This post is by Daniel Sperling-Horowitz, President and Co-founder of Zentail.
Something interesting in the world of online retail happened during the summer of 2014.
Mark Lore, co-founder and former CEO of Quidsi (which sold to Amazon for $540 million in 2010) announced that he had raised $55 million in funding, to launch an innovative shopping site called Jet.
Jet would make use of technological advancements and transparency to ultimately provide consumers with unprecedented savings. In September 2014, Lore raised another $25 million. By February 2015, $220 million had been raised – six months before Jet would publicly launch.
The marketplace landscape is evolving, and this new seller-friendly entrant is now emerging as a serious channel. If you rely on Amazon’s third-party marketplace for a disproportionate percent of your sales, chances are you’ve experienced many sleepless nights wondering if tomorrow is the day it all gets taken away. Diversifying by selling on additional sales channels is an effective way to reduce that risk.
So what is Jet.com and what does it mean for your business?
- Jet’s Story So Far
- How big is the opportunity, really?
- Is Jet taking a piece of the pie or is it enlarging the pie?
- Which products do best on the site, what’s the target market?
- How do listings work on Jet.com?
- How can sellers gain an advantage over competitors?
- How do brand owners feel about Jet? Can I break MAP?
- What’s the best way to start selling on Jet?
- Can I use FBA Multichannel Fulfillment to sell on Jet.com?
- In Closing
Jet’s Story So Far
The initial vision for Jet was to be a members-only shopping club that – in exchange for a $50 annual fee – provided access to millions of products sold by third party sellers at prices roughly 15% below other marketplaces.
Unlike Amazon and eBay, Jet would not take a commission on the sale. Instead that commission would be passed on to the members as savings. Members would have the option to unlock further savings by paying by debit instead of credit, waiving their right to a return, providing their email address to the third party seller, purchasing in bulk, and purchasing other items shipping from the same warehouse.
All told, the savings would be so compelling that members would easily justify the annual fee and habitually shop Jet for an ever-growing catalog of products.
But in an interesting turn of events, Jet dropped its annual membership fee shortly after launching, to avoid unnecessary hurdles to customer acquisition and retention. Instead, Jet now takes a variable percentage of the commission fee (15% but with some exceptions) that otherwise would go directly to the shopper in the form of savings. Prices on Jet are now less steeply discounted but we believe the discounts remain meaningful.
Such a business model requires massive investment and sustained losses in order to achieve the scale to compete with Amazon. Last November, Jet announced an additional $350 million in funding from the likes of Alibaba and Fidelity.
As a marketplace seller, either you are already selling on Jet.com, itching to get started, or patiently collecting information to decide if the new channel is right for your business. According to Web Retailer’s Amazon Sellers Survey 2016, 48% of million-dollar sellers want to be selling on Jet.com this year. If you’re a member of that camp, hopefully this article answers the important questions that will help you make your decision.
How big is the opportunity, really?
Big, thanks largely to the size and growth of the ecommerce market, Jet’s innovative business model and fundraising prowess. For Lore and his team, it’s go big or go home.
Jet plans to achieve $20 billion in GMV by 2020. This compares to estimated third-party Amazon GMV of $120 billion and actual eBay GMV of $82 billion in 2015. Based on monthly revenue growth and other core data points that we’re monitoring, we believe Jet is on a $1 billion annual GMV run rate for 2016. If you extrapolate based on the growth Jet is exhibiting, we think $20 billion in GMV by 2020 is certainly feasible.
Perhaps the most eye-opening indicator that Jet has struck a nerve with their business model is their average cart value and average units per order. Across the growing number of retailers we monitor, Jet averages 1.5 units per order. That number on Amazon across the same merchants is 1.1. As a result, on a dollar basis, average cart values are meaningfully higher, and average profit per order is considerably higher.
