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September 17, 2018 • Volume 24


Jet takes off with an urban strategy

Walmart announced this week that it was implementing a significant strategy shift in its Jet brand, targeting city folk: Merchandise assortment, delivery options, and brand partnerships uniquely relevant to the hipsters, urban sophisticates, and generally younger inhabitants of our increasingly vibrant cities.

It reminds me of a commercial that I saw while on vacation in Maine for an online dating site called Farmersonly.com, with the tagline ‘City folk just don’t get it’. No, it wasn’t a Saturday Night Live commercial spoof.

This is a smart move, I think, for practical and logistical reasons, and for unfortunate social and political ones.

First, on the practical side. It doesn’t make any sense for Walmart, which has finally developed positive, sustained momentum online, to invest in a retail brand that would compete directly against the mothership. 

Since its acquisition of Jet, Walmart has adopted key elements of Jet’s strategy. It dramatically improved the ‘click-to-door’ speed of Walmart.com, reaching near parity with Amazon on delivery speed. It has struck partnerships with more upscale brands and retailers. It has grown its marketplace. And it has used price incentives to align retailer and consumer economics (offering steep discounts on certain items picked up in store, for example).  

The other big practical consideration is the fundamentally different last mile environment in urban areas compared with suburban and rural ones. Urban environments offer unique challenges (lack of parking, sparse car ownership, locked entrance doors) and unique opportunities (doormen, population density, existing courier networks) that the ‘burbs can’t offer. This forces retailers to develop separate last mile strategies for the suburbs and for the cities.  

On the social side, we are evolving into two tribes. We know who we can discuss politics with [those that agree with us] and who we can’t. We are for the players that kneel or for the owners that want them to just play the game. We passionately embrace diversity of all kinds, or we feel like we don’t understand the world around us. 

Grand Central station in New York, which shuttles commuters to and from the suburbs of Connecticut and New York State is like West Berlin during the Cold War – a well-guarded island of fairly homogenous people surrounded by a sea of entirely different kinds of people wearing different clothes, listening to different music, believing in different politics, sharing only a common language. 

We used to have network TV to bind us together. Everyone watched The Love Boat. Now we’ve got virtually infinite media options that appeal to us in niches. And this polarization has clearly invaded the formerly dispassionate realm of commerce. Patagonia sales spike when the company sues the Trump administration. Ivanka Trump sales spike when Kellyanne Conway implores Trump fans to buy Ivanka’s stuff. Nike sales soar in response to a Colin Kaepernick ad campaign. 

So, from a business perspective, Walmart is doing the right thing both logistically and socially when it carves out an urban niche for Jet.com

But what does it mean that we’ve become so different that we’re no longer buying the same stuff? 

The futility of incrementality

It happened again. I was asked by a client if I had any data that shows the extent to which online sales are incremental, rather than just shifted from brick and mortar channels. When people ask this question, it is usually because they are trying to justify incremental investments in e-commerce. I get it, I do. It’s hard for a retailer or brand to swallow the idea that they might have to invest in a new channel that isn’t bringing in new customers or creating incremental buying occasions.

I was first asked this question 20 years ago, by an executive from a large department store chain. He was struggling with my argument that he needed to spend extra money to win in e-commerce, even though that meant that he was only facilitating a swap of customers from a profitable channel into an unprofitable one.  

Fast forward 20 years, and it’s CPG retailers and brands asking the same question. Not coincidentally, from a category development standpoint, many CPG categories are about as deeply penetrated by e-commerce today as apparel was back then.

I often fall back on an airplane metaphor to make my case: A growth strategy for virtually any retailer and any brand that isn’t centered around e-commerce is like an airplane without wings; it just ain’t going to fly. But that metaphor isn’t perfect, because retail existed before the Internet, while airplanes didn’t exist before wings. The importance of e-commerce has crept up relatively slowly over a 20 year period; it slowly became a functional requirement.

I empathize with that department store executive from 1998. At that time it wasn’t clear to most that e-commerce was going to become the force that it has. We are well past this point, though, folks. Let’s put the question of e-commerce incrementality behind us once and for all, and accept the reality that to win in retail means winning online.

About Ken

Ken Cassar is vice president, principal analyst at Rakuten Intelligence, where he looks at trends in the e-commerce industry armed with Rakuten Intelligence's robust set of online sales data.

Ken brings a rich online retail background to Rakuten Intelligence. Most recently, Ken was SVP, Media Analytic Solutions at Nielsen, where he developed several innovative digital commerce measurement and advertising effectiveness solutions. Prior to Nielsen, Ken was an analyst at Jupiter Research, where he was an early thought leader, trusted adviser, and media source on e-commerce. His prescient outlook on fledgling e-commerce industry was a key contributor to Jupiter’s dominance as a digital media zeitgeist at the dawn of the Internet.

Ken has an MBA and Bachelors Degree in Political Science from the University of Connecticut. Ken aspires to stay technologically ahead of his teenage children, as evidenced by his ‘Gadget Geek’ Rakuten Intelligence's profile. He also has the appropriate jacket for every occasion.