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Jet.com:How will it land?

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contextJet.com officially launched in July 2015 by Marc Lore, founder of Diapers.com, which was acquired by

Amazon in 2010. Backed by more than $700 million in venture capital funding, Jet is ready and willing

to take on retail behemoths Amazon, Walmart, Target, and Costco online. Jet’s business model is a hybrid

retail/marketplace model where it is selling products from its own inventory while encouraging partner

retailers to use Jet as a platform to sell their own products, and Jet receives affiliate fees.

Originally, Jet’s plan was to fund itself with a membership model, taking little margin on products, but

the company pivoted away from that model in October 2015. This pivot may have been driven in part

by a fear that consumers wouldn’t pay $50 for membership given that Jet is new on the landscape. The

company claims that this pivot was the result of better-than-expected performance by its proprietary Smart

Cart technology. The goal of the Smart Cart is to align consumer incentives with merchant economics.

Consumers are encouraged throughout the shopping process to take actions that will save them money,

such as adding items to their shopping cart, or agreeing to forgo the ability to return an item.

Jet has shed some light on its business, releasing gross merchandise value figures through October, but

there are many other questions that merchants have, particularly around whether they should view Jet as

a competitor or as a potential partner.

• How healthy is Jet’s business?

• What are people buying on Jet.com?

• Does Jet’s Smart Cart work?

• Will Jet be able to grow sustainably?

• Is Jet stealing business from established online retailers like Amazon and Walmart?

topline growth is strongFueled by significant advertising dollars and expansive media coverage, Jet has enjoyed strong

sales growth since launching in July 2015. In the figure below, we see monthly total sales (including

first-party, Concierge, and Marketplace sales) from September 2015 through February 2016. Sales have

grown well, by an average of 28 percent per month from September through February. While sales did

slow after the holiday season, February 2016 sales were still 50 percent higher than September.

Jet has said that it plans to spend on advertising (reports have that number between $100 million in the first

year, and up to $25 million per month), so it is reasonable to expect that strong growth can be sustained

for the foreseeable future.


repeat purchase rates raise some concernWhile revenue growth has been strong, Jet is heavily dependent on acquisition of new, or first-time,

customers. By December, 80 percent of revenue was from new customers; only 20 percent was from

repeat customers. By February, 30 percent of sales were from repeat customers, a welcome improvement.

Another key metric, orders per person, shows weakness. Since Jet launched in July, Jet customers have

purchased 1.5 times, compared with 2.2 for Target.com and 2.1 for Walmart.com. It is too early to conclude

that Jet has a retention problem, but going forward, both of these metrics will be key indicators of Jet’s

ability to sustain growth.

Jet.com monthly sales trend

sales from the first time vs repeat Jet shoppers

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Jet sales by category resemble Amazon, but heavier on CPGJet’s breakout of sales by category has a roughly similar composition to that of Amazon. Electronics is

the largest category, accounting for 24 percent of sales. About 40 percent of Jet sales are in consumer

packaged goods (CPG) categories.

The chart below compares Jet’s sales contribution by category against Amazon’s. Positive indexes

indicate that Jet generates a larger share of sales in those categories than Amazon. Negative indexes

suggest that Jet generates a smaller share of sales than Amazon. CPG categories represent the most

significant over-indexes versus Amazon, while Apparel and Books are the categories where Amazon

indexes the most strongly compared to Jet.

Jet.com composition of category sales compared with amazon

Jet’s Smart Cart showing good resultsJet.com has touted its Smart Cart as its secret sauce – a sophisticated engine that matches supply pools

with consumers willing to upsize their shopping carts. Of course, Jet’s $35 minimum order size to qualify

for free shipping is a potent enticement for shoppers to add additional items to their carts as well.

-6%

Apparel & AccessoriesBooks

Toys & Games

Automotive

ShoesSports & Outdoors

Music

Movies & TV

Appliances

Software & Mobile Apps

Jewelry & Watches

Pet Supplies

Electronics & Accessories

Baby Products

Health & Beauty

Home & Kitchen

Grocery & Gourmet Food

Tools $ Home Improvements

-4% -2% 0% 2% 4% 6% 8% 10%


It appears that the combination of these two factors have indeed driven larger units per order for Jet than

its competitors. Jet averages four items per order (from launch through February, 2016), compared with

less than three for Amazon, Walmart, Target, Costco, and Sam’s. If we isolate only shopping carts with

at least one CPG item, Jet’s items per order average is 5.2, compared with 3.4 for Sam’s – the strongest

amongst Jet’s direct competitors.

