Thanks to emerging online marketplace Jet.com, it doesn't look like American retailers are going to be escaping intense price competition any time soon.
Founded by Quidsi co-founder Marc Lore, who sold that venture to Amazon in 2010, Jet.com Inc. is set to disrupt online retail by adding layers of customer choice beyond price (while keeping prices at the barrel’s bottom).
With U.S. e-commerce at $300 billion last year, there seems to be plenty of opportunity for Jet to take off. That may be why the online marketplace is garnering so much attention—and funding—before its launch.
“This is a very big play,” Jet CRO Scott Hilton told Retail Dive about the site’s launch. “We have enough money now to do what we want to do.”
What Jet is up to
The marketplace has been collecting early adopters through its “Jet Insider” program and will fully launch its $49-per-year, club-based retail site this spring. Jet bulked up its participation and word-of-mouth through an unusual program that rewarded top recruiting members with investment opportunities.
The company also recently garnered a valuation of close to $600 million and $140 million in financing, led by consulting firm Bain Capital.
But Jet executives brush aside the attention it received after its latest round of funding, telling Retail Dive that its goals have remained the same from the beginning: To revolutionize e-commerce by forging seamless connections between retailers and consumers.
Where the disruption is
Amazon initially freaked out retail by undercutting on price, then disrupted itself (and everyone else) further by offering ways to get free shipping. Jet, much like bulk e-commerce site Boxed, is adding layers of disruption by providing more variables and choices to consumers. Also like Boxed, Jet plans include nimble mobile commerce, Hilton says.
But, unlike Boxed, Jet is membership based, and pledges to make nary a dime on the goods it sells. As Hilton puts it, Jet will operate its marketplace at cost, similar to Costco’s model, Hilton says, but with many more items available to shoppers. And that $50 will easily be made up by savings almost immediately, he says.
The site will work with retailers’ inventories to locate items a shopper wants and provide options. The item, price, speed, basket size, and basket mix are all variables that may be under a shopper’s control, and Jet shows the potential savings.
“We have a unique tech angle—live dynamic pricing and repricing,” Hilton says. “There are options that steer shoppers to more economically efficient orders. Jet members will be able to pay more to speed up shipping or waive the right to return to save money."
Meanwhile, retailers will also be pleased because they can use Jet to market directly to customers, with access to “millions of shoppers,” according to Hilton.
“There’s certainly an audience of people that are willing to pay for fast delivery,” Lore told Forbes magazine. “But there’s no way to do it without doing it expensively. It is expensive to get product to somebody in an hour. It just is. Our view is that the market for the people that want to save money and be smart for how they buy a product is a much bigger opportunity. The next $300 billion that comes online isn’t going to be catering to people that more want to feel like smart shoppers.”
Making Amazon vulnerable
Amazon’s membership fee is double Jet’s at $99 a year, although that includes streaming entertainment and music services and other perks. And Amazon operates a lucrative cloud services business that helps cushion its own willingness to keep prices low at the expense of profits.
Without seeing Jet in action just yet, it’s hard to say what its prospects are.
Hilton downplayed the media’s obsession with the company’s putative aim to “take on Amazon,” saying its goals have more to do with retailers and consumers. But of course it’s a logical comparison, especially considering founder Lore’s time spent at Amazon. In any case, there may indeed be areas where Amazon could be vulnerable to Jet’s approach.
Amazon’s interface has become somewhat cluttered and its marketplace can be confusing. Sometimes the same products are available from various sellers at various prices and shipping costs and services, but it can take work to figure that out. And while Amazon is not struggling with the grey market the way, say, Alibaba has, its rapidly growing marketplace has allowed increasing numbers of knockoffs to be sold.
The risk upon launch
Hilton also emphasized, as Lore has done, that Jet will be a boon to retailers as well as to consumers. But that must still be proven; Jet hasn't even launched yet.
There’s a danger that the tech-based efficiencies and transparencies that Jet will introduce won’t quite catch on, or will be easily replicated, possibly by Amazon itself. But its differences, especially if enough retailers are aboard, may be enough for shoppers who, as Lore puts it “want to feel like they’re shopping smart and saving money.”