opinion

Commentary

The Jet.com Shopping Model Challenges Conventional Wisdom

After an impressive pre-launch mediablitz, Jet.com is scheduled to take off later this spring, joining countless other retailers and shopping programs vying to capture a significant share of the online retail market. Jet.com, I feel, merits close scrutiny, because its shopping model differs so substantially from others’.

Most programs cater to online shoppers’ demand for free deliveries and desire for quick gratification. According to variousdescriptions, though, Jet.com’s shopping model pays little heed to these interests. While it offers free shipping on orders of $35 or more, it rewards members primarily for placing large orders.

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The program uses an algorithm that recalculates the total price whenever the shopping cart grows or contracts. Final prices are based on a combination of small, individual offers and other factors, not all of which apply to every purchase; still, Jet.com says its prices will be 10-15% lower than anywhere else online. To consistently optimize their savings, though, members will have to change the way they shop and save online.

Variable Savings

Consumers respond positively to well-defined deals on the items they want, i.e., percentage discounts, BOGO offers, and the like. However, Jet.com members won’t know how much they’ll save on any item — or an overall purchase — until they decide on the final composition of their cart. Cost-conscious shoppers will see additional offers that can reduce a single item’s price, but only if they increase their overall purchase.

Unless they come prepared with a shopping list or they have a flexible budget, members who want to maximize their savings will need to weigh a variety of changing options in real time. That isn’t a typical, let alone optimal, shopping experience.

Deal-Free Shopping

Bargain hunters want to compare sales offers — they like knowing they’ve found the best possible deal. Similarly, coupon clippers enjoy coupons — they like looking for them, entering the codes, and seeing the promised discounts appear.

Members won’t see these offers at Jet.com. Founder and CEO Marc Lore told NerdWallet that they “don’t need to look for bargains or clip coupons” because the algorithm will squeeze inefficiencies from the process and give the resulting savings to the member. Nevertheless, eliminating coupons and sales offers will force these shoppers to alter their habits and/or pursue those deals elsewhere. If Jet.com doesn’t consistently deliver higher savings, these members may not remain in the program long.

Uncertain Returns

Because they can’t check the fitness of online orders until they arrive, consumers place a high value on free, easy online returns:

  • 66% of online shoppers check a retailer’s return policy before they make a purchase;
  • 81% are unlikely to shop again at sites that charge them for return shipping; and
  • 95% say they’d go back to a retail site if they had a positive return experience.

While Jet.com offers members free return shipping on purchases, another benefit is a 3% discount if a member agrees upfront not to return any item in the order. (An as-yet undisclosed penalty will be imposed if a member breaks the agreement.) Some shoppers will embrace this discount, but for many, the chance to save, say, $4.50 on a $150 order won’t be worth the risk of getting an unsatisfactory item.

It’s obviously far too soon to make any predictions about Jet’s fate. While every start-up faces an uphill battle in the online space, Marc Lore’s track record has inspired a lot of investor confidence. However, Jet is pinning its hopes on an untested, unproven model that seeks to significantly alter the current behavior of online shoppers. Its every step will therefore be analyzed in depth — and not just by me, but by the entire online retail industry.

1 comment about "The Jet.com Shopping Model Challenges Conventional Wisdom".
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  1. Paula Lynn from Who Else Unlimited, May 1, 2015 at 5:35 a.m.

    Caveat emptor.

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