Blue Nile Site Review

I have been holding off on this review for a long time – too long. As you can imagine a good number of inquiries to the site concern BlueNile. If you have read any of the pages of this site (other than this) you also know that I am not a big fan of BlueNile. There, I said it! But the truth is you deserve more and I have neglected in providing a quality review of BlueNile that properly outlines the site and my reasons for usually (but not always) recommending that people shop elsewhere.

This site review will be a little more in depth than some other ones I am preparing because being the largest of the online diamond retails I feel it’s important to explain how this industry works. How is it that BlueNile (and others) have such a large inventory? Why is it that BlueNile (and others) can have such a deep discount over Brick and Mortar stores? Does BlueNile really inspect and certify every diamond that comes there way? These are some of the questions I hope to give answers to.

A Brief History of Online Diamond Buying

Walk into any local Mom and Pop Jeweler today and you will find a selection of dozens of diamonds available. Go into a larger mall store and you are likely to find a few hundred. Go to an online diamond site like BlueNile or James Allen and you will find yourself search through well over 20,000 diamonds! Why the discrepancy?

Brick and Mortar stores, no matter how large, are given a certain amount of credit to buy diamonds on consignment (called memo in the diamond industry). Memo is costly to the manufacturers and is given out on a very tight basis. A small store with little turnover is given a small amount of credit and in turn can only afford to carry a small number of diamonds. Larger stores are given more Memo credit and can therefore carry a larger number of diamonds. However, even the largest stores can’t possibly carry enough memo to have 20,000 diamonds on hand (certainly not in each location). In addition diamond wholesalers will usually require you to buy outright a certain amount and give you an equal amount of memo\credit. This makes it even harder to for a small store to carry a large inventory

In 1999 Mark Vadon, seeing an opportunity, completely disrupted the traditional diamond buying process though a relatively simple idea. By obtaining the exclusive rights to list diamonds of other vendors online, BlueNile is able to have a “Virtual Inventory” larger than any brick and mortars physical inventory.  Besides having a larger inventory BlueNile is able to undercut the competition because they don’t have the overhead of actually owning the diamonds they sell (insurance, certification, memo costs, etc).

What Does This Mean You, The Diamond Buyer?

1)      In most cases BlueNile never actually sees the diamonds they are selling. They are simply the front end to a massive database of inventory from around the world.

2)      When you buy from BlueNile the diamond you are buying is being drop-shipped direct from the vendor who listed it on the BlueNile web site.

3)      When you request that a BlueNile gemologist evaluate a diamond- BN in turn asks the vendor who listed the diamond the question. For example for an SI2 diamond you may ask to confirm that a certain diamond is eye-clean. BN will simply ask the vendor selling the diamond if it is in fact eye clean. 

Sounds Good- Why Do You Knock It?

As a buyer why should you care where the diamond comes from as long as a company like BlueNile is willing to stand behind it? Hey, if they have the best pricing, what do you care.

First, the main flaw with BlueNile  (in my opinion) is that they work under the assumption that diamonds are a pure commodity and then any diamond with similar 4C characteristics should be the same. For this reason they don’t supply photos of the diamonds. After all, if I am buying an H-SI1 it’s the same no matter where I buy it. Nothing can be further from the truth! The proof is that if you look at the BN inventory you will see wide margins in diamonds of the same 4Cs!  If all were the same then the pricing should be the same.

As I say 100’s of times on this site- they key to buying a diamond online is being able to see a photo of the diamond beforehand! This is a huge advantage that sites like James Allen and Whiteflash have over BlueNile.  Just look at these 2 samples. On paper these diamonds are nearly identical. In reality while the one on the left is a great buy, the one on the right has a major inclusion dead center on the table that will stand out and be visible to the naked eye. On BlueNile you really have no way of knowing what you are buying. Granted if you are buying a VS1 or higher diamond this is much less of an issue since in these cases the diamond will 99% of the time be eye clean in any case. But if you are looking for “bang for the buck” you should be looking at the VS2 and lower ranges (at least in rounds).

But What About Price?

Bottom line is that while in 1999 BlueNile had a radical idea and for a while dominated the online diamond buying space- this is no longer the case today. Today, there are several high quality and very reputable online diamond sites that can compete head to head with BlueNile on price and surpass them on features. James Allen for example has photos online of nearly every diamond they sell. These are high quality photos that can be zoomed in for a lot of detail (too much in my opinion, but that’s for another review). See the table below for a comparison of pricing. Given that on BN I don’t really know what  I am buying and on JA I do- it’s not really an apples to apples comparison- but it does illustrate that JA competes or even exceeds BN on pricing.

 Bottom Line:

For diamonds VS1 or higher BlueNile should be considered – for anything in the VS2 or lower clarity grades I don’t recommend BlueNile for the following reasons:

1)      BlueNile is no longer the cheapest

2)      BlueNile in most cases never sees the diamonds or QA’s the diamonds they are selling

3)      BlueNile, while having a great website experience, does not provide online photos for you to make a proper buying decision.

 Additional Resources:

http://en.wikipedia.org/wiki/Blue_Nile_Inc.

http://finance.yahoo.com/q?s=nile&ql=1

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