3rd Party Brands Online is Almost Mission Impossible

The WSJ has another interesting piece on the hotly covered ecommerce startup Jet.com. If you’re selling third party brands online you’ll know this but if you’re thinking about it please read on:

Over the summer, the company said it would spend $100 million on ads in the first 12 months after the site opened. In the recent plan, that total had grown to nearly $300 million. The money is fueling television spots, subway posters and online ads—including nearly $10 million spent on Google in October, according to people familiar with the figure.

It takes $300 million to market a third party branded ecommerce website in 2015. Ouch.

Putting aside the fact Jet is a large, venture back outfit, the costs for any startup doing the same will still be very steep. This is what killed Webvan and caused the dotcom bubble. In essence, competition in ecommerce has the same economic factors as physical offline commerce. Sometimes people forget to be rational with customer acquisition.

So how do you compete other than paid media? One answer is social media aka word of mouth and arguably it’s is the best route to market today for online ecommerce startups. It’s also something Jet will be hoping to rely on in the future (as Amazon does) to avoid becoming another Webvan.

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