Next-Generation Marketplace Jet.com is Ready to Change the Game

By Mark V and Egrift

It's a bird, it's a plane … it's Jet.com. Flying high and ready to disrupt the e-commerce world, Jet is a revolutionary marketplace that's taking a new approach to online retailing by using a membership-based business model (think an online Costco or Sam's Club). If you're an online retailer, you might want to take notice.

What if you could sell on a marketplace that did all the work up front to deliver items at the lowest possible costs? What if you could offer shoppers a discount for different incentives — e.g., a larger basket size or in-store pickup?

Jet founder and CEO Marc Lore wants to provide all this and more. Lore is no rookie in the e-commerce space, having started Quidsi (parent company of Diapers.com) before selling it to Amazon.com in 2010 for $550 million. Lore then worked at Amazon for two-and-a-half years before moving on.

After paying a $49.99 subscription fee, Jet shoppers will be able to access products and merchandise with prices that Lore says will be 10 percent to 15 percent lower than anywhere else online. Jet members can shop for items in categories such as electronics, home goods, consumables, appliances, sporting goods and more.

The Jet Vision
Jet's goal is to offer a unique experience for both sellers and buyers that differentiate it from other e-commerce sites. The company hopes to build a fair marketplace where value wins out. Jet doesn't appear to be the only one buying into this business model; Lore and his team have already raised $220 million in financial backing.

Jet's consumer value proposition can be summarized in three words:

Quality: By working with trusted brands and retailers, and backing them up with a satisfaction guarantee, Jet offers a no-risk value proposition for customers.
Transparency: Jet plans to reduce unnecessary costs in the existing systems that current online marketplaces use.
Experience: Jet is making a substantial investment in the consumer experience. From search to buying, delivery to customer service, Jet's goal is nothing short of an exceptional customer experience.

The Jet E-Commerce Model
Like a warehouse club model, Jet plans to drive its profit from the $49.99 annual subscription that members pay. Jet operates its marketplace at cost and covers payment processing and other operational expenses as part of commissions that sellers pay. The remaining commission is used to drive consumer behavior in ways that reduce retailer costs. This is accomplished via preset rules that retailers use for shipping, email opt-in, cart value, returns and more.

At a very basic level, the Jet model functions like this:

Buyers are motivated to shop in a way that minimizes costs for retailers, drives larger baskets (or shopping carts) and maximizes order profitability.
At checkout, Jet determines which retailer can provide the best economic value for a transaction based on product location, buyer location and order details.
The retailer that offers the best value wins the sale and fulfills the order.
Customers access these savings and benefits by joining Jet.

Many marketplaces tend to focus on the buyer experience at the expense of the merchant experience, leaving retailers frustrated. Jet understands that e-commerce is a two-sided coin. These two sides are different, but intimately tied together because a positive merchant experience correlates with a better customer experience.

To marry the merchant and customer experiences, Jet's platform includes an innovative, real-time dynamic pricing engine that can help retailers sell effectively and improve both sales and profitability. The end result: lower costs and more incentives for buyers.

When a consumer wants items that you sell, Jet refers to your preset rules and calculates the new price. It does the same for all the sellers that are offering the products included in the order, then compares the adjusted prices and awards the purchase to the seller that can provide the best offer.

Are You Ready to Take Flight?
Before you get started on Jet, here are some things you need to know:

You must have a U.S. address, U.S. bank account and U.S.-based operations.
You must pass a screening process to ensure a high-quality experience for Jet members. The Jet partner services team will review your online presence, Amazon or eBay ratings/feedback score and other proxies for quality.
Your company name isn't revealed until checkout, after the dynamic pricing engine has calculated the best value.

Jet brings an exciting and innovative approach to online retailing and has generated a lot of buzz in the industry. It will be interesting to see how consumers respond to the marketplace.

Mark Vandegrift is the director of business development at ChannelAdvisor, a provider of cloud-based e-commerce solutions.