Can the Jet Online Strategy Win the Ultimate Battle with Amazon?
Beat Amazon? All of a sudden, a new e-commerce competitor believes it can. The Jet online strategy has gotten serious about this E-commerce competition and is willing to invest a ton of money to make it happen. Why? It’s all about the future and the current trends. And the Jet.com e-commerce strategy and its business model.
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According to Nielsen, e-commerce will gain more ground than any other segment of the retail industry by 2017, with a compound annual growth rate of 11% each year3. Supercenters come in second, with their growth rate projected at only about half that of web shopping.
When you consider sales for consumer packaged goods online — food, groceries, everyday items — are more like high double digits, almost 20%, you can see why this is shaping up to be a gigantic battle.
Background
Jet is a new online retail site that hopes to take on Amazon by targeting price-conscious shoppers.
Users of Amazon and customers of Costco and Sam’s Club are no strangers to club based retailers… the question is, however, are these same customers ready to introduce another merchant to their go-to-list of places to shop?
With Jet.com joining the ranks as the newest club based retailer, consumers will naturally need to decide if it’s right for them. First, however, they need to understand just exactly what Jet.com is andwhether or not it makes sense for them to become part of their “club”.
With a company seemingly designed to challenge Amazon head-on while also offering customers savings they have never experienced before, how can a company like Jet.com expect to survive? According to their website, Jet.com’s ultimate goal is to make their profit from customer membership fees.
We don’t profit on the products we sell—just on membership fees.
So we’re always on your side. Every time we can get costs down, we pass the savings back to you,” Jet.com’s website states as part of their membership benefits.
How Jet Online works
Jet’s website says they won’t profit on the products they sell—just from their membership fees. So every time they can get costs down, you pocket the savings.
A pricing algorithm to find savings in real time
As you shop, they show you the items that bring costs down when bought together. Choose those items and watch your savings get bigger and bigger.
Unbundled costs to give you a choice
They took apart the traditional retail model, letting you avoid costs normally baked into prices. For example, if you don’t need free returns on an item, they give you the choice to waive returns, so you save more.
Jet online … membership benefits
Know that awesome feeling when you find a forgotten $20 bill in your pants pocket? That’s what a Jet membership feels like. When you join Jet, here’s all that you get:
Savings on pretty much anything you buy
Get club price savings on just about anything, from small sizes to bulk, when you shop Jet. You can save at Jet by shopping non-Jet sites, too. Earn JetCash when you shop hundreds of brands with Jet Anywhere to use towards your next Jet.com order.
A membership club that works for you
As we said earlier, they don’t profit on the products they sell—just on membership fees. So Jet is always on your side. Every time they can get costs down, they pass the savings back to you.
Free shipping, free returns
To Jet, they’re like peanut butter and jelly—can’t have one without the other. Get free 2-5 day shipping on every order over $35, with faster 2-day shipping on the basics, and free returns within 30 days.
Jet concierge service
Jet always wants to help you get club price savings on pretty much anything you are looking for, so if they or our retail partners don’t carry a particular product yet or are out of stock, a Jet Head Concierge will find it for you somewhere else on the internet.
Jet understands the privacy of your personal information is important, so when they provide Concierge services, they never share your payment information or e-mail address with other retailers.
They just provide the name and shipping address on your order so you can receive your items.
24/7 customer care
The Jet Heads, our Salt Lake City-based customer service team, are always here to help no matter which one of our trusted retailers fulfills your order. Contact Jet for any question, concern, or comment you might have, or even just to say hi.
Jet guarantee
Jet is confident you’ll love shopping (and saving!) with them. But if you don’t save more than the $49.99 cost of membership during your time with them, they’ll refund you the difference.
Trial membership
Shop Jet free for 3 months and see how much you can save as a Jet member. Never worry about being auto-enrolled. After your trial, if you loved your experience, join Jet for just $49.99 per year.
No auto-enroll
They won’t auto-enroll you into Jet membership at the end of your trial. It’s totally your call if you want to continue shopping Jet—but of course, they hope you will.
