Pando

Jet.wow

By Sarah Lacy , written on August 4, 2016

From The Disruption Desk

It’s hard to neg a $3 billion deal, that’s triple an already high venture valuation of $1 billion, but the world’s business press managed to do it yesterday when word leaked via the Wall Street Journal that Wal-Mart was looking to buy Jet.com.

If $3 billion after 18 months of work is a bail-out, then please-- I implore you-- bail me the fuck out.

Some of the negging is understandable. Investors have-- according to seemingly everyone’s unnamed sources-- been grousing and some haven’t reupped in subsequent rounds. I wonder what they expected in 18 months from a company that’s the inverse of everyone in ecommerce. Rather than trying to nibble at the edges or bob and weave into the white space of Amazon, Jet was founded to take on Amazon. The last time I heard a company say -- and raise capital based on-- something close to that was Fab.com-- at one time with the goal of being the “Amazon.com of design.”

That didn’t end well for Fab and Jet was running at Amazon even more aggressively, more directly taking it on in the one area no one thinks they can: Price and breadth of inventory.

Did investors think bizarre commercials and an advertising blitz would shortcut the seemingly impossible?

Unlike Jet’s investors, I’ve gone from “Why the fuck did anyone fund this and why are the commercials so annoying?” to comparatively bullish. I started using Jet only a month or so ago-- mostly out of curiosity and an impassioned speech a friend made about the reliability of getting Bounty paper towels that are not select-a-size. This is hard, apparently. (Related: What is more privileged than first world problems? .5 world problems?)

I didn’t feel like I needed something better than Amazon, but Jet was a dramatically better shopping experience. The UI and browsing was some of the best I’ve seen in a mass ecommerce site and I love the dynamic pricing. I save maybe $16 extra on a $200 order so it’s not dramatic enough to make a huge difference in my household budget. But it’s fun. You feel like by declining free returns and paying with a debit card and buying smaller items that can fit in other boxes easily you are in control of price savings. And Jet’s explanation of the savings, makes you feel grateful they’re passing it on to you, while wondering at the same time, why other retailers don’t.

If Jet were more successful you could see discounts on payment method and declining free returns becoming one of those things that consumers begin to expect and demand. Kinda like how Zappos conditioned the industry to demand free returns to begin with.

At the same time I’ve started using Jet more, I’ve used Amazon less. Amazon marketplace is responsible for a lot of it’s growth in various categories, but it’s created a consumer hassle. Two of my last four Amazon orders arrived well after they were supposed to-- or in one case not at all. It’s way too hard to parse which vendor is reliable or take action when they flake.

So to the questions reporter are bringing up:

  • Why would Wal-Mart pay this much for something no one else is likely bidding on, that investors are reportedly soured on?
  • What will it do to Amazon should it play out?

The first point is that I think reporters who don’t use it confuse the business with the product. The business may well be atrocious. I have no inside knowledge. But the dynamic pricing engine, the breadth of inventory and the UI is pretty great.

Wal-Mart can fix demand. Wal-Mart can drive people to use the damn thing as long as it’s easy, fun and they’re saving money. The same way Facebook dramatically took Instagram from some 50 million users to 200 million in short order.

What Wal-Mart lacks is a cool, well done ecommerce brand people like me want to use.

So, perhaps, that is the risk. If I don’t want to shop at Wal-Mart now, do I want to shop at Jet if it’s owned by Wal-Mart?

I hesitated on this one about as long as I hesitated before leasing a minivan. As Paul pointed out my 17 year old Honda Passport was no Tesla. How would a new minivan with-- omg! USB ports! Modern technology!-- possible be a downgrade? For the next three years of my life I absolutely need a car where the high end feature is an in-car vacuum cleaner. SOLD.

Likewise, when you are buying paper towels, goldfish crackers, diet cokes and coffee in bulk, what do I care about “cool”? Amazon has just as many reasons to not like it as Wal-Mart. It’s a modern Wal-Mart.

And Jet hasn’t just siphoned off purchases I used to make on Amazon. It’s largely replaced my shopping at Safeway.com and Costco. The synergies between Sam’s Club and Jet are dizzying to think about, integrated right.

That last one is key. But Wal-Mart’s CEO Doug McMillon has groused that they haven’t made the switch to ecommerce fast enough and it’s paramount for the company. Is $3 billion too much to pay for a team that understands ecommerce, understands what makes Amazon work and already has a sexy front end that Wal-Mart’s ultra-efficient back end can power?

Let’s get back to brand for a moment. While many people may not have used Jet or come to prefer it for a lot of unsexy purchases, most people who are shopping for staples only care about cost and convenience and nothing else.

Recently I spoke at a massive conference of “etailers.” Dominated by a lot of brick and mortar stores making the switch, it could have been called “Amazon anonymous.” A speaker before me asked for a show of hands of whose companies used AWS. He scolded them that they were giving Amazon the revenues to destroy their businesses. Over and over again Jet was spoken about as the great hope. And yet, most people -- even in the retail world-- just don’t want a moral alternative enough to change their behavior and try something new, even if it has managed to match Amazon on breadth and cost.


Yesterday, I read story after story saying this deal-- should it happen-- was a sign that Jet had “failed” in its bid to take on Amazon. I read it the opposite: This is exactly how Jet.com actually takes on Amazon. With Jet’s front end, Marc Lore’s ecommerce smarts, and Wal-Mart’s balance sheet, trove of customers, and ultra-efficient back end.