So what kind of lift can you expect for your retail business? This is where paths diverge for retailers. Jet’s model benefits retailers that have at least one of the following attributes:
- Competitive prices on competitive products, ideally located close to major markets.
- A mix of complementary competitive products commonly purchased together, located in the same warehouse.
- Exclusive distribution of products sought by consumers.
If you sell competitive products that are not currently available on Jet.com, you will have a first-mover advantage, but that advantage is not likely to endure.
We have found that for many marketplace sellers, if they have not invested time and energy into growing their eBay sales, that their monthly sales on Jet fast approach their eBay sales – regardless of their product catalog.
Is Jet taking a piece of the pie or is it enlarging the pie?
There is no easy or certain answer at this point. In one respect, we believe Jet’s efforts are expanding the ecommerce market, because the savings generated by Jet’s business model finally make it economical to purchase household staples online.
Jet is also attracting sales from shoppers who are not fiercely loyal to Amazon. If you search for any product on Google, there’s a good chance you’ll see Jet.com’s offer at the top of Google Shopping results – because they are outbidding retailers seemingly across the board. eBay also leverages Google Shopping, while Amazon does not participate so as not to reveal data to their fiercest product search competitor.
Here’s one Jet.com retailer’s take:
My experience so far is that it is a different customer than the one that shops on Amazon or Ebay, probably due to their extensive television advertising. I view Jet as an adjunct to my Amazon sales. We try to keep up with the trends and Jet requiring API’s to support the adding and shipping of products is not for the faint of heart, it requires an investment in the right software so that we can focus on our strengths in product sourcing.
— Jerry Bloomberg, La Toys Etcetera (FBA and merchant-fulfilled on Jet.com)
Which products do best on the site, what’s the target market?
While Jet builds towards a broad-ranging catalog rivaling that of Amazon’s “everything store”, shoppers will currently have a tough time finding a robust selection in many categories that stray from the home.
From our view, Jet’s core focus is in serving shoppers with a comprehensive selection of products that center around the home and family – health and beauty, consumer staples (“essentials”), housewares, home appliances and accessories, toys, and pet-related products.
It’s important to note that Jet sells many “essentials” first party – partly a loss-leader strategy – and therefore it will be difficult to compete if you’re mainly selling well-known household brands. In other words, if you’re selling products commonly found in a drugstore, you’re not going to do well on Jet.com.
Knowing Jet’s primary appeal, you can merchandise to meet the needs of their core customer; people shopping for the family and home. Unsurprisingly, we’ve seen success with family-oriented products of products ranging from to-go food containers to children’s toys.
Once approved to sell on Jet, you’ll gain access to their Sales Rank file which shows a comprehensive, categorized list of top selling products.
How do listings work on Jet.com?
Unlike Amazon which has crowd-sourced (often duplicate) ASINs and eBay which has unique listings per seller, Jet utilizes a “Unified Product Catalog” in an effort to maintain a clean, consistent catalog.
This places a significant burden on Jet’s catalog team to carefully review each SKU contributed by retailers. They make sure it’s either routed to a pre-existing listing for that unique product, or accurately represented as a new listing. Due to an overwhelming number of SKUs and unique products in Jet’s review process, new listings can take some time to flow through to the live site.
The actual amount of time for a unique product to go live on Jet.com can vary from days to months, as Jet prioritizes the review of catalogs that are over 1,000 SKUs. Jet’s team is working hard to implement a streamlined, technology-enabled process for approving new listings and we expect delays to subside once the current backlog is cleared.
Sellers who contribute a catalog with a mix of SKUs that are already live and not yet live will therefore start generating sales – so long as their pricing is competitive – for the SKUs associated with already live listings, while the remainder of their catalog awaits review.
Jet search optimization is fairly crude. In order to ensure your products appear favorably in search results, you will need to focus on including keywords in your title, description and bullet points, and select the most appropriate Jet Browse Node ID. Browse Node IDs cannot be top level, and must be provided in order to qualify for listing.
