Seattle online diamond retailer Blue Nile Inc. has sought for years to steal business from brick-and-mortar jewelers. Now with the economy forcing many traditional jewelers into bankruptcy or liquidation, the Seattle company has an opportunity to grab more market share.

Jewelry stores have been hit by slumping consumer demand and the tightening of credit, which makes it harder for people to make big-ticket purchases like diamonds. Bankruptcies in the jewelry business are up 118 percent this year through July compared to the same period last year, according to data from the Jewelers Board of Trade, an industry group based in Warwick, R.I.

Earlier this month, Finlay Enterprises, which runs jewelry stores nationwide, filed for bankruptcy, and Zales announced it was closing more than 100 underperforming stores.

Blue Nile isn’t immune to the pressures on the jewelry business — sales were down 5 percent and net income down 11 percent in the second quarter — but the company remains profitable and doesn’t have the same overhead costs as brick-and-mortar stores. CEO Diane Irvine said the company is debt-free, allowing it to invest in its sales and customer service efforts.

Irvine

“The physical store jewelry model is broken,” said Irvine said. “Consumers are looking for a different way to shop.”

Blue Nile is in the midst of a large project to upgrade its website and make it more enticing to potential diamond buyers, with better photos, improved search function and new features for its “Build Your Own Ring” customization tool. Irvine wouldn’t get into details, but called the website upgrade a “key initiative” and said the company plans to launch it before the end-of-year holiday shopping season.

Irvine said the “conversion” rate for Blue Nile’s website — the rate at which it converts visitors to actual buyers — is 1 percent to 1.5 percent, a number she would like to boost.

Dan Geiman, an e-commerce analyst for Seattle brokerage McAdams Wright Ragen, said there’s “no question” Blue Nile is stealing market share away from traditional jewelers, but added a note of caution about the brick-and-mortar stores going out of business.

“As some of these liquidations are going on, the prices are being cut,” Geiman said. “That could be putting some pressure on Blue Nile, which as a rule doesn’t not tend to discount.”

Geiman, however, said Blue Nile is benefitting from a “pretty fragmented” marketplace of web-based jewelers and the growing comfort level of many consumers in buying diamonds online.