Jet is the new kid on the e-commerce block and boy, are they causing a ruckus. They’ve got a membership model that supposedly has Amazon shaking in their boots, and that’s quite the feat.
Chris Neiger even proposed that Prime Day was a response to Jet’s approaching launch. It makes sense though, since Jet costs half of what Prime does and guarantees the lowest prices online.
Jet has a membership model in which shoppers pay a fee to have access to super low prices. If you think that sounds like Costco, you’re right in some respects. Jet has a big task in trying to steal customers away from trusted retailers like Walmart, Amazon, and Costco, but their pricing structure is what’s catching everyone’s attention.
Pricing on Jet is based on a number of factors and it updates often. The combination and number of products a shopper is buying impacts pricing. Just like Amazon, Jet offers free shipping on orders over $35. To minimize the cost for Jet, if all items are in the same warehouse, they’ll be cheaper.
This cuts out the shipping inefficiencies by adding an incentive to buy more from one location at a time. On the other hand, Prime gives shoppers the same pricing regardless of how many separate orders they place. Jet stands out as a leader in transparency and efficiency.
Jet goes beyond Amazon in terms of customer service, by offering free 30-day returns across the board. But, if shoppers forfeit the ability to return items, they’ll pay even less, minimizing hassle for Jet. Another factor that goes into the pricing model is payment method. Using certain cards cuts down the shopper’s bill even more.
Amazon has been the king of low prices for years. Even if Amazon isn’t actually the lowest price, their brand perception and additional features are so strong that shoppers keep coming back. Prime Day had mixed reviews to say the least. Shoppers were met with great deals, but their complaints stemmed from the products that were featured.
Electric sharpeners and dishwashing detergent aren’t really the kind of items that have shoppers lining up around the digital block. And yet, many of the items offered on Prime Day sold out. Amazon was clearly doing something right and their implied revenue spike for the day is a testament to that.
If Prime Day really was a response to Jet’s launch and it didn’t exactly go as planned, what does that mean for Amazon’s ability to maintain its throne? It’s going to come down to price, in addition to a number of other factors.
Sure, shoppers are looking for deals, but they’re also looking for fast shipping. Amazon has fulfillment centers in 26 states already and guarantees two-day shipping with a Prime membership. Another factor is impeccable customer service. Have you ever had an Amazon package lost in the mail? They get it solved quickly. Can Jet measure up to the standard that Amazon has set for e-commerce? Only time will tell.
And what about the countless other retailers that are scared that Jet is going to start an unbeatable price war? Price matching is tricky and generally best to avoid because not all retailers are the same. While Amazon, Jet, and Walmart might set up agreements directly with manufacturers to get goods at the cheapest price possible, retailers with lower sales volume might not have the same bargaining power. Selling below cost consistently is unsustainable for most businesses and frankly it doesn’t make sense. If a retailer is only competing on price, it’s time to work on branding.
So what’s a retailer to do in the wake of Jet’s launch? I say retailers should keep doing what they do best. Dig into customer reviews and feedback data to remind yourself of why your customers keep coming back. If you have a great assortment and provide a small discount a few weeks after a purchase was made and shoppers love it, keep doing that.
Think about it this way, Amazon is a large player in online retail, with an estimated 23% of online retail market share, but the behemoth hasn’t taken over the industry. Small Etsy shops are still alive and well because they serve a purpose that Amazon hasn’t been able to address just yet (although they’ve caught on and are building out a “handmade” marketplace). Luxury retailers still have a place, as Amazon has tried to sell high fashion items with little luck. Essentially, if Amazon hasn’t totally taken over online retail, there’s hope for other retailers that Jet won’t either.
If anything, Jet’s launch should serve as a wake up call for all online retailers. It’s time to define your value proposition and really explain to shoppers why they should choose you. The number of online retailers increases every day, after all. The barriers to entry are low and going viral can send sales through the roof. Jet is going to turn retail on its head and solidify the reign of the membership model, but other retailers shouldn’t wave the white flag just yet.