Retail

Can Jet.com Soar Without Logistics Fuel?

The common perception in the eCommerce industry is that, for any emerging online retailer taking on the tall task of seriously competing with Amazon, it would definitely have to address one area in which that giant thrives: fast, low-cost (or free) delivery.

However, Jet.com — arguably one of the more viable aspirers to Amazon’s throne to enter the market recently — seems not exactly to adhere to that line of thought … and is nonetheless on track to achieve $1 billion in sales by next month, less than a year from when the site first launched.

While Amazon set the standard (as it did in many aspects of online commerce) in the area of low-cost/no-cost speedy delivery — offering free two-day shipping to Prime members (who pay an annual membership fee of $99), one-day shipping to the same starting at $2.99 per item and, more recently, free same-day delivery to Prime members for orders of $35 or more — Jet’s delivery policy matches it in only one aspect: the $35 order minimum. And meeting that threshold only gets Jet shoppers two- to five-day shipping for free.

How, then, can Jet have achieved the success that it has to date — keeping in mind that the company did away with its membership fee structure back in October — when consumers can get just about everything they could on Jet’s site on Amazon (if not more, given the latter company’s breadth of reach) and receive their items just as fast or faster (particularly if they’re Prime members), at lower costs (including, in many cases, no delivery charge at all)?

There are a couple of characteristics differentiating Jet from Amazon that may begin to explain things, first and foremost being that Jet does not sell its own products but is instead a tried-and-true online marketplace that provides a platform for third-party merchants to hawk their own wares. Amazon, on the other hand — although it continues to serve that same function in many respects — is making the acquiring and sales of its own merchandise an increasingly bigger part of its business model.

While the “platform-only” aspect of Jet’s operations goes a way toward explaining the marketplace’s own revenue growth — the company takes a cut of between 8 and 15 percent on each sale depending on the product category — what difference does it make to consumers as to whether or not they’re buying “Jet products” (a thing that does not technically exist) or another company’s on Jet.com?

In a word, none.

What does appear to make a difference to consumers in choosing between Jet and Amazon (or another online marketplace, such as eBay) is that the more items they purchase in a single order on Jet, the lower the overall price becomes. This offering — which Jet calls its “Smart Cart” — could arguably go a long way to assuaging shoppers’ concerns about having to pay $35 for free shipping in cases where the difference in what they would have paid for shipping from Amazon (or online from Target, Walmart, Costco, et al.) is offset by the comparable value they receive on their merchandise spend.

Another beneficial element of Jet’s Smart Cart — one that relates directly to delivery cost — is an algorithm that determines, as Internet Retailer explains, if there is a comparable item in a customer’s online cart that is available at a lower cost and offers it to him or her prior to checkout. What determines those “smart choice” items is simply logistics: They are available from retailers located closer to the consumer’s home (than the retailer he or she was originally going to buy from), which inherently lowers the cost of delivery. The resultant benefit, therefore, is not just to the consumer but also to the retailer selling on Jet, who gets a lift from Jet’s aforementioned policy of encouraging bulk orders as well.

Should more consumers determine that the overall savings they receive strictly on the purchase price of orders made through Jet.com are worth the wait, literally, in terms of delivery time — particularly compared to some of the ultra-fast options that Amazon offers to its Prime members — there is a chance that Jet could hold its own in the eCommerce space, while going directly against the largely held perception that speed of delivery is everything.

For now, the company is on pace to reach the $1 billion sales mark (and presumably exceed it within its first 12 months of operation) by holding to the notion that how much online shoppers get for their dollars matters a little bit more to them than how quickly they receive it.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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