E-Commerce Takes Aim at Amazon & Costco

In order for Jet’s e-commerce business model to work, the company has to sell twenty billion dollars’ worth of items annually, a high threshold for a startup in a crowded field dominated by a single big corporation., the e-commerce startup founded by Marc Lore, the former founder of, is finally saying how it intends on beating when it opens up shop next month.

In a Bloomberg BusinessWeek story, Brad Stone reports that Jet will be part-Amazon and part-Costco, offering reduced prices to those willing to pay $50 a year for access to the marketplace.

(Coincidentally, it was Stone, who wrote the book The Everything Store, which uncovered some of the heavy-handed tactics that Amazon used to acquire anticipates selling just about everything that Amazon does - clothes, books, and electronics, baby goods and athletic gear.

But unlike Amazon, which is free for anyone to use, customers will be expected to pay a membership fee after a 90-day trial expires. In return, Jet is claiming to offer prices that are 10 to 15 percent lower than anywhere else online.

Amazon charges customers $99 a year to be part of its club, which offers free two-day delivery, but makes no promise when it comes to the price of products. Costco charges $55 a year for an annual membership.

Jet explains that it can offer lower prices because it only plans to make money on membership fees - it does not take a percentage of any of the sales. Launch Day
Marc Lore, Founder & CEO (center), said his startup’s online shopping marketplace needs to eventually be selling $20 billion of goods annually to make its complex business model work - on launch day, the company got $1 million of the way there - they sold about $1,002,000 worth of goods in the first 24 hours the site was open to the public.

The company also said savings will come from making the process more transparent to the consumer, and offering more ways to save money.

“It’s not like we’re smarter with the way we ship stuff, we’re really just exposing the true underlying economics, and when we make that transparent to the consumer in discounts, we’re creating in effect more efficient orders” - Marc Lore, Founder & CEO at

Such options may include opting for ground shipping, instead of air, or combining multiple orders into a single shipment. Customers will save even more if they are willing to pay with a debit card, which collects fewer transaction fees than a credit card. Items that are found locally will also cost less than those that are shipped across the country.

“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,” Lore told Bloomberg BusinessWeek. will mostly operate as a marketplace, like eBay or Alibaba, which means it will have to partner with other retailers for products. That also signals that Jet is unlikely to build its own warehouses, which represents a huge cost savings.

That’s not to say that building out this Lore’s idea will be cheap or without risks. The 100-person company has already raised $80 million, and he has plans to raise up to $600 million over the next five years, with a vast majority of it being spent on marketing.

In November, the Hoboken, New Jersey-based company started spreading the word about Jet through a wacky marketing ploy. It offered to give stock options to some of its earliest and most dedicated customers.

So far, Jet says it has signed up a handful of retailers, including Sony Store,, and hundreds of smaller ­retailers. launched its live site this Tuesday, July 21, 2015.

Source: GeekWire

Five Ways the Guy Behind Plans to Challenge Amazon - Again

Marc Lore, Founder & CEO at

1. Product prices on Jet will be on average five percent to six percent cheaper than anywhere on the Web - including Amazon, Lore says. Lore and I tested the pricing while we were meeting. We searched for some diapers here, some detergent there. The savings were real.

Then we searched online for a Sonos Connect device and decided that $349 was pretty much the best price out there. Then we checked Jet: $301. Wowser. Fellow membership clubs like Costco can sell at steep discounts because they buy in bulk. But that’s not Jet’s approach. So how can it possibly afford to discount so heavily?

Lore says that when a retailer sells on Jet, they give Jet a cut of each sale. The size of the fee varies depending on the product category, but more or less mirrors Amazon’s fee schedule (which typically ranges from eight percent to 15 percent). Jet then essentially takes that commission and uses it to fund the initial discount its customers will see on all products. Jet plans to make its profit solely from membership fees, not the products it sells.

“All our products are basically sold at our cost, plus a little to cover overhead,” Lore said.

2. Discounting strategy is just the beginning. If a customer orders a few products at the same time, they will save 10 percent to 15 percent on average, Lore says.

How? If you order a few items at a time, Jet’s technology will search behind the scenes to find a retailer that has both items in its warehouse. If it does, the system will automatically apply additional discounts to the order since it is more cost efficient to ship to you.

Jet’s system will also look for a warehouse that is closest to your home, which can add additional discounts to your order. All of this is happening behind the scenes while the shopper just sees additional discounts piling up as they add new products to their shopping cart.

“It’s not like we’re smarter with the way we ship stuff,” Lore said. “We’re really just exposing the true underlying economics. And when we make that transparent to the consumer in discounts, we’re creating in effect more efficient orders.”

There’s more. Want to waive your right to return an order? A few more percentage points may drop off the price. Are you fine paying with your debit card or your bank account instead of a credit card? Jet will discount your order some more, since it pays lower payment processing fees when you don’t use a credit card. Give the seller your email address and your price may drop again. Each seller gives Jet the business rules that determine what type of order characteristics trigger what type of discount.

3. Delivery is free for orders of $35 or more and will otherwise cost $5.99 for smaller orders. Orders will arrive in three to five business days for most goods.

But for consumable products - think napkins, cereal and toothpaste - Jet will get them to you in two days max, just like Amazon Prime, for no extra charge. Jet is able to do this because it has two (soon to be three) warehouses, stocked with these items in geographically efficient areas.

Jet also believes that shoppers typically want, or need, these types of items sooner than, say, a camera or toy car. Lore said Jet would rather not have to warehouse any goods. But it needs to in this category because the type of retailers that stock a wide assortment of consumables in a given warehouse (Amazon, Walmart, Target), are the type of retailers that won’t sell on Jet.

4. “It’s a very simple brand promise,” Lore said. “Pay $50 a year and you will save on literally every single product you want to buy online.”

Sounds amazing. One problem: How can Jet promise this when its site will launch with millions of products, but not every product on the Web? Lore thinks his company has an answer. If you search for a product on Jet and can’t find it, the company will allow you to still place an order. The site will order it for you and still give you some type of discount, though Lore didn’t say how much. This tactic we’ll have to watch, because it’s not clear how Jet will be able to execute it at scale.

5. Lastly, every big online marketplace aspires to sell popular fashion brands that traditionally haven’t sold their wares outside of their own stores or websites. Amazon, for one, has mostly failed in their pursuit of these brands. Jet knows it would likely suffer the same fate.

Instead, Jet has created an affiliate program, called Jet Anywhere, that will reward Jet members when they shop on retailer sites that are part of the program. For example, if a Jet member buys something on the websites of Gap or J.Crew - two brands that Lore says have signed on with Jet - the shopper will receive a Jet credit of 20 percent to 30 percent of the purchase as a reward.

“It’s an extra benefit that should make it a no-brainer to shop with us,” Lore said.

Source: Re/code

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Commentary Reefer Madness
Pardon my ‘60s pot metaphors of late. There’s just maniacal, seemingly drug-induced behavior happening and it seems to be going viral across many industries. In particular, I think there’s a lot of legalized pot being passed around among Internet start-ups, and their investors are smoking the stronger weed. I mean, look at this photo of…..more

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