Commentary

Jet.Com Has Amazon In Its Sights

Jet.com, a startup based in New Jersey that uses a bit of the Costco formula — it’s “the shopping club reinvented,” it claims — and is run by the numbers whiz who sold Diapers.com and its sister sites to Amazon, is about to open its portal to “friends and family,” according to just-published pieces in Bloomberg Businessweek and The Wall Street Journal

The new site, which is the brainchild of Marc Lore, co-founder of Diaper.com parent company Quidsi, “has grand ambitions, including a planned half-billion-dollar marketing budget and projections for $5 billion in annual sales by 2020, according to slides distributed to potential merchants,” reports the WSJ’s Greg Bensinger.

“While Amazon has been working to speed deliveries through a widening network of warehouses, Jet is targeting cost-conscious customers who may be willing to sacrifice speed for lower prices,” Bensinger writes.

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Shipping costs will play a major factor in the pricing algorithms. Jet.com is betting on the supposition that many shoppers will be willing to wait a few days longer than the two days promised to Amazon Prime customers if the price is right. Plus, there are built-in savings on orders fulfilled by merchants who are shipping within their region as opposed to cross-country, as well as to buyers who order multiple products from the same merchant that can ship in the same carton.

“The bottom line is, we’re basically not making a dime on any of the transactions. We’re passing it all back to the consumer,” Lore tells Bloomberg’s Brad Stone in a piece under the hed: “Amazon Bought This Man's Company. Now He's Coming for Them.”

“We want to build a different type of relationship with the consumer,” Lore continues. “When we show you a product, it’s not because we are making money on it and not because we are closing out a line. It’s because we think it’s a good deal.”

The Bloomberg Businessweek feature contains a helpful infographic that illustrates how the concept that more goods in the cart equals more savings for the consumer — using the example of a softball player gearing up this winter for the coming season — if all goes according to the business plan. 

Besides small retailers, Jet currently has agreements with Sony Store, TigerDirect.com and Sears Hometown & Outlet Stores, Stone reports. “The trick will be to persuade shoppers to load up their carts instead of buying individual items impulsively,” he writes.

“We need to open people’s eyes a little bit,” admits Jet.com CTO Mike Hanrahan to Stone. “If we can educate them that, ‘Look, instead of buying one thing every week, come back every two weeks and buy two things and you will save a few percent,’ it’s actually a lot of money.”

The WSJ’s Bensinger points out the formidable head start that Amazon has with its 30 million Prime members. Also, he writes, “Jet likely will offer fewer items than rivals and may struggle to attract vendors that prefer to sell merchandise through their own websites. With no other source of revenue, there will be continuous pressure to bring in new memberships.”

Jet has a plan for that. The website this morning is offer a “free 6-month membership just for signing up” as a “Jet Insider.” What’s more, “Top Insiders get early access and up to 100k shares of Jet stock options.”

How do you become a Top Insider, you ask? By referring friends, who presumably sign up, boosting your rank. The Top 100,000 referrers will get early access to the site; the Top 100 get free lifetime membership (which is currently pegged at $49 per annum), the Top 10 will get 10,000 shares of stock and the No. 1 networker will be given 100,000.

Lore is writing a Tumbler blog that broke the news of its Insider program in November, as well as leasing of a 40,000-square-foot office in Hoboken with “amazing views of Manhattan” in December. Lore has also used the blog to “confirm” stories about funding that seem to have been strategically leaked to influential publications. Smart. 

One thing that comes across strongly in all of the pieces about Lore is that he when he and childhood pal and co-founder Vinit Bharara sold the company that they had launched as 18000DIAPERS in 2005 to Amazon for $545 million in a deal that closed 2011, he did not relinquish his quixotic taste for “what if” — the translation of quidsi from the Latin.

2 comments about "Jet.Com Has Amazon In Its Sights".
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  1. Marc Wallace from marc stuff, January 8, 2015 at 4:23 p.m.

    Looks like they are beating Costco and Sams Club to a real online store. There is still time to get in early and sign up for early invite and free membership https://jet.com/#/ji/cjrmp

  2. Thom Forbes from T.H. Forbes Co., January 9, 2015 at 5:51 p.m.

    For the Record: A spokesman for Sears Hometown and Outlet Stores says: "We’ve conducted initial scoping discussions, but have not reached an agreement with Jet."

    As for signing up for a free trial with Jet, I'd advise that you go directly to the site — https://www.jet.com/ — and start your own referrer network, if you're interested, rather than join someone else's.

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