Jet.com, Inc’s dreams of surpassing Amazon.com, Inc.’s as the world’s number one eCommerce platform could be in ruin, just weeks after its official launch. The startup, which is backed by $220 million in venture capital funds, has found itself in hot water after being accused of placing affiliate links to hundreds of sites without permission.
The incident could severely hamper Jet’s ambitions of stealing Amazon’s crown as the world’s number one retailer. Jet launched to huge fanfare less than three weeks ago with a seemingly unbeatable offer for anyone who does the bulk of their shopping online – for just $49.99 a year, it promises to beat all other platforms on price for anything you want to buy.
Jet’s unbeatable price model
Jet’s business model is markedly different from that of Amazon. Whereas Amazon is both a retailer and a marketplace for third parties, relying on sourcing large quantities of stock in its warehouses and taking fees from sellers, Jet is more of an automated price comparison service, showcasing products from affiliates and third-party sellers. Unlike Amazon, Jet doesn’t take a cut of the profits from each product sold. Instead, its profits coming solely from its member’s $49.99 subscription fees. Jet doesn’t compete with its sellers either, and it doesn’t charge them any fees to use its platform, which means those cost savings can be passed directly on to customers.
Jet also offers a lot of flexibility for those making multiple purchases. It’s algorithm boosts users discounts by identifying cost savings made possible by their shopping history. For example, when a customer has already made one purchase on an affiliate site, they’ll be given 30 percent cash back for any subsequent purchase on the same site.
But although Jet’s business model is superior to Amazon’s in many ways, it’s plans have hit a major stumbling block with the news that dozens of its retail partners are refusing to do business with it. Last week, The Wall Street Journal reported that Jet had placed affiliate links to hundreds of retailers, including Macys.com, Inc.,Wal-Mart Stores, Inc., Target Corp., Amazon, The Gap Inc., Walgreens Co., The Home Depot Inc., and many others, without their permission. As a result, those sites have demanded Jet remove those links – and Jet has since complied.
An abortive takeoff?
Retailers are unhappy with Jet for several reasons, Tom Caporaso, CEO of ecommerce solution provider Clarus Commerce, told SiliconANGLE. He explained that some retailers don’t want to work with platforms whose product is “subscription-bias”, like Jet’s is. He also said customers often won’t know which retailer they’re actually buying from when they use Jet, which means a lack of brand awareness.
“If you want to buy Dove soap, you can see that you’re buying Dove, but you don’t know if you’re purchasing it directly from the company, or someone else like Walgreens, for example,” Caporaso said.
Responding to retailer’s fury, Jet’s chief customer officer Liza Landsman told the WSJ that Jet had automatically enrolled hundreds of popular retailers onto Jet Anywhere using VigLink Inc., an intermediary that sends traffic to sites without getting individual approval for each affiliate. Landsman said they did so in order to save time, but Caporaso explained that by doing so, Jet had likely ignored certain retailers’ program terms, specifically those regarding loyalty programs, cash back, and incentive sites. As a result, there are question marks over the legality of Jet’s affiliate links, which explains why the site was so quick to remove them.
Caporaso worries that the incident could have a big impact on Jet’s reputation, just as it’s struggling to establish itself. He says there are a number of implications, the main one being that consumer’s choices will be limited as a result. In turn, Caporaso said this also impacts Jet’s ability to live up to its promise of providing the lowest possible price on anything its customers want to buy.
There’s also the question of trust to consider. According to Caporaso, the incident will likely reflect negatively on Jet’s brand.
“Jet received a lot of positive publicity in the pre-launch build-up, but it was still something of an unknown entity,” Caporaso said. “It needs to deliver on its promise to build and expand its audience. Having questions raised about its business practices won’t help build trust among consumers; nor will having its product selection reduced as a result of those practices.”