A significant contributor to Jet’s larger baskets is a high rate of multi-unit purchases of the same item.

Twenty percent of items purchased on Jet are in increments of greater than one. This compares with 13

percent for Walmart and 14 percent for Target. It may be that the operative cog in the Smart Cart is Jet’s

simple practice of discounting when consumers buy multiples of the same item.

Jet modestly taking wallet share from AmazonAt current sales levels, Jet is still small, especially compared with Amazon. The month with the strongest

competitive share story for Jet is February 2016, when Jet sales accounted for 19 percent of Wamart.com

sales – a significant feat considering the focus that Walmart has placed on e-commerce.

Another view of competitive impact is a wallet share analysis of Jet against its principal competitors where

we evaluate shifts in spending by merchant amongst Jet customers since launch. Here we see that before

Jet launched, the people that became Jet customers spent 88 percent of their online wallets (within a

competitive set of Amazon, Walmart, Target, Costco and Sam’s) with Amazon. In the months after Jet’s

launch, however, Amazon owned only 78 percent of Jet customers’ wallets among this set. So it does seem

that Jet is impacting Amazon, albeit modestly, at this point.

items per order (only includes baskets with at least 1 CPG item)

Walmart

Target

Sam’s Club

Jet

Costco

Amazon


our take: complexity may deter many buyers in an era of convenienceBased upon Jet’s quick sales ramp-up, it seems that consumers are willing to try a new merchant that

offers a novel approach to saving money. We believe that the complexity of saving money on Jet is going

to deter many shoppers that value convenience over finding the lowest prices. The result is that Jet may

isolate a particularly price-sensitive group of shoppers that are willing to work and compromise to achieve

savings. There is ample precedent for this in US retail: Club stores require a membership fee, huge pack

sizes, and often long drives. Black Friday provides an annual reminder as well. The key question is how big

this segment is.

our take: experimentation with Jet by manufacturers is worthwhileGiven Amazon’s dominance in e-commerce in the U.S., manufacturers are eager for a legitimate Amazon

alternative out of a desire for negotiating leverage. Manufacturers’ early hesitation about Jet

centered on concern about pricing degradation given Jet’s membership model. However, since dropping

the membership fee, it seems that Jet’s prices are more likely to be higher than Amazon’s rather than lower

(see a December 2015 study from Revionics) – at least before consumers begin extracting savings through

Jet’s Smart Cart incentives. Smart Cart savings are often generated by compelling consumers to buy more

of a particular item, locking in consumers longer. There is potential for Jet’s Smart Cart to allow for less

blunt price promotion opportunities for manufacturers than are typically available because of the consumer

engagement that the Smart Cart requires. Again, the key will be whether this is a material segment or not.

our take: Jet’s long-term sustainability is not a foregone conclusionWe believe that success or failure for Jet is going to come down to consumers’ willingness to

repeatedly engage with Jet’s Smart Cart – essentially, to play a cost-savings game that creates a

complex three-way win between Jet, the manufacturer, and the consumer (and sometimes a

merchant partner). Jet’s executives are is smart enough to pull off this complex feat, but the following

are the key metrics that we’ll be watching in the months to come in order to see whether the model is

working or not.

• Repeat purchase rates – After going through the shopping experience, do consumers feel that it

was worth it? Will Jet become a habit?

• Continued expansion of user base – Can Jet’s marketing efforts continue to expand its user base?

• Sustained ability to drive high units/order – Will Jet be able to sustain, or grow, basket sizes with

its Smart Cart?


[email protected]@sliceintel

ken cassarprincipal analyst, vice president

Ken Cassar is vice president, principal analyst at Slice Intelligence, where he looks at

trends in the e-commerce industry armed with Slice’s robust set of online sales data.

