Walmart's interest in Jet.com led me to a 2013 Patent that might describe the e-commerce infrastructure that enables Jet to offer 'Gain Sharing'. Jet is able to take a large number of independent variables from a broad range of systems and bring them together to set a discounted price at the the cart. (August 2016)
August 2016, Walmart is rumored to be in talks to acquire the one year old online retailer Jet.com. Despite an impressive fundraising and a first year’s growth that took it to a $1B valuation, Jet’s customer retention and repeat purchasing seem unable to compete with the massive effects of Amazon Prime.
The Jet e-commerce model also differentiates itself through ‘gain sharing’ and by the fact that it relies on its suppliers to handle shipping logistics, fulfillment and returns.
Further speculation suggests that Walmart wants to have Jet Founder and CEO, Marc Lore head up the Walmart’s e-commerce operation. Over the past five year Walmart.com has made some sizable acquisitions but its model seems to have been to brute force the path to a 3% market share (compared to Amazon’s 31%).
From a retail technology perspective, the interesting part of the acquisition is the ‘gain sharing’ model, where the price the customer pays reflects the basket size, product availability and shipping costs. As Jet.com relies on its suppliers to handle logistics, the systems that run in the background will be how all this is carried out and I wanted to find out more.
On July 25, 2016 in Nevada District Court there was a Patent Infringement case heard for Consolidated Transaction Processing LLC v. Jet.com, Inc.. This case focused on two almost identical patents, one of which is Sending targeted product offerings based on personal information filed in 2012 by Robert S. Alvin, CEO of Netline.
Unlike most e-commerce which has separate system for each of the business functions the patent describes a deeply integrated e-commerce system funneling information from the network into the decision module that sets the deal parameters in real time. So the supplier catalogs are pulled regularly into the product database - uploading of product data even in batch mode is a major friction point for most e-commerce architectures.
The personalization is done as a function of how a user request for the site passes user information and a dynamic pricing function that reacts to demand, supply, promotions and some other variables - this is another messy problem that most e-commerce organizations solve with people and rule sets.
Order processing, fraud detection, payments and CC processing are all integrated. Distributor selection is also driven by margins and delivery forecast - so it’s got the smarts built in which means that the optimizations can have greater effect up and down the supply and demand chains.
If you’re interested, it’s worth scanning the patent document. Most e-commerce systems have evolved over time and have had to accommodate legacy order management and supply chain infrastructures, they generally have homegrown merchandising applications and pre-packaged Content Management Systems and WebStores. Over the next few years, deep integration and higher level of automation will be required to be a player in the increasingly competitive mass retail space.
Wal-Mart in Talks to Buy Web Retailer Jet.com WSJ (August 3, 2016)
Jet.com has been trying to beat Amazon at entirely the wrong game Quartz (August 4, 2016)
Wal-Mart’s Deal for Jet.com Said to Hinge on Keeping Its Founder Bloomberg (August 6, 2016)
Walmart Announces Acquisition of Social Media Company Kosmix Walmart Press Release (April 18, 2011)
Walmart Announces Acquisition of Digital Entertainment Provider, VUDU
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