• by Dylan Gordon , Op-Ed Contributor, August 10, 2015

Days after Amazon’s Prime Day, Jet.com released its “membership club” price savings model to the world. The Google shopping meets Costco ecommerce startup swears by its complex algorithm to find members the best prices across the web and then add savings on top of them via transparent pricing structures and practices.

The proprietary algorithm takes into consideration a variety of factors to drive down costs. However, the most innovative feature is the ability to opt out of costs that are often already baked into prices. For example, you can save more money if you agree to waive free returns or pay with a debit card. 

Real-Time Pricing

Where Jet.com really tries to pull away from Amazon is in regards to real-time price adjustments. For example, when you buy peanut butter, the cost of jelly decreases in real time for that purchase. The idea of bundling complementary items is by no means revolutionary, but it’s unique for a membership-driven service. You might recall that Amazon also recommends a bundle of related items, but bundling products based on their recommendations doesn’t necessarily lead to savings. 

For the price-conscious consumer, there’s something enticing about watching your bill decrease as you add items to your cart. It’s a solid play for Jet.com that extends a benefit to customers while gamifying the experience and leading to increased purchases.

War of Membership Perks

There’s no secret that Jet.com aims to usurp Amazon’s market share, but it’s taking a different approach to do so. When you sign up for a yearly Amazon Prime membership, you get something tangible: free two-day shipping in addition to unlimited photo storage and exclusive access to music, movies, and Kindle books. Although you might not be able to put a tangible dollar amount on these perks, Amazon’s approach to consumer loyalty extends beyond price savings as they focus on providing a simple and enjoyable web experience, and reliability that is commonly perceived as second to none.

On the other hand, a yearly Jet.com membership gets you something more mysterious: access to an algorithm and transparent pricing practices. Something about an algorithm just isn’t as tangible as free shipping, and it requires a bit more trust. However, transparent pricing empowers the customer to rank the value of various price-saving benefits. 

For Jet.com, pricing flexibility is a huge perk, but the unique selling point is that consumers are able to decide how they want to create discounts for the products they are buying. Whether it’s paying with a debit card or buying complementary products instead of being offered sales, consumers have the freedom to essentially create sales for themselves. 

While Jet.com is likely betting that it will win the battle of membership perks over Amazon Prime’s free two-day shipping and additional user services, it’s tough to gauge, considering Amazon’s brilliant name recognition and generally reasonable prices. Jet.com will either shine or fail based on understanding how consumers like to shop and their ability to brand themselves as more than just low prices.

Race to the Bottom

The emergence of Jet.com into the online retail scene means it has potentially ignited a race to the bottom with Amazon. Although Jet.com’s algorithm is sleek, the sustainability of its model is under question. How long can they slash prices below cost, and at what point will the annual membership fee fail to cover price cuts on complementary items?

Compare that uncertainty against Amazon, an established ecommerce innovator with proven viability of its pricing model and increasing consumer affinity for its Prime membership. Jet.com is looking to take a bite out of Amazon and its Prime membership base, hedging bets on a cost-saving algorithm, transparent pricing structure, and flexible user discounts. While the startup’s value proposition is clear, a battle for consumers’ hearts will likely be a challenge at a time when building consumer loyalty comes down to much more than discounting.