Similarly, in order to prevent a mismatch on Jet, if you list SKUs that are packs of multiple units, it’s important to explicitly indicate that your SKU is a multi-pack if the UPC or Brand and MPN you are providing is also associated with a single unit.
How can sellers gain an advantage over competitors?
Jet’s “smart cart” considers several factors when dynamically assigning an order (in whole or in part) to a retailer. Item price, shipping price, quantity discount, proximity to customer, total cart composition – among other factors – are taken into consideration. For more on how Jet functions from the shopper’s perspective, watch this video.
Optimizing sales on Jet is currently a bit of a black box that requires careful experimentation. If the products in your catalog are carried by other retailers, we recommend making sure that you:
- Price competitively.
- Stock complementary products that are frequently bought together.
- Implement a shipping model that does not treat shipping as a profit center, and instead offers shipping price discounts for customers who are nearby or purchasing in bulk.
- Implement a “Basket Building” model that incentivizes shoppers to buy in bulk. In Jet’s Partner Portal there is a “Rules Engine” section which gives retailers the ability to customize their offerings based on specific characteristics. For example, you can offer “commission adjustments” (savings) based on cart value and number of units.
- Have a customer-friendly returns policy. We believe Jet favors sellers who do not charge for returns and restocking, and Jet is extremely focused on establishing repeat customers.
- Prioritize fulfillment of Jet orders. Try to fulfill same day or at least next day. We believe Jet routes orders in a manner likely to “wow” the customer.
- If possible, stock your products near densely populated areas.
How do brand owners feel about Jet? Can I break MAP?
We’re finding many brands are interested in selling directly on Jet.com and excluding resellers from selling their products on the new marketplace. This is a rather concerning theme across all marketplaces that deserves its own article.
One of the most common misconceptions from sellers is that they can sell below MAP because the identity of the seller is hidden on Jet. The shopper does not know who is ultimately fulfilling their order until they reach checkout.
At checkout, however, Jet is transparent about which trusted retailer is fulfilling the order. Even if you obscure your seller name, we have seen brand owners contact Jet and successfully obtain the identity and contact information of all retailers selling their products on Jet.com.
What’s the best way to start selling on Jet?
First, apply to be a Jet Partner – it’s free and only takes a few minutes. A business entity based in the United States is required.
In order to establish and maintain a high service level for shoppers, Jet requires retailers to acknowledge orders within 15 minutes of receipt. Effectively, this means having a data system that can automatically (not manually!) tell Jet’s data system “roger that, we’ve received this order, we have inventory and we’re going to fulfill according to the expectations set in our fulfillment settings”. Accordingly, retailers are required to programmatically integrate with Jet’s data system either via API or using an approved third-party channel management vendor such as ChannelAdvisor, CommerceHub, or Zentail.
Can I use FBA Multichannel Fulfillment to sell on Jet.com?
Yes, FBA multichannel fulfillment is embraced by Jet as it ensures a consistent service level. FBA multichannel fulfillment is not right for every seller, as it raises fulfillment costs which makes you less profitable or less competitive. FBA-to-Jet automation powered by a Jet-approved software vendor is probably the easiest way to get started selling on Jet.com. We highly recommend using unbranded packaging so as not to confuse the customer with Amazon branded packaging.
Your success selling on Jet.com is not guaranteed. But with the proper catalog and service levels, Jet represents a compelling opportunity for retailers looking to grow sales and diversify their channel mix.
Setting proper expectations for Jet’s impact on your business is absolutely critical; Jet is a startup with an evolving business model. Like any startup, Jet is prone to growing pains.
With Jet in the equation, we believe the future for third-party marketplace sellers is looking bright.
This post was by Daniel Sperling-Horowitz, President and Co-founder of Zentail, a software system for multichannel retail. Zentail worked closely with the founding team at Jet, and was a top 5 seller on Jet.com beta testing.