My understanding is that Marc is none too fond of Amazon for whatever reason and jet.com was created specifically to beat Amazon. Jet's group coupon and localized shipping discounts became to hard to figure out profitability and keep growing the business so it was keeping raising and fighting or go help do it with Wal-Mart's checkbook. I actually think it was a win-win.
http://allthingsd.com/20131010/how-jeff-bezos-crushed-diaper...
Of course, I don't know the logistics and how Walmart's acquisition could effect their burn rate and their revenue stream. My point was specifically that Jet was spending money to acquire customers, but the customers (in my anecdotal experience) always went back to Amazon.
There is more than one flavor of unprofitability. On one end, you have Pets.com-style "selling stuff for less than it costs to stock and ship", and on the other end you have Amazon-style "every penny of profit and funding goes into expanding infrastructure ahead of projected demand and leveraging current infrastructure to enter new markets."
So true.
- Did they prove the membership model would work for them? No.
- Did they prove their loyalty program / gamified shopping (discounts, opting out of returns, etc) would work. No.
- Did they prove they could use technology to minimize shipping costs? No. they acquired customers by essentially giving away money.
They were basically fulfilling from Walmart and others at a loss. I can't think of another company post dot-com bust that deserved to crash and burn more than Jet. And yet they got a nice exit. The pixie dust must be amazing. Or it's just blinding FOMO on Walmart's part.
Anyway - the part that's ignored in their gamified shopping is that saving money requires work from the consumer:
- Use a debit card to save credit card fees - little to no consumer credit protections, no rewards points, can't delay payment. People that want to use this option aren't going to be the penny pinchers.
- Watch for the tag icon so you can bundle items that can ship together and save money. Requires work to save compared to competitors. Not everyone is a stay at home coupon clipper.
- Forego the ability to return your item and save money. If they know it's not likely to be returned - they should just lower the price on their end so the consumer doesn't have to think. And if there's a chance they might return it - now the consumer has to gamble? Sore taste the first time you gamble and lose.
- Free shipping, but only over $35. Another thing to think about.
I find it hard to believe that even with Walmart's audience, the gamification will pay that $3B off. Jet's trying to compete with Amazon on price, but they added more work for the user to save. And because of inventory/reviews/value, Amazon is the first stop for consumers. I don't see how Jet's offering is compelling at all.
So Walmart spent $3 billion to acquire someone who can spend cash fast? What exactly did he prove with Jet, other than he can spend more money to acquire customers than they will pay?
I only know what I read about it from a few articles, so I don't know the specifics. But from a consumer perspective Jet was losing horribly to Amazon - I'd use their coupons when it was cheaper than Amazon and then go back to Amazon. I figured out ways to essentially get steep discounts for every order, and even then I still preferred to use Amazon because it had less friction.
Maybe I'll just never understand big business.