Jet.com predicts its sales will total $1 billion
April 16, 2016 06:00 AM
Jet.com has acquired customers quickly, and those customers are on track to spend nearly $1 billion on the online marketplace this year, Scott Hilton, chief revenue officer of Jet, said at the annual ChannelAdvisor Catalyst conference in Las Vegas this week. ChannelAdvisor helps retailers sell on marketplaces such as Jet, Amazon.com Inc. and eBay Inc.
Jet, which opened its online doors in July 2015, primarily acts as a platform where other merchants sell. Jet does not sell its own private label products, however it does sell products that it sources directly from manufacturers and distributors. To date, Jet has more than 1,600 sellers on its site offering about 10 million products, Hilton said. Jet takes a cut of between 8-15% depending on the product category, of each purchase on its site.
The value of goods sold on the marketplace, or gross merchandise value, will be on track for a $1 billion run rate by the end of May, Hilton said. Between 20-25% of the goods sold are electronics, by far its best-selling category. The home, garden and furniture category is second, with slightly more than 15% of the gross merchandise value, followed by grocery and household items, about 12% of Jet’s gross merchandise value thus far.
In February, Jet acquired home products e-retailer Hayneedle Inc., No. 92 in the just-released Internet Retailer 2016 Top 500 Guide. The acquisition helps Jet attract more consumers to shop home furnishing products, Hilton told Internet Retailer.
“Our Hayneedle alliance allows us to significantly expand the assortment in the indoor and outdoor home furnishings and decor categories, which are important categories for our customers,” he says. “This partnership will attract more consumers to shop the home category, which will benefit all of our retailers.”
In the months since its debut, Jet has invested in advertising—from TV commercials to banners on trucks and trash cans—to acquire customers. The marketplace, which has raised more than $700 million in funding, will continue to invest heavily in acquiring customers, and plans to spend several hundred million dollars this year on advertising, Hilton said. Jet has 3.6 million users and a double-digit repeat customer rate, he said.
Jet’s aggressive marketing drives business for retailers selling on Jet.com, says Ian MacDonald, director of e-commerce at Silver Star Brands, a Jet seller. The direct-to-consumer retailer operates six catalog and online brands, including Miles Kimball, Walter Drake, Easy Comforts, As We Change, Exposures and Native Remedies brands.
Jet is a small portion of Silver Star Brands’ marketplace sales—equal to about 5% of its Amazon sales—but Jet’s projected $1 billion in gross merchandise value by May is a positive sign, MacDonald says. “$1 billion in sales is very surprising, but good” MacDonald says. “More marketplaces and more competition is good for both retailers and consumers.”
However, MacDonald says Jet has had some technical issues that have kept Silver Star Brands from offering all its merchandise on the marketplace, limiting its sales. But once Jet resolves those problems MacDonald says he expects Silver Star Brands’ revenue on the marketplace to increase.
Silver Star Brands, No. 193 in the Top 500 Guide, increased its total web sales 8.7% to $156.5 million in 2015, up from $144.0 million in 2014. In 2015, 24%, or $37.6 million, of Silver Star Brands’ total sales were from marketplaces, up from 18% of sales, or $25.9 million, in 2014. Sales through Amazon were 18%, or $28.2 million, of its revenue. Silver Star Brands sells on the Amazon, eBay, Sears and Jet marketplaces.
Jet differentiates itself from other top online marketplaces, like those operated by Amazon and eBay, by offering shoppers lower prices if they add additional products to their shopping carts, Hilton said. Jet also gives customers the option to waive the right to return merchandise in return for added discounts.
Shoppers seem to be responding to the offer of lower costs when they order several items. Jet customers average 5.5 products per shopping cart, Hilton said.
Additionally, Jet offers “smart choice” products at checkout that can save costs for both retailers and customers, Hilton said. For example, if a consumer adds a pair of scissors to her cart, Jet’s algorithm evaluates whether there is a comparable product that the shopper could receive at a lower cost because the seller is located closer to her home, Hilton said. If the consumer chooses the “smart choice” item, she gets a discount on the product.
“Typical marketplaces are very product-centric, where consumers select the retailer for the product they want to buy. This action adds a lot of unnecessary fulfillment and shipping costs,” Hilton told Internet Retailer. “We have visibility into where the consumer wants to ship the order as well as the specific pools of inventory from all of the retailers. Consumers are incentivized to make these smart choices by sharing in some of the cost savings. Both the retailer and shipper win—the retailer gets a more profitable order and the shopper gets rewarded with a less costly order.”
These cost savings are a bright spot for the marketplace, says David Escobar, senior manager of e-commerce at Bealls Inc., which sells on Jet. Bealls gets a better deal financially on Jet because to the retailer can tailor commission rates based on regions and product type, he says. Encouraging customers to buy in bulk is another positive feature of the marketplace for Bealls, which operates department stores in Florida and its e-commerce site, BeallsFlorida.com.
There are downsides to retailers selling on marketplaces, however, and low visibility is one of those on Jet.com. “Customers don’t know they’re shopping from you on Jet,” Escobar says. When customers search on Jet, they won’t see the retailer selling the merchandise until they check out. This limits retailers' exposure to potential customers.
Bealls, No. 359 in the Top 500 Guide, generated about 28% of its $57.5 million in revenue through online marketplaces in 2015.
To learn more about how retailers are growing on online marketplaces and the risks associated with that channel see the latest edition of the Top 500 Guide. Now in its 13th edition, the 2016 Top 500 Guide includes a feature on online marketplaces that includes details on the largest marketplaces in the U.S., such as Amazon, Jet.com and Walmart.com.