When technology-driven businesses disrupt an industry, the business model is the key to the disruption — not the technology.
That’s a central takeaway from a chat I recently had with Liza Landsman, chief customer officer at online wholesale shopping startup Jet.com, and Scott Friend, managing director at Bain Capital Ventures. Bain is an investor in Jet, currently in closed beta but on course to release a retailer platform intending to — let’s say — disrupt that industry.
Both will be participating in a fireside chat at VentureBeat’s upcoming GrowthBeat Summit, which takes place June 1 and 2 in Boston.
Jet, which has raised more than $100 million, is intent on reinventing the wholesale shopping club. It offers a wide range of products for members who pay $50 annually and receive prices promised to be lower than elsewhere, especially if they wait for sales and for opportunities to combine orders into one shipment. The company has said it intends to make its money on memberships, not on the sale of any products.
Technological advantage is like painting the Golden Gate Bridge, Landsman told me: “Once you get to the end, it’s time to start again.”
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A giant disruptor like Amazon, she said, is built on a given infrastructure and a certain way of doing business. It’s the bridge that already needs repainting.
Amazon “exists on the infrastructure it built 20 years ago,” Friend said. Jet, on the other hand, has the advantage of building from scratch.
Jet can take inefficiencies out of the system, Landsman said, “because of the scale of merchants and the algorithmic approach, almost like a [real-time] trading system.”
The only hedge against getting disrupted by a newcomer, Friend noted, is “building on openness, transparency,” like Airbnb.
In other words, creating a business model that lets customers know how it works for them.
In Jet’s case, he said, “the system optimizes because all of the players know where the value is, [clearing] inefficiency out of the system.”
The factor that can’t be disrupted
The company’s platform is designed for such actions as optimizing in real time where products are coming from, how they can be consolidated into the fewest boxes, and how they can be shipped with the least amount of effort and cost.
At some point, of course, removing inefficiency could damage the customer experience. When viewed through the lens of inefficiency, for instance, call centers are bastions of wasted resources, but an inability to resolve an issue when there’s only web self-service is a great way to lose a customer.
Jet will have human-based customer service, Landsman said, as customer service “is not a place where we’re measuring efficiency.” Since a competitor is only a click away, she said, Jet endorses the prevailing idea that customer experience is a key differentiator.
The company also intends to imbue its members-only brand with the quality of a niche brand like online eyeglasses retailer Warby Parker, but attached in this case to a mass retailer focused on price.
Of course, the perfect marketplace is a long-sought dream of every business and industry. But even if all the levers could be perfectly balanced to impeccably reflect demand and supply, there’s one little factor that can’t be disrupted.
More than few economists make their living by trying to explain why people are not always rational actors, and why they sometimes make counterintuitive choices. It may be, for instance, that the extra wait to save money by shipping one purchase with another may not be worthwhile for most customers.
With the real-time technological levers and the disruptive business mode in place, the psychology of buying may be the irreducible factor that determines whether Jet.com takes off.