Friday, October 16, 2015 could win the online retail game with old-school ads

Jet is a newcomer in online retail, and it’s gotten some pretty impressive funding ($225 million to be exact) that it’s blowing through with a massive old school advertising campaign. If you live in a major city, you may have seen Jet’s ads on buses and taxis, in addition to the TV and digital ads it is pushing nationwide. And Jet is just warming up.
Within less than a month after its official launch, it has jumped to the fourth most popular marketplace on ChannelAdvisor, surpassing well known marketplaces like Sears and Rakuten. Despite this, Jet still has a lot to prove, especially since its goal is to beat Amazon, Walmart, and other established loss leaders on price. That’s where its interesting choice in advertising campaigns comes in.
Marc Lore, Jet’s CEO and founder, says the company has been spending $5 million per week on advertising. Taking that further, he told DigiDay that over the next year, the company intends to spend $100 million on advertising. Jet is an online retailer, so you might think it would choose to advertise online where its potential customers might be found. But it’s taking a very different approach to build its brand awareness. Lore explained to DigiDay that the company plans to have a “big focus on TV, outdoor advertising, direct mail, and online display.” Hold on before you question his sanity. He actually has a good point that could help Jet become a real threat to Amazon.
Let’s face it, online retail is far from taking over brick and mortar. Physical stores are more efficient when shopping for necessities. Why wait for shipping (and maybe even having to pay for it!) when you could have it much sooner? Millions of Americans shop online every year, and online retail growth consistently drives overall retail growth. But, truth be told, online retail still only makes up a paltry 7 percent of overall retail sales.
Jet’s advertising plan brings up a good point: Winning in online retail is both about getting returning shoppers to spend more and convincing shoppers to begin shopping online in the first place. Yes, loyalty is worth a lot in retail in general, but increasing the pool of loyal shoppers could gain Jet a significant leg up. In-store shopping is a necessity for most consumers, but shopping online hasn’t become a requirement yet; it’s still a convenience that many consumers are able to do without. With Jet’s old school ad campaign and intensely low prices, it could really warm shoppers up to the idea. Instead of just trying to lay claim to a piece of the existing online retail pie, it is trying to make that pie bigger — and its section of it by association.
It’s interesting to compare Jet and Amazon because they’re in such different places in their maturation as businesses. Jet is online retail’s fresh face that has to ramp up at breakneck speed to pose a real threat to Amazon’s reign. Jet lowers prices further through a dynamic pricing algorithm for shoppers who are willing to wait longer for their items to arrive, while Amazon has one hour delivery in several big cities. Aside from consumer preferences and additional membership offerings, the winner will be the retailer that is able to convince Luddite shoppers to hop online.
While Jet is spending massive amounts on advertising, Amazon is busy bulking up its original programming and streaming services to make its Prime subscription more appealing. Amazon has already spent 20 years setting up a world class marketplace, so Jet has quite a bit of catching up to do. Regardless, the race between Jet and Amazon will likely be arduous, and it’s clear that both retailers have their boxing gloves on tight.

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