From Forbes on September 17, 2015:
Recently, retail industry analysts and pundits were abuzz with the launch of Jet.com. A combination of membership-only exclusivity, low-threshold free shipping, and an intricate pricing algorithm, this new shopping site was seemingly positioned to be a formidable challenge to the web dominance of Amazon.com as well as other popular club retailers. In a spending environment where shoppers continue to be driven by price, loyalty is hard-won and easily lost, and this new entry to the retail space was certainly positioned to turn shoppers’ heads (and wallets) in a new direction. Enough about Jet.com’s potential, though: are shoppers buying into the Jet.com hype?
A few weeks after the Jet.com launch in July, Prosper Insights queried consumers’ awareness of the new retail membership website (which is currently offering a free three month trial period). While fewer than one in five (18.6%) adults was aware of the website, this translates into a significant 45 million heads turned in the direction of Jet.com. And the type of shoppers who were attracted to Jet.com is interesting as well. Among the 7.7% of consumers who had actually visited or made a purchase on Jet.com, the majority of shoppers was male (65.2%) and under the age of 35 (58.7%) – an interesting parallel to the young male early adopters who are typically among the first to trial new technology. Specifically, about half of Jet.com’s shoppers were comprised of Millennials (49.0%); Gen X-ers accounted for another third (34.7%), while members of the Boomer (14.2%) and Silent (2.1%) generations significantly lagged their younger counterparts. Jet.com’s early users report an average household income of $65,000, mimicking the profile of those interested in Walmart’s $50 ShippingPass pilot program.
With Walmart and now Jet.com joining the retail membership “club,” one has to ask the question: how many memberships will be too many memberships for shoppers? With consumers remaining cost-conscious and budget-minded with their spending, they will likely become more selective with their retail memberships, increasing the competition between these players. And early Jet.com shoppers are no strangers to other retail membership programs: this group was 70% more likely to already have Amazon Prime, 60% more likely to have a Costco membership, and 35% more likely to be an existing Sam’s Club member compared to average. A look at a few simple demographics provides fascinating insight on which retailers might be “in” and which might be “out” looking forward to the future of membership retailing.
Jet.com vs. Membership Warehouse Clubs. An examination of the generational break-outs of current Costco and Sam’s Club members reveals the current plight of the traditional club store: lacking interest among young shoppers. For each of the current club titans, just one in four members is a card-carrying Millennial. Instead, Boomers make up the largest generational segment for both Costco (32.8%) and Sam’s Club (34.5%), followed by those often overlooked Gen X shoppers (31.8% and 31.5%, respectively). The good news for Costco and Sam’s Club? At the launch of Jet.com, Boomer shoppers overall weren’t that interested in the new shopping site, representing just 14.2% of those who initially checked out the online retailer. The bad news? The warehouse clubs are going to need those young shoppers down the line, and Jet.com could present another Amazon-esque obstacle for Costco and Sam’s Club to hurdle.
Jet.com vs. Amazon Prime. As online retailers, the competition between Jet.com and Amazon.com (specifically, Amazon Prime) seems more direct. Additionally, the two boast influence among younger shoppers, with the majority of Amazon Prime memberships falling in the Millennial (32.7%) or Gen X (33.4%) camp. The vast demographic difference between Amazon Prime members and Jet.com shoppers boils down to income: Prime enthusiasts earn about 20% more per year than those who showed an interest in Jet.com. And that 20% (which translates to $80,000 average yearly incomes) surely helps those shoppers shoulder the $99 Prime fee, which is twice Jet.com’s $49.99 annual cost. Amazon Prime, of course, offers its members more than free shipping. However, should its costs begin to outweigh its benefits (i.e. how many video streaming subscriptions does one household need?), Jet.com could present itself as a low-cost alternative for online bargain seekers. Perhaps Amazon’s ace in the hole is its stellar reputation for customer service – the enthusiasm shoppers have for the current digital darling won’t be easy to replicate.
Pam Goodfellow is Principal Analyst/Consumer Insights Director for Prosper Insights & Analytics™ and editor of the monthly Consumer Snapshot.