In this paper, the case of a commercial website called Jet.com is considered. Jet.com is patterned after Amazon, but with a focus on saving money rather than on providing the most convenient experience possible. Amazon focuses on providing goods quickly (consistent 2-day shipping is one of its biggest draws), whereas Jet focuses on making the factors in the price transparent to the customer and providing the lowest possible price, even if that means the customer will have to wait somewhat. Because of this, Jet.com could compete viably with Amazon in some respects, but only if Amazon does not perceive it as a threat. I suggest that Jet should create a browser extension to inform shoppers on Amazon and other sites whether they can get a better price using Jet, and that it should stop subsidizing the sale of unprofitable products as it has done so far.

Before I discuss the technological avenues available to Jet.com for supporting their business, I need to first complete two tasks. The first is to describe the central idea behind Jet.com so you can see why some of the problems that I will highlight are salient issues that must be addressed. Jet.com is a retail website formed around the idea that it would be like Amazon.com, except that it would focus more on price and less on convenience. The notion is this: Amazon.com makes money through enormous economies of scale that ensure that it can deliver most products listed as “prime” products within 2 days because they are available at a distribution center that is located relatively close to the consumer. Where it cannot do this profitably, it accepts the loss on some of its items, shipping them rapidly from further away, in order to promote the convenience that is the main selling point of “Amazon Prime” (their guaranteed, free two-day shipping service). Note that its focus is not on keeping costs down (in absolute terms) so much as it is on keeping the cost of this convenience at an acceptable level. Similarly, Amazon’s margins are eroded slightly by its very generous and simple return policy, which it compensates for by slightly raising prices.

The intuition behind Jet.com is that for many products, consumers will tolerate or even seek out a lesser degree of convenience in exchange for lower prices (Merrifield, 2017). The hope was and is that this would be the case primarily with respect to harder-to-ship or more niche items, like foods and bulk goods, which are prohibitively expensive under Amazon’s model but which could in theory be profitably shipped in bulk and more slowly (for instance, for delivery within a week rather than within 2 days). Imagine, therefore, a distribution network set up very much like that of Amazon.com, with two key differences. First, prices adjust in real time to reflect the actual price of delivering the good in question to a particular address, based on warehouse availability, shipping cycles, whether the customer is ordering additional goods from the same distribution center, and so on. Second, the focus is on economical shipping and delivery options rather than on consistency and convenience.

A bulk shipment of diapers, for instance, might be able to ship almost free if a week-long delivery option is selected, because of the possibility of extra space on a specific courier — and the price would reflect this. This is sharply at odds with the Amazon approach, which prides itself on consistency. This is the ideal case for Jet.com, but it must be admitted that there is a third difference that has thus far made it unprofitable: Jet.com doesn’t have anything like the robust and well-developed distribution network that Amazon has. Consumers are almost certainly willing to give up convenience to save money, but only if the “exchange rate” is good — and to generate large consumer savings to justify the inconvenience of waiting many extra days (as opposed to using Amazon), Jet.com has had to offer many items at below its cost of delivery, causing it to lose a great deal of money.

None of this, ultimately, can be traced to its supply chain management software, which by all accounts is excellent and would represent a source of sustained competitive advantage if Jet were able to benefit from the economies of scale necessary to provide these services profitably. The fact that Jet is able to adjust its prices to reflect the actual cost of delivering a given item to the consumer is an impressive feat and suggests that it has a very well-developed model of not just inter-distribution center shipping times, but also of intra-center times (i.e. the time to locate and package an object) and the effect that various combinations of orders will have on the total cost to ship. This is highly impressive, and suggests that Jet.com has a technical advantage that — if it can be leveraged — will significantly help it compete with Amazon and other online retailers.

One market that I believe that Jet could branch out into is clothing. One feature of Amazon that is, I believe, underappreciated by its competitors and especially by “big-box” retail stores is that even when Amazon does not have the best price or fastest delivery on an item, when the alternative is creating an account, entering payment and address information, and so on, on a completely new website, Amazon seems much more attractive. Jet.com could serve a similar role as a product-locating and checkout portal. Or, another economy of scale that presents itself specifically in the clothing arena, Jet.com could be used to compare the sizing of various clothing brands. Thus far, Amazon has a very limited selection of clothing because many clothing providers prefer to handle distribution themselves; the Jet model of “you may have to wait” could be more compatible with this attitude on the part of supplier.

I believe, also, that Jet could stop hemorrhaging money on selling items at a loss if it stopped trying — at least for right now — to be a one-stop-shop in the same way that Amazon is. What it should do, instead, is create a browser extension that works on every conceivable platform (including cell phones) that would do absolutely nothing unless the user was on a webpage from Amazon or some other retailer and it displayed a price that Jet could beat. This would allow Jet to gradually expand its distribution network while still making a profit, because it would no longer need to carry everything. It would just need to carry the things that it can distribute more cheaply than anyone else.

I believe that the best way to implement this approach is through a social media campaign, especially directed to current users. Current users, especially high-volume users, should be given generous store credit as a “customer appreciation” signal or something to that effect. This will hopefully offset any disappointment they will experience when many goods carried on Jet.com return to their natural price rather than the artificially low price that Jet has subsidized at ruinous expense. This will ideally accomplish two complementary goals. First, it will transition some high-volume buyers who are generating losses for Jet (e.g. those who buy primarily or only heavy bulk items that are being subsidized by the organization to make them attractive) to high-volume buyers who generate primarily gains. Online buyers are not likely to stop buying online, and they will very likely stick with Jet as long as they know, whenever they are buying online, whether Jet has a better price for what they’re hoping to buy. Second, it will pull in some buyers who appreciate the convenience of Amazon (and have thus far stuck with it because of that convenience) but who are willing to sometimes tolerate inconvenience to buy things that Amazon doesn’t carry or carries at a high price.

There is one risk that I find very concerning, and I am not sure how I would mitigate it. This risk is the possibility that Amazon, if it observed its sales being cannibalized by Jet.com’s extension, could adopt a similar program (Amazon Budget or something) that shipped items more slowly, offered a lower price, and (because of the economies of scale that Amazon benefitted from) beat Jet’s price in most cases. This is not an idle musing, either. First, Amazon would be able, from observing Jet’s profitability or lack thereof, to determine whether its strategy was generally effective or ineffective.

If it were effective, Amazon could quite justifiably conclude that it was losing significant sales to Jet and adjust its strategy. Second, and more insidiously, it is possible for web pages to detect extensions that are being run by the browser viewing those pages (Grossman & Profile, n.d.). If Amazon observes a decreased volume of sales to some customers after those customers begin using the Jet extension, it will almost certainly adjust its strategy. This is unfortunate because, as was mentioned above, Jet survives now because Amazon has not yet tried to co-opt its strategy. Amazon has a very robust distribution network such that if it does try to use the Jet strategy, it will almost definitely succeed. Jet’s recent partnership with Walmart may change that, but I doubt very strongly that it will be sufficient (Reagan, 2017).