Jet.com Misses Last-Minute Christmas Sales and Shows Downside of Its Model

Jet.com CEO Marc Lore recently told me on Re/code’s podcast that his company doesn’t have to beat Amazon to be successful; it would do just fine as No. 2. Good thing he feels that way.

The heavily funded e-commerce startup began notifying customers 10 days before Christmas that it could not guarantee delivery by the holiday, citing “nationwide shipping delays that have affected many of our shipping partners.” On December 16, Jet.com added an alert to the top of its homepage. The company has still been guaranteeing two-day delivery for items it ships out of its own warehouses, but those are mostly household goods like toilet paper, detergent and packaged groceries that are typically not bought as gifts.

While Jet.com is less than six months old, the incident highlights one big downside of its current model compared to Amazon’s. Jet’s pitch is that its large network of warehousing partners helps it choose the most efficient way to fulfill an order, thus stripping out excess costs and passing along discounts of 5 percent to 10 percent to shoppers if they order multiple items at once.

But the model also means Jet doesn’t currently have as much control over the experience shoppers have after they complete a purchase for a large number of orders. Some items on Amazon also come from someone else’s warehouse. But Amazon can still guarantee two-day shipping on more than 20 million items through Amazon Prime, thanks to its huge Fulfillment by Amazon program that lets merchants store goods with Amazon for a fee.

Jet’s Chief Customer Officer Liza Landsman told Re/code on Monday morning that the delays were not unique to Jet, citing press reports of delays at carriers like UPS because of the crush of e-commerce orders. She said Jet stands out, however, because it was overly conservative with its messaging to customers, in part because it was already having a great month and didn’t want to risk disappointing customers for incremental revenue.

“Maybe what’s unique to us is we told people as soon as we knew,” she said.

Landsman said Jet.com registered its two-millionth customer earlier this month, and will hit or slightly surpass its projection of $44.9 million in gross merchandise sales for December.

“It was a conscious choice because we were crushing our numbers,” she said.

Before next holiday season, the company plans to offer expedited shipping on items for an extra fee, even for orders that come out of partner warehouses. The site may also let shoppers choose slower shipping speeds in exchange for an additional discount.

This article originally appeared on Recode.net.

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