Jet.com is an exciting success story showcasing that what may seem impossible and risky investment at first can turn into an indisputable success in a matter of a short period of time. The small company that began its operations as a risky start up merely 2 years ago, is now sold at an unprecedented evaluation ($3.3 Billion) to the world’s largest retail corporation. When the company launched on July 21, 2015, its CEO, Marc Lore was quoted saying that the company’s goal is to compete with Amazon. A very bold statement at the time. Yet, the innovative founder who previously sold its former business (diapers.com) to Amazon, had a reason to remain positive. He set an ambitious, detailed plan to assure that the attempt will carry the hype it had created through its immense marketing efforts.
One of the plan’s key factors involved engaging in competition by targeting Amazon biggest strength and making it better. It was all about cutting prices. Jet.com delivered on the promise to offer prices 4-5% cheaper than any other online retailer including Amazon itself. In a sense, it used the competitor’s margin as its opportunity. Few months into operation it even dropped its initial $50 subscription fee model and began delivering awesome service at low prices. This move has had Amazon’s customers as well as other online shoppers wondering if Amazon’s Prime subscription fee of $99 is necessary for delivering such performance.
The Second part of the plan involved a development of a revolutionary shopping cart algorithm. The pricing algorithm was designed to locate the most price efficient seller at every point in time and adjust the prices online based on a combination of data including shipping cost to the customer’s destination. The algorithm was so powerful since it was seamlessly synced with the most popular search engine services including like Google and Bing. This meant that every time a potential customer went to such search engine and looked for a product the algorithm calculated and offered the best price possible. This integration allowed for highly effective online marketing campaigns. To make the check out process even more efficient and cost reducing friendly the company began offering discounts for customers willing to pay using debit cards as well as for those opting out of free returns services.
From that point the company continued to expand on a daily basis and offered additional product categories every month. The rapid network of more than 1800 local retailers the company has created allowed the company to close the gap compared to Amazon’s vast product selection. It is now offering more than 11 Million products including fresh produce.
Despite the fact that the upstart company was burning millions of dollars every month and was far from becoming profitable in the near future, Walmart was able to see the enormous potential of the company. Walmart realized that if it plans to compete with Amazon on the lion share of online shoppers it better have an innovative management like Jet’s on its side. This opportunity was important enough for Walmart’s management to offer the biggest dollar amount ever paid for acquiring a two years old online company.
Written By: Yosef Bagdadi
Author & Market Research