Jet.com Takes Off: What Does This Mean for Retail?

After months of anticipation, upstart retailer Jet.com is finally open to the public. Equal parts membership club, e-commerce store and discount program, Jet.com is touted by some analysts as a major retail disruptor.

At first glance, the New Jersey-based startup may seem to be just another online retailer with a huge product mix. But there’s a difference — mainly that Jet charges an annual membership fee of $50 to shop at its online store.

In fact, membership fees are the company’s bread and butter. Its business model doesn’t involve making money from the products it sells. Instead, members pay a fee in exchange for getting optimum pricing on each order.

In fact, Jet’s shopping cart system is constructed to let shoppers know when they have the option to save more money. For example, many businesses build the cost of returns into product pricing. In some cases, Jet customers will have the option of waiving the right to return a product in exchange for a lower price. Larger orders of some products can earn shoppers even more discounts. Using a debit card, rather than a credit card, means lower fees for Jet, savings that are passed on to the customer.

Jet also offers its “Jet Anywhere” program that allows members to earn store credit even when shopping at other retailers. Members simply visit online retailers through Jet.com and receive a percentage of their off-site purchases in the form of Jet.com product credit.

So will Jet.com fulfill its promise of being a retail disruptor? Maybe, maybe not.

“The former bricks-and-mortar environment and the e-commerce space are now seamless, and if Jet.com hopes to challenge Walmart and Amazon, they will have to solve for the same logistical and delivery challenges that their competitors have been working on for years. It will be interesting to see if their solution is sustainable,” said Chance Chapman, vice president of digital and media at Saatchi & Saatchi X in Springdale. “For a lot of people, shopping involves an emotional connection to the experience beyond just results — it is fulfilling a deeper need of socialization, taking care of their families or taking care of themselves.  Both Walmart and Amazon spend a lot of time building that emotional connection with their shoppers.”

Jet has plenty of well-known competition in both e-commerce and membership club markets.  Both Walmart and Amazon offer a number of services that Jet.com doesn’t have: Amazon’s Prime program provides free, two-day shipping to members, along with access to a vast digital library of movies, television shows, music and books.

Walmart, on the other hand, offers customers unprecedented shopping choices: Shoppers can place orders online, or do their shopping at a brick-and-mortar store. Online shoppers also have the option of paying for their purchases in a store and waiting for it to be delivered or they can pick up their orders in-store.  Walmart has also partnered with some financial services suppliers, allowing customers to do their banking in the same place where they shop. Some stores even offer health care services, such as medical clinics and eye exams.

Another area where Jet.com may have difficulty disrupting is that of fresh grocery. Walmart has long offered fresh groceries in stores, as have warehouse clubs such as Costco and Sam’s Club. Amazon has also moved into the fresh grocery delivery business.

While Jet.com’s interactive shopping cart may be fun to watch as it points out savings opportunities, over time, customers may prefer the convenience of one-stop shopping. Especially when the consumer can still visit a store when they need and want to.

The financials are another concern. Jet hopes to do $20 billion in sales over the next five years. An ambitious number, made even more challenging by the fact that the company sells a lot of low-priced consumables. While Jet’s systems attempt to optimize shipping costs by packaging some items together, a recent CNBC article noted that these systems don’t always work well, highlighting a case of where a single toothbrush ordered through Jet.com shipped separately from the rest of the customer’s order. The shipment ended up costing Jet far more than the actual price of the toothbrush.

Jet’s management seems to be taking these concerns in stride, however. Journalists and analysts will undoubtedly be keeping their eyes on this company, even as they also pay attention to how Amazon and Walmart respond to the challenge.