Ken brings a rich online retail background to Slice Intelligence. Most recently, Ken

was SVP, Media Analytic Solutions at Nielsen, where he developed several innovative

digital commerce measurement and advertising effectiveness solutions. Prior to

Nielsen, Ken was an analyst at Jupiter Research, where he was an early thought

leader, trusted adviser, and media source on e-commerce. His prescient outlook on

fledgling e-commerce industry was a key contributor to Jupiter’s dominance as a

digital media zeitgeist at the dawn of the Internet.

Ken has an MBA and Bachelors Degree in Political Science from the University of

Connecticut. Ken aspires to stay technologically ahead of his teenage children, as

evidenced by his ‘Gadget Geek’ Slice profile. He also has the appropriate jacket for

every occasion.

[email protected]@sliceintel

leslie warshawvice president, analyst solutions

Leslie Warshaw is currently works with Slice Intelligence as the vice president of

analytic solutions, and is responsible for working with consumer package goods

clients.

Before joining Slice Intelligence, Warshaw was global senior vice president of

product development for Lightspeed Research and TNS, responsible for product

development, marketing, and sales of panels and custom online marketing research

communities. She is also a veteran of the Nielsen Company, where she was vice

president of product development and sales. At Nielsen, Warshaw played an

instrumental role in the development of ground breaking products that linked online

behavior with purchasing as a way to measure the sales ROI of targeted online

advertising.

In the start-up world, she assisted with the early stage development of both Usamp

(Instant.ly) and InfoScout as those businesses entered the market research space;

bringing new technology and new data collection methodologies.


about slice intelligenceWith a panel of over 4 million online shoppers, Slice Intelligence directly measures

all digital commerce activity from the consumer. By collecting and cataloging actual

shopping behaviors from online shoppers in the wild, Slice Intelligence precisely

measures what others have only been able to approximate, revealing new insights

about online shoppers and their behaviors.

Slice Intelligence’s retailer-independent methodology captures commerce as it

happens at the item level, across all merchants. While most companies rely upon

panels of online users or of people who scan or take pictures of their receipts, Slice

measures all online shopping activity directly gathered from consumers’ purchases.

This allows Slice Intelligence to collect more data, at a higher level of quality than

other methods. This intelligence gives clients unparalleled insights about everything

their customers buy, even when shopping elsewhere, eliminating the need to use

less reliable and less actionable a research products.

Because we extract information from email receipts, we are able to capture all

purchases on any and all devices. This “hands-off”, device-agnostic approach

to measurement solves many of the challenges that have plagued online and

household scanning panels, without the gaps that inherently occur due to

inconvenience, multiple device usage and panel recruitment challenges.

Only Slice Intelligence measures all online purchases, using the same methodology,

tied to the same consumer, including that consumer’s historical purchase patterns to

reveal loyalty and switching behavior, and brand affinities.

Slice Intelligence comes from a methodology developed at Stanford that extracts

online purchase data from e-receipts in consumers’ inboxes. This refined data

collection method enables impeccable, near real-time data from a global panel of 4

million people, the largest panel of online shoppers anywhere.

Slice Intelligence is led by a team of measurement industry executives who have

brought some of the most innovative and successful digital measurement products to

market.


methodologySlice Intelligence uses a proprietary technology that was developed by machine-

learning scientists from Stanford University. Slice Intelligence’s technology identifies

e-receipts within inboxes, extracts every available data point about every purchase

at the item level, normalizes measurements across retailers and structures the data

into an industry-wide taxonomy and catalog. All this happens at high speed and

accuracy, and is reported daily.

With 4 million panelists, Slice Intelligence has the largest, most representative panel

of online shoppers. Recruited through sources including: partners who leverage the

Slice API to create new compelling online experiences; the popular Slice shopping

utility which enables shoppers to organize, track, and manage their online purchases;

and the Unroll.Me service which reduces inbox clutter.

Our methodology provides near real-time data that is representative of the U.S.

online population and correlates closely to the U.S. Department of Commerce and

public disclosures by online retailers.

Documents

Jet.com: How will it land?intelligence.slice.com/wp-content/uploads/2016/04/Whitepaper_Jet...Home & Kitchen Grocery & Gourmet ... evidenced by his ‘Gadget Geek’ Slice profile