Jet.com thought it could be the Grinch that would steal the Christmas from Amazon.com Inc. AMZN.
But the Grinch never really manages to steal the Christmas, does it?
Jet.com, the well funded e-Commerce start-up, began informing customers 10 days prior to the festivities — via emails and alerts on its homepage — that it could not promise delivery by Christmas. It cited “nationwide shipping delays that have affected many of our shipping partners.”
A spokesman for Jet said, “This is an industry-wide issue. The company did go above and beyond letting customers know, early, in an effort to be responsible and transparent.”
It added an alert on top of its homepage on Dec 16 and changed its normal delivery estimate from 2–5 business days to 3–7. However, the company has still been promising 2-day delivery for items it ships out of its own warehouses. However, these items are mostly household items not usually bought as gifts.
Jet will also offer credit to customers affected by shipping delay.
Surge in Online Sales
Though Jet ships several of its own goods, it has to rely on other retailers for shipping other merchandise.
During the beginning of this year’s holiday season, United Parcel Service Inc. UPS and FedEx Corp. FDX were hit by similar disruptions
In fact, according to the latest data from software developer ShipMatrix Inc., timely delivery rates for UPS’ ground packages based on their normal shipping transit times plunged 91% in the first week of December. The rate was 97% this time last year.
Online sales have surged during the holidays. In fact, as per ChannelAdvisor, during the five days from Thanksgiving through Cyber Monday, online sales rose 21%. ComScore estimated that sales through computers and mobile devices hit a record $3.12 billion on Cyber Monday alone.
Amazon too has faced similar problems in the past — remember Christmas of 2013? It has since then found new ways to manage delivery. Per the latest rumors, it is starting air cargo services! (Read: Can Amazon Rock the Logistics Space with Project Aerosmith?)
Going Ahead
This incident brings to light one major hitch in the six-month old company’s business model compared with that of Amazon.
Jet’s big network of warehousing partners helps it to select the most competent way to fulfill an order. Thus, it cuts costs and passes along 5–10% discounts to customers on bulk orders.
The downside?
It doesn’t have too much control over customer experience once the purchase has been completed.
On the positive side, last week, Jet.com hit two million members. It also projects $44.9 million in gross merchandising revenue this year.
CEO Marc Lore recently told Re/code that Jet doesn’t have to beat Amazon to be successful, it would be happy being No. 2.
Amazon currently holds a Zacks Rank #2 (Buy). Investors can also consider Stamps.com Inc. STMP, as it sports a Zacks Rank #1 (Strong Buy).
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