• This is a partial transcript from Your World with Neil Cavuto, December 26, 2002, that was edited for clarity. Click here for complete access to all of Neil Cavuto's CEO interviews.

    Watch Your World w/Cavuto weekdays at 4 p.m. and 1 a.m. ET.

    BRENDA BUTTNER, GUEST HOST: Something else popular this year, online holiday shopping. While retailers are still tallying their total sales for the season, my next guests says that adventurous online shoppers gave his business a big boost this year. Joining me now, Mark Vadon, CEO of the online diamond retailer, BlueNile.com.

    Mark, thanks for joining us.

    MARK VADON, CEO, BLUENILE.COM: Of course, good afternoon.

    BUTTNER: So you actually have seen a real increase on what order over last year percentage-wise?

    VADON: We have seen tremendous increase, Q4 sales will be up about 75 percent over last year to 30 million in sales for this quarter.

    BUTTNER: And you are actually making a profit now; yes?

    VADON: We are. This will be fifth straight quarter of profitability.

    BUTTNER: Yeah. I love your story. You went to Harvard, went to Stanford, all the big places, but when it came to buying an engagement ring you didn't have a clue. So you went online.

    VADON: Yup.

    BUTTNER: And you were impressed with the site?

    VADON: Right. I was prototypical consumer. I was - when it came to jewelry I was a dumb male and I didn't know what questions to ask when it came to buying engagement ring. So I went online just looking for information. And this was back in 1999 when there wasn't as much commerce on the Web.

    BUTTNER: right.

    VADON: But I found a site that was selling diamond rings, and wound up buying a ring it from it. And it was great experience. And I got into the business.

    BUTTNER: Right. Now it is surprises me actually that people would buy such huge purchases like a diamond ring, your engagement ring, I would think you would want to see it, you would want to hold it. You want to look at it, not just click on it.

    VADON: Well, I think it's different for different types of consumers.  Some shoppers definitely want that hands-on experience. I think some other shoppers actually enjoy being online, it reduces the pressure for them.  They don't feel as much anxiety. It's a little bit more anonymous and they can gather their information, and take their time, and make the purchase on their own, sort after their own speed without a lot of sales pressure.

    BUTTNER: Right. And you guys are privately held; right? Do you have any plans go public?

    VADON: We are privately held company and we have no plans go public right now. Fortunately we don't need any capital. And I think it has been good being a private company over the last year or so.

    BUTTNER: Right. And it is a very clean site. You make it easy to go on there and actually spend thousands of dollars. What is your demographic? You said it was the dumb male. But I mean are we talking really rich guys?

    VADON: You know, our typical consumer is male, 25 to 40 years old, higher income, higher education. The merchandise is definitely at the higher range of quality. It's offered at 20 to 40 percent less than you'll pay in a physical store. But it is for that...

    BUTTNER: How do you do that? how do you beat the margins of Tiffany and of Zales?

    VADON: Excuse me?

    BUTTNER: How do you beat the margins? How do you beat Tiffany and Zales on this?

    VADON: With physical stores it's just a totally different cost structure. So your typical jewelry store overhead runs about 50 percent of revenue. And for us, we are a scale commerce company. And overhead for us is about 12 or 13 percent. So it is a much different cost model, and we just pass all of that lower cost structure on to our consumers.

    BUTTNER: So last question, did she like the ring?

    VADON: She did. It was great ring. It appraised for twice what I paid for it. And that is same experience a lot of our consumers are getting today.

    BUTTNER: And she said yes, that is the real answer.

    VADON: Of course.

    BUTTNER: OK, thanks so much, nice to see you.

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