After months of hype and $220M+ in raised capital (including an unspecified amount from Alibaba), Jet.com has launched in beta to its first 10,000 users. Profitero’s Keith Anderson was among the first 10,000 users and shares his initial impressions of the would-be Amazon challenger.
Strategy & Positioning: An Extension of Amazon’s Ideas to their Logical End
Jet.com was founded by Marc Lore, the founder of Quidsi—the Diapers.com and Soap.com operator Amazon acquired in 2010.
Lore has been open about his dissatisfaction with the way that acquisition went down, and the mainstream business press has hyped Jet as Lore’s attempt to settle the score.
On first review, there may be some truth to that angle. Jet seems to extend some elements of Amazon’s growth model—low costs, low prices, wide selection, a marketplace model, and convenience—beyond the bar Amazon has already set. But it falls short in others.
Like Amazon Prime, Jet.com has an annual membership program (though Jet’s is not optional.) Programs like Prime and Jet can have a lock-in effect with households, which feel incentive to shift spend where they’re members to maximize the value of membership.
At $49, Jet’s membership fee is half that of Amazon Prime. It doesn’t come with added-value like Prime Video, but the lower membership fee may attract some households.
Like Costco, Jet is explicitly choosing to profit from membership fees, not merchandise margin. This model can be brilliant when it works but has major implications for suppliers.
Also like Costco, Jet’s membership isn’t optional the way Amazon Prime is. This has the benefit of forcing the favorable economics of membership revenue, but I’ll be watching to see whether Jet.com opens its site up so non-members can browse after the beta period ends.
Amazon’s vast, search-indexed selection is a massive driver of organic traffic. For now, Jet.com is opting out of optimizing for organic search.
Emphasis on Price & Value
Besides the lower membership fee, Jet is clearly emphasizing price and value at launch, with a secondary focus on selection.
For years, Amazon has experimented with offering shoppers incentives that help improve its bottom line—offering MP3 credits for agreeing to “No Rush” shipping, for example.
Jet makes these economic tradeoffs even more explicit, letting shoppers save more by:
Forfeiting the right to return product
Buying multiples of the same product
Buying “Smart Cart” items that ship better together or for less based on warehouse location
Using payment methods with lower merchant or interchange fees (e.g. debit)
Jet also lists a “competitive price” for each product. Jet doesn’t name the competitors it apparently checks prices against, but some observers believe Amazon (and perhaps Walmart.com) are the likeliest benchmarks.
Directionally, Jet is headed somewhere interesting, but this approach lacks transparency. Shoppers may not trust Jet to display a “competitive” price without showing which competitors’ prices were checked, and when.
There are also some data accuracy issues. Take the Kashi Golean product displayed above, for example. Jet lists that product’s “competitive price” as $12.28 for a 21.3 oz box.
At the time this was written, Amazon.com happened to have the same product for—you guessed it–$12.28. But Amazon is selling a pack of 3 at that price, versus Jet’s price of $4.84 for a single box. At an equivalized price, Jet is actually more expensive.
At Profitero, we know firsthand how challenging accurate product matching can be, especially with non-identical packsizes or pack configurations. But shoppers may feel misled.
Selection: 10 million products?
Jet claims to carry 10 million products, though my manual review of the site suggests that may be aspirational for now. Still, Jet is clearly angling to create the perception of “infinite selection” that has become so key to Amazon.
As at Amazon, there’s a heavy emphasis on everyday essentials like laundry detergent, personal care products, and cleaning supplies.
These consumable categories are important to drive frequency and lock in loyalty. I’m surprised not to see a subscription program or other auto-replenishment model, but I imagine that Jet doesn’t yet have the supply chain visibility or reliability to support one.
Convenience & Experience
The convenience and experience of shopping with Jet is where I see the biggest competitive gap in the near term.
First, product content on the site is woefully inadequate and incomplete:
Products tend to have just a single product image
Common product content fields like nutritional information, ingredients, allergy info, directions for use, and more are often absent or poorly structured
Product pages don’t suggest alternatives or upsells through any kind of “better together” or “customers who viewed/bought this also…” merchandising
Ratings and reviews data isn’t yet available (fair enough; you need customers before you can expect them to review anything!)
These weaknesses will have implications for Jet’s own ranking in Google’s organic search as well as the relevancy of search results on its site.
And a lack of detailed and accurate product content will lead to sub-optimal conversion rates.
Secondly, I don’t expect Jet to be able to match Amazon’s fast (and accelerating) delivery speeds.
Though I do see many products in consumables categories with Jet’s “2-day shipping” designation, I don’t anticipate that Jet will be able to out-Amazon Amazon with 1- or 2-day shipping on anywhere near as many products. Fulfillment and delivery capabilities like Amazon’s are incredible capital intensive, and it takes years to build the infrastructure to support infinite selection and urgent delivery.
Jet’s free shipping threshold ($35) also feels a little high, but free returns are a good move.
I do like Jet’s sophisticated category filters, which include variables like brand, form factor, size/volume, product attributes like color, and many others.
Product categorization and data still has some kinks to be worked out, however.
For example, I found this CD in the pain relievers category by clicking “CD” under the “Form factor” filter:
The Vendor Equation
Jet appears to be buying primarily through wholesalers or distributors (along with partnering with third party merchants that sell through the Jet marketplace), a common tactic for retailers trying to accelerate expansion.
This gives them the advantage of speed and agility but leads to challenging economics and limited collaboration with manufacturers.
There’s little to no “official” content from brands on Jet and no brand-driven promotions or creative.
If I were a manufacturer, I’d be concerned about Jet’s emphasis on low prices and inadequate/inaccurate product content.
The risks are relatively low for now, but as Jet and other marketplaces rise in prominence, brand owners will need much better intelligence on how they’re being presented and sold.
Many manufacturers take the stance that marketplaces like Jet, Amazon’s 3P marketplace, or Instacart can safely be ignored because “we can’t impact them directly.”
It’s true that manufacturers have less direct influence on most marketplaces than they do with more traditional retailers. But ignoring these fast-growing marketplaces strikes me as a major blind spot, and I’ll continue to follow them closely.
It’s far too early to really judge Jet; as the site itself notes, it’s in beta, and there’s still a lot to be done.
What is clear is that another well-funded entrant into the online grocery and CPG market serves as additional validation of demand.
Alongside other new players like Instacart and Boxed, Jet is using new ideas to shake up a massive category.