A few rules
Trial memberships begin when you make your first purchase at Jet unless the trial offer states otherwise.
You can’t combine Trial memberships without Jet’s express written consent. So, if you have a 3-month Trial membership, you can’t use another 3-month Trial membership when it’s over (unless that Trial membership explicitly says that you can).
Jet’s price tool looks for the best prices. They claim they will find low prices across the web, and give you member savings on top of that.
Get member savings on your order with every item you add to your cart. Get even bigger savings on your order when you add Smart Items—these items cost less when bought together.
With every item you add, unlock more savings on more items across the site. Watch savings on Smart Items get bigger and bigger in real time as you shop.
Waive Returns: Confident you’ll want to keep those super soft paper towels? Just waive returns, and they’ll pass the savings back to you.
Practical Payment: Pick a payment method with lower fees and we’ll make sure you get the savings.
Save when you shop non-Jet sites, too.
Imagine a world where you save on just about anything you already buy—even stuff not sold at Jet.com. Boom! Imagination is a reality. Shop at hundreds of different brands across the web and earn up to 30% JetCash to spend at Jet.com.
Jet.com strategy … you may not know
Marketed as having a “nifty price tool” that discovers the “best prices off the web”, Jet.com markets itself as an online warehouse that typically saves customers “10 to 15″ percent from all other available online prices.
Small items and large items alike are among the 10 million plus items available on Jet.com, as are bulk based items and singular products, as well.
Jet.com orders items in bulk from other online companies, allowing them to reduce their retail price on their own website.
Beyond buying on Jet.com, customers of Jet.com are encouraged to “Jet Anywhere” and shop on other sites that include Macy and the Gap as part of an affiliate program they have with these merchants.
Jet.com offers something called “smart card” items that automatically unlocks additional savings when added to customer shopping carts.
The annual membership of Jet.com is $49.99 – which is about a $5 savings from Costco’s “gold star” membership rate and about $50 less than Amazon’s Prime membership – and is currently being offered for free for a 90-day trial. Note however that this is not a simple apple to apple comparison
Short-term results
Tapping into an underserved segment of consumers has Jet.com off to a roaring start only six weeks after it began selling online.
That’s according to a report from David Spitz, CEO of e-commerce services provider ChannelAdvisor, which looked at how ChannelAdvisor’s clients are performing on select online marketplaces since the date of Jet’s launch, July 21, through this week.
ChannelAdvisor’s data shows that Jet.com ranked fourth among all online marketplaces for gross merchandise value.
Perhaps more importantly for Jet.com and for ChannelAdvisor’s clients that are selling through Jet, the online marketplace boasts a 23% repeat buyer rate, higher than that of online giants Amazon.com Inc. (11%) and eBay Inc. (17%).
The Hoboken, N.J., company is absorbing steep losses on many orders filled as part of a trial run that began in March, largely because they haven’t signed up enough partner merchants or opened enough warehouses to directly sell much of the merchandise shown on its website.
When a Jet customer buys items that aren’t in its inventory or available from partner merchants, a Jet employee buys the items from another website and has them shipped directly to the customer.
That is expensive for Jet because the company often pays high shipping costs plus any difference between its advertised price and the amount charged by the outside website.
For example, The Wall Street Journal recently bought 22 items from Jet. Twelve were shipped to the Journal by retailers such as Wal-Mart Stores Inc., J.C. Penney Co., and Nordstrom Inc., according to sales receipts.
Jet’s prices for the same 12 items added up to $275.55, an average discount of about 11% from the prices Jet paid for those items on other retailers’ websites. Jet’s total cost, which also includes estimated shipping and taxes, was $518.46.
As a result, Jet had an overall loss of $242.91 on the 12 items. Can’t work that way for long, can it?
Can it build scale?
Jet is trying to pull off one of the most improbable scenarios of all: lure millions of customers away from Amazon, which had raised less than $10 million in funding before it went public in 1997. Amazon, of Seattle, now is worth about $225 billion.
Jet needs to spend aggressively to reach massive scale, at which point the company will start to turn a profit.
That includes as much as $300 million over five years for the outside merchandise-buying program, which Jet calls a “concierge” service, to help attract new members while Jet adds inventory and forges more partnerships with retailers who want to sell products on its site.
The company has already spent $40 million to hire more than 300 people, subsidize the concierge service, set up warehouses in New Jersey, Kansas and Nevada, and on other startup costs.
Business model issues
Dozens of the nation’s largest retailers including Macy’s Inc., Amazon.com Inc., and Home Depot Inc. have quickly moved to disassociate themselves from new discount retail website Jet.com.
The retailers complained to Jet after discovering it had placed links to their sites without permission, promising its own members cash back for making purchases after clicking the links.
A comparison of Jet’s website on July 1 and on Tuesday reveals that more than 100 brands owned by at least 70 different companies have been removed, most in the week after the company’s July 21 launch.
Liza Landsman, Jet’s chief customer officer, said some of the merchants requesting their brands be removed were unhappy because they view Jet as a competitor, while others insisted Jet negotiate a deal with them first. Another group of merchants was unaware but was happy for Jet to direct traffic to them, she said.
The affiliate program is where the retail brands appear under a section of Jet’s website called “Jet Anywhere.” As of Thursday, Jet listed 640 retail sites as part of the program after adding dozens of smaller retailers in recent days.
Jet typically gives 80% of the commission it receives back to its members in the form of “Jet Cash,” said Ms. Landsman. Customers can use that credit to spend on items sold through Jet.com.
To get the credit, they send an email confirmation back to Jet proving they made a purchase.
Jet Anywhere is small but not insignificant: Ms. Landsman said it accounted for 15% of the gross value of merchandise that has been purchased through Jet since launch two weeks ago. Jet counts the value of merchandise purchased on other retailers’ sites via its affiliate links as if it were merchandise sold on its own site.
“Wal-Mart loses money on many online sales,” says a person close to the retailer. “The model only works if those losses are investments in customer loyalty. To the extent, those sales are to competitors who turn that investment around to steal or even just intermediate the customer relationship, that’s a frustrating outcome for Wal-Mart.”
Why Amazon holds all the cards
Agile Innovation
Amazon has existed in the e-commerce technology world since their inception. They think like a technology company and agile innovators.
They are not afraid to try new things and they can get things done quickly, thanks to the culture their CEO Bezos has instilled.
Related: 6 Ways Biases Destroy Decision Making Results
They are miles ahead of the competition in thinking and acting like a business innovator.
Technology lead
Amazon has a massive product offering and has a big lead in the race to fulfill orders guarantees quicker turnaround times and more convenience after placing the order.
Jet’s technology must make sure customers can find what they’re looking for, quickly and easily. That is not an easy task with all those affiliates. Or, in the case that customers don’t know exactly what that is, helping them figure it out with a fairly high degree of accuracy.
Key takeaways
At the end of the day, Jet’s success really just revolves around turning an otherwise complicated shopping experience into one that feels quaint and easy and most importantly saves customers money while offering a broad product line. They have a long way to go to beat Amazon.
And the price is not the value proposition I would want to be using to compete and beat the gorilla Amazon. How about you?
Unfortunately, Jet beating Amazon is much easier said than done.
If Walmart hasn’t been able to do it, I very much doubt Jet can.
So what’s the conclusion? The conclusion is there is no conclusion. There is only the next step. And that next step is entirely up to you.
It’s up to you to keep improving your continuous learning. Lessons are all around you. In many situations, your competitor may be providing the ideas and or inspiration. But the key is in knowing that it is within you already.
All you get is what you bring to the fight. And that struggle gets better every day you learn and apply new lessons.
When things go wrong, what’s most important is your next step.
Test. Learn. Improve. Repeat.
Are you devoting enough energy to improving your continuous learning for yourself and your team?
Do you have a lesson about making your lifelong learning better you can share with this community? Have any questions or comments to add in the section below?
Mike Schoultz is the founder of Digital Spark Marketing, a digital marketing and customer service agency. With 40 years of business experience, he blogs on topics that relate to improving the performance of your business. Find them on G+, Twitter, and LinkedIn.
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