1. Buying that which you don’t understand.
Jet seemed to inject all of their money into their marketing, on the novelty of curation. There was little evidence to show that they were retaining the customers when the novelty wears off. Jet was just too new.
It had a better design strategy than Walmart and gave it something different. In this way, Walmart overpaid for Jet, when it could have cloned the design strategy. This is the type of play that is made by leaders who don’t understand experience design.
Spending half their cash on hand also not the most prudent move. Clearly the retail giant is not doing as well as it would like compared to Amazon. Having said that, Jet had new approaches to logistics and data modeling that Walmart has struggled to figure out, and that Amazon has down to a science. So going beyond design and into logistics, there could be some important lessons to be learned there.
2. Building a business to be sold vs. building to turn a profit – Step1 – Spend every penny acquiring customers. Jet was built to sell from the ground up, not built to last, not even built to survive. Jet was a pure and simple, high stakes VC flip. Make it work…barely, just long enough to solve the problems that Walmart, Target, and others have not, then get acquired. It was a risky gamble but it has certainly paid off.
3. Experience Design is Key.
Walmart’s UX suffered compared to other ecommerce experiences. Jet had this down in a way that is designed to deepen engagement…at first glance. Is it better than Walmart’s, yes. Worth buying the whole kit and kaboodle? I don’t know.
If your user experience amounts to feeling pushed into buying in bulk, like a reluctant Cosco regret, odds of your retaining customers are likely to go down. It’s one thing to try something new, it’s another to cross the line and present a new burdon. Further, why would users switch from Amazon, and spread their financial risk on yet another site?
4. How to Make Money on a Massive, External R&D Project
Alibaba.com looking for a way into the American markets, and ways to compete with Amazon, was a major investor in Jet. In this way, it’s like paying the entry fee into the innovation lab. Alibaba learns a lot, turns around and sells it to a retailer, and we’ll see what solutions and wisdom Alibaba returns to the table with in the ecommerce market. Suffice it to say this is becoming increasingly common in the big business playbook and it’s worth noting. How can we endeavor on a learning project in a way that will net us a profit? Find a project that achieves those two goals invest, learn, sell and profit.