Jet’s been getting some blowback from retailers, but the company insists it’s still primed for serious growth.
The buzzy e-commerce marketplace that launched last month and raised over $220 million has met skepticism from some brands who were listed as Jet affiliate partners without their knowledge.
The company’s Jet Anywhere program listed over 700 retailers as partners — from Gap to Sephora — but most were not aware that the company was offering users what was essentially cash back to spend on Jet when they shopped the brands’ digital flagships.
Some companies, including Gap Inc. and Wal-Mart Stores Inc., complained and were removed from the cash-back program.
In an interview with WWD Tuesday, Marc Lore, Jet’s founder and chief executive officer, defended the program as a standard affiliate practice and said retailers would be removed upon request.
The affiliate business is made possible by a partnership with VigLink, what Lore called a middleman that simplifies the process of getting startups set up with affiliates. Lore said it was a “great idea” to partner with VigLink and pay the firm a fee as a middleman to connect Jet with hundreds of retailers.
“We thought, ‘OK fine, in the short-term we’ll do this and then go directly to merchants — which we have done, and we have now over 110 direct relationships with Jet Anywhere,” Lore said, adding that the company has only seen drop off from about 30 merchants who have been asked to be removed from Jet Anywhere.
Lore said he didn’t mean to “oversell” the affiliate program during an interview at Jet’s headquarters before the launch, where he told WWD that nearly 700 merchants would be part of it, and thus implying that these retailers were aware of their affiliation with Jet.
“I was talking about the value proposition of the consumer more so than the actual relationships [with merchants] themselves,” Lore explained. “That was what we’re offering consumers, discounts on 700 brands. We were eating some of that [cost]. The idea that we were giving people money back and sending traffic to these sites — I was shocked that the few retailers asked to be taken down. We’re sending traffic to them. We will get every single one of those that isn’t a competitor back on there.”
Of the 642 initial retailers that were part of Jet Anywhere’s program, though, only 20 to 30 were working with the marketplace in an official capacity at launch. The number working with Jet in an official capacity has now increased to about 110 and includes Nike, Birchbox, New Balance, Gilt City and FragranceNet. Overall, 628 retailers are now included in the Jet Anywhere program.
Jet also took flack for a concierge service where the company would buy goods that it didn’t carry from third-party sites in order to keep its members happy.
“We’re so pro-retailer and brand,” Liza Landsman, Jet’s chief customer officer, told WWD, adding that “We know that marketplaces are not necessarily something they’re comfortable with now, which is why we think this program makes sense for them.”
Landsman said Jet drives “great traffic and consumers” and it can be a “really good conduit for retailers.”
She differentiated between Jet’s core business — a marketplace that works directly with 4,000 vendors, up from about 2,300 at launch on July 21 — from Jet Anywhere, the feature that allows users to get JetCash back from shopping at retailers that don’t sell through the marketplace. Currently Barnes & Noble, Lenovo, Newegg, FragranceNet, Asics, Jockey and Cosabella are all carried on the core marketplace, with Bluefly joining the group later this week. It’s rumored that Jet is in talks to sign up Macy’s as a retailer on its marketplace business later this year, although neither party would confirm the negotiations.
The much-discussed Jet Anywhere features a considerably smaller portion of the business that Lore predicts will make up 10 to 15 percent of the company’s overall gross merchandise volume.
Anthropologie told WWD before Jet went live that they were on board with the program’s affiliate and 5 percent cash-back rate. Anthropologie’s JetCash rate has dropped to 4 percent, but is still listed among the featured Jet Anywhere brands, along with Nike, American Eagle Outfitters, 1-800-Flowers, Levi’s, Panasonic, Zara as well as Warby Parker, which saw its JetCash back percentage increase from 5 percent in early July to its current rate of 8 percent. Jet said that Warby Parker is not a “direct” relationship but it’s been approved by the brand, with the increase in commission a reflection of Jet “flowing through the level of commission approved in the system.” Similarly, the marketplace said that Apple reached out to provide links to where they wanted Jet to direct traffic — one goes to iTunes and another to the App Store.
However, Neiman Marcus, Macy’s and Target, for instance, were all listed as part of the Jet Anywhere program in a beta version of the site and have since been removed. Those retailers all declined to comment on whether or not they work directly with Jet.
Gap said on Monday that it no plans to partner with Jet, even though it was listed as one of the featured Jet Anywhere brands on the beta version as of July 8, with a JetCash back rate of 30 percent. Jet has since removed Gap from this list of brands. Lululemon, another one of the brands listed on the beta version with a JetCash back rate of 30 percent, was removed as a partner before Jet officially launched.
The fine print on the Jet Anywhere landing page reads: “Jet has relationships with some great stores on Jet Anywhere. But there are also stores listed where Jet has no relationship and we are simply committed to offering you JetCash.”
This means that it’s up to Jet if it wants to give members 15 percent back in JetCash for placing on order on sephora.com, for instance.
“There is really no other reason to not want to be part of Jet Anywhere unless you’re a competitor,” Lore added. He said Wal-Mart and Walgreens were two brands that called and asked to be taken down from the site because they viewed Jet as a competitor.
Jet is pushing hard to grow its business, with a goal of driving $20 billion in sales through its platform by 2020. Although Jet Anywhere and the Jet Cash programs could be expensive in the near-term, Lore is looking to grow scale quickly so the economics of the business make it better equipped to face off with e-commerce giants such as Amazon.
The controversy over the programs has shined a bright light on a corner of e-commerce that is rarely examined by consumers.
“This is blowing up the world of affiliates. This is going to shed light on affiliate fees,” said a source in the tech space who works with several of the brands initially included in the Jet Anywhere program, noting that the average consumer has no idea what an “affiliate fee” is or that their most-read blogs and publications are getting paid to link to some brands and not others.
“This entire business that no one knows exists, people will [now] know it exists because Jet is using it to build its business model,” the source said. “Because Jet has chosen to build a part of its business around the secretive affiliate business, and the fact that a whole bunch of news media outlets have decided to pick up and write about it has shed light on what was, until now, a total industry secret.”
As for Jet orders being placed on third-party sites by employees, Landsman compared it to one of the pillars of Jet founder and chief executive officer Marc Lore’s former company Quidsi, acquired by Amazon in 2011 for $545 million.
“Back in the day at Quidsi, if they were out of stock [Lore] would act like he would personally go out to his local drugstore and buy it and bring it back so it can be shipped [to the consumer],” Landsman said of the origin of Jet’s concierge feature.
If members want a product that isn’t carried on Jet, then customer service representatives place orders using a one-time use credit card.
The team originally forecasted that this portion of the business would make up 30 percent of sales, but she said that due to a “massive influx of retailers joining the core marketplace” from Toys ‘R’ Us, Babies ‘R’ Us and Barnes & Noble, that only 5 percent of sales thus far have come from the concierge option.