to see. We feel this is a game changer for us.

Blue Nile doesn’t carry lab-grown diamond jewelry. Could that ever change?

We’re watching the lab-grown business pretty closely. To us, there are two parts to it. There’s the center-stone engagement lab-grown business and then there’s the fashion jewelry lab-grown business. We think of those two as completely different businesses. We continue to be skeptical about the long-run value for consumers from the center-stone engagement ring business. Over time, I just worry about the value of a lab-grown stones as production ramps up. So, we’re kind of wait and see on that.

On the fashion jewelry side, we’re pretty excited about that and we’ve been looking pretty hard and talking with a lot of different folks about fashion lab-grown jewelry because of the brilliant and amazing colors [that can be produced] and the consumer value proposition. That’s something we’re looking hard at, and we’re in pretty good discussions with a bunch of folks about that.

What else can we expect from Blue Nile in the near future?

We’re growing out our jewelry product lines. We really are trying to expand from being a an engagement ring company to a fine jeweler. So you’ll see more product lines and more partnerships, and we have a few really terrific brand partnerships coming up.

So, number one is a bigger emphasis and expansion of our jewelry business. The second is continued growth in our international business. We have a strong business in China and in Europe, and we’re really investing in those two areas. We don’t have any plans for showrooms outside the United States, but I bet we will in the future.

You’ve been in the job a year, so that makes you still a relative newcomer to the industry. Any thoughts?

There’s a couple of big challenges that we see in the industry. It’s traditionally been a brick-and-mortar industry, and it’s becoming more of an online industry.

One thing that can make it complex is the underlying asset prices, which can fluctuate wildly. We’ve seen gold and platinum prices fluctuate a lot this year. Diamond pricing has been crazy this year. I’ve spoken to a number of folks who have been in the industry for a long time, and they haven’t seen a year like this.

It’s a fashion business, and with fashion businesses, you have to be able to jump on trends when they when they happen and when they are hot. Right now, earrings are really hot. You have to go all in on trends when they’re hot, and they can turn pretty quickly. What’s hot one month can be cold the next month.

To me, one of the biggest things is just how much of the business is driven around the holidays in November and December. It’s really a seasonal business, so that is certainly challenging for technology company.

But you know, we get to look at beautiful jewelry all day, and we get to work with customers who are buying something for themselves or to celebrate a big event or to give a gift to a loved one. It’s really an amazing industry with an amazing set of products. I can see why people love this industry so much.

(Images courtesy of Blue Nile)

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