Membership-only retailer Jet.com recently launched with a new strategy designed to compete with the big online retailers. The company is betting on buying merchandise from other retailers to fill the holes in their product offering and underpricing Amazon.com while initially facing some big losses.
Jet’s concierge-style service creates the perception that they have millions of products for sale that they don’t actually stock themselves. Jet buys items from other sites for its customers if they don’t inventory the products themselves.
According to the Wall Street Journal, the company will spend as much as $300 million over the next five years to support this concierge service while it builds up its inventory. To manage costs when placing orders on other retailers’ websites, in some cases, Jet representatives use affiliate links so they can earn a commission on the sale. While Jet initially used affiliate links during launch to purchase products through retailers who they did not have a partnership with, the company quickly ended that practice. Jet is now only using affiliate links to fulfill concierge orders with retailers that they have established a direct affiliate relationship with.
Affiliate programs are a key component of Jet’s strategy. Retailers have affiliate programs to motivate partner websites to send them customers by paying them a commission if their users click through and buy products.
Jet also has affiliate links for its customers to directly click when they want to buy a product that Jet doesn’t carry but is available at another retailer such as Macy’s, Apple, or Crate & Barrel. Its Jet Anywhere service transfers the affiliate commissions earned back to its customers in the form of Jet Cash that members can use to make more purchases on Jet. It’s a similar business model to Ebates, a loyalty site that offers cash back to its members for their purchases.
What this means for retailers
Retailers will have to decide if they want to work with Jet and if so, how. They have two options to consider when partnering with Jet. First, they can become a direct partner and list their products on Jet as a marketplace. This same option is available to retailers through both Amazon and eBay. Jet, Amazon, and eBay benefit by having a more complete product catalog than they’d be able to provide on their own. Retailers benefit by adding an additional channel to their marketing mix to drive sales. As with all marketplaces, the downside for retailers is that they are less directly involved in customer transactions, which limits their ability to include them in their efforts to generate repeat sales.
A simpler way for retailers to work with Jet is through a direct affiliate relationship and be featured in Jet Anywhere. Some retailers may have concerns that Jet has signed up for their affiliate programs indirectly by joining sub-affiliate networks like VigLink so they don’t have full transparency into how they are driving performance. This tactic was used by Jet as a way to build out their retailer base quickly for launch but the company is in the process of building direct affiliate relationships with retailers. On the other hand, Jet may be bringing about new sales opportunities with these relationships. The key for retailers is to understand where the activity is coming from and whether or not it is driving incremental sales.
How will retailers decide whether they want to develop an affiliate partnership with Jet? While there’s never been an affiliate who has made more noise entering the market, the Jet Anywhere program is a straight loyalty affiliate play much like the shopping portals through banks and airlines. If brands have already decided that it makes sense to work with loyalty affiliates, there’s no reason not to add Jet into the mix. Retailers will receive promotion on Jet.com and access to their members plus the indirect benefit of the $100 million Jet plans to spend on marketing in the next year.
Whether Jet will succeed in the long term is a topic of debate, but if retailers are wondering about partnering with Jet through their affiliate programs, that’s an easy answer. If loyalty is already working, partner with Jet. Retailers who aren’t convinced if they’d like to work with Jet should do what marketers always do when unsure of potential viability—test and analyze the results.
Want to learn more about working with coupon and loyalty sites through your affiliate program? Check out our e-book, How to Make Coupon Sites Work for Your Brand.