A year since launch, e-commerce upstart Jet has shifted strategies and continues to experiment, but founder and CEO Marc Lore remains confident of its prospects, he said in an interview with Fortune magazine.
Jet does not aim to topple Amazon, but to follow in its footsteps and be “a really large No. 2, 3, or 4," Lore said. He also took issue with the idea that Jet won’t be profitable, saying that it enjoys the support of deep-pocketed investors and that getting to profitability takes time. Sales have tripled in the past six months, Lore added: In December, Jet sold $33 million in merchandise, compared to $90 million worth in May.
Jet has entered the low-margin grocery business because it attracts customers, Lore said, noting it is focused on offering harder-to-find gluten-free, kosher and ethnic food items to help it compete and to boost margins.
Around the time of Jet's launch last July, Lore and other executives were touting the e-retailer's $50 membership fees as its sole source of profits, bolstering their contention that merchandise would be priced at rock-bottom levels. Thanks to Jet's dynamic pricing model, consumers could—and still can—squeeze even greater savings by choosing variables that might slow their delivery, for example.
The membership model is a proven one: Both Costco and Amazon both have found success—and extremely sticky customers—that way. The problem is that there may not have been room for another membership-based general retailer, Profitero VP of strategy and insights Keith Anderson told Retail Dive last year. “It’s successful, but saturated,” Anderson said.
So Jet changed course, abandoning its membership-fee base in favor of delivering single-digit discounts of 4% to 5%. Lore told Fortune last week that customers have responded well to that level of discounting. The company also plans to enter the private-label market, something that has also emerged as a key track for Amazon (which has recently added a series of apparel lines, baby products and food products to its existing lines of tech accessories and bedding).
Still, Jet is nowhere close to mounting a serious threat to Amazon, according to Forrester Research analyst Sucharita