Chuck, I think you're way off-base for dinging Blue Nile (NASDAQ:NILE) on price, quality, and service based on one local retail experience. Not all consumers are fortunate enough to live near a reputable diamond wholesaler that also services consumers.

I'm not dismissing your argument out of hand. There are some fantastic diamond wholesalers across the country that treat customers very well, and those businesses probably don't have to worry too much about Blue Nile. However, I'd argue that the diamond retailers who buy from those wholesalers do have cause to worry, and none of them have Blue Nile's reach.

I'm also going to throw in a quick second point on diamond quality. Two stones of the same size, cut, clarity, and color can be priced hundreds or even thousands of dollars apart, because the grades reflect ranges, not absolute values. Also, additional factors like the polish, symmetry, sharpness of the culet (the bottom point), and the stone's fluorescence all can move its value a fair amount, even if the famous three C's are the same. That's the way the business works, and the less consumers know, the better it is for the diamond industry.

Part of what makes Blue Nile so great is the transparency it provides customers across its entire inventory. All the sales pressure and double-talk is removed from the equation. All of the data on thousands of diamonds is there in black in white. In many cases, a customer can even view the grading report for specific diamonds. Numerous reviews have shown that diamonds purchased from Blue Nile appraise for a higher price than purchased.

The only potential problem with Blue Nile is that it's at the top end of its justifiable valuation range. That's also the problem with purchasing other Internet pure plays like Amazon (Nasdaq AMZN) and eBay (NASDAQ:EBAY). However, like Amazon and eBay a few years ago, Blue Nile has great potential, it's profitable out of the gates, and it also has the cash on its balance to expand its business beyond its current offerings if it so chooses. Otherwise, that cash provides a nice buffer, which is great to see at a company that's been public for less than two years.

Wait! You're not done. This is just a quarter of the Duel! Don't miss Chuck Saletta's bearish beginning, Nathan's bullish response, and Chuck's rebuttal. When you're done, you're still not done. You can vote and let us know who you think won this Duel.

Nathan Parmelee has owned shares in Blue Nile for about a year, but has no financial stake in any of the other companies mentioned. Blue Nile is a selection of both Motley Fool Hidden Gems and Motley Fool Rule Breakers. and eBay areMotley Fool Stock Advisorpicks. The Motley Fool has an ironcladdisclosure policy.