Businessmodel of Jet

Customer Segments

Jet has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

Consumers: Shoppers who want to be able to buy items online at lower prices.

Retailers: Product-sellers that want to reach consumers seeking lower prices.

Value Proposition

Jet offers four primary value propositions for consumers: price, cost reduction, convenience, and brand/status.

Price - Site membership is free for consumers and begins with an initial purchase. Product prices are lower than those found at other online retailers (by 10% – 15%) because the company passes on savings obtained from reduced packaging/shipping costs and retailer commissions. Users can obtain additional discounts by combining several products into a single shipment, waiving the ability to return items, and using debit cards instead of credit cards. Lastly, the Jet Anywhere program enables customers to earn “JetCash” for use on the site by shopping at Jet-approved partner sites.

Cost Reduction – The company offers free shipping on all orders totaling $35 or more. In addition, it offers free returns within 30 days of purchase.

Convenience – The company creates convenience by enabling users to cancel their memberships at any time, at no cost.

Brand/Status – The company has established a powerful brand as of result of its success. It offers more than 4.5 million items on its site. Further, as of May 2016 it was valued at $1.3 billion.

Jet offers two primary value propositions for retailers: accessibility and cost reduction.

Accessibility - The company creates accessibility by enabling vendors to sell their offerings to a new group of consumers. This is particularly the case for retailers who do not have physical presences. Jet also gives retailers the ability to acquire customer information for direct marketing purposes. For example, they can offer users specific savings when they opt-in to receive promotional materials.

Cost Reduction - The company charges a 15% commission on sales that occur through the site. However, commissions are only charged on items that are fulfilled. Furthermore, there are no additional sign-up, monthly, listing, or other fees. Lastly, retailers can adjust customer savings dynamically based on factors such as order size and shopper location, increasing profitability.

Channels

Jet’s main channel is its website, through which it acquires most customers. The company promotes its offering through its social media pages.

Customer Relationships

Jet’s customer relationship is primarily of a self-service, automated nature. Customers utilize the website while having limited interaction with employees. The site provides answers to frequently asked questions. That said, there is a personal assistance component in the form of 24/7 customer service via phone and e-mail from its support team, the “Jet Heads.”

Key Activities

Jet’s business model entails maintaining a robust common platform between two parties:  consumers and retailers. The platform includes the company’s website and mobile app.

Key Partners

Jet’s aforementioned program, Jet Anywhere, enables members to earn money for use on the site by shopping at the websites of retail partners. The retailers primarily fall into the Clothing, Beauty, Electronics, and Specialty Products categories. Specific partners include Nike, Foot Locker, Land’s End, Ann Taylor, Bloomingdale’s, PetSmart, Starwood, Panasonic, Samsung, and Marvel.

Key Resources

Jet’s main resource is its proprietary software, which calculates savings for customers based on factors such as their location and order size. The firm depends on its engineering staff to maintain the platform, and its customer service staff to provide support. Lastly, as a new startup it has relied heavily on funding from outside parties, raising $545 million from 17 investors as of November 2015.

Cost Structure

Jet has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. Its biggest cost driver is likely marketing expenses, a fixed cost. Other major drivers are in the areas of customer support/operations and administration, both fixed costs.

Revenue Streams

Jet has one revenue stream: the commission fees it charges for each fulfilled order on its website. The basic commission fee is 15% for most items; however, it is lower for certain specified items (e.g., 6% for personal computers and 10% for tires and wheels). In addition, retailers are allowed to make discretionary adjustments to commission rates depending on four factors: order size, shipping zone (distance from fulfillment center), item returnability, and marketing email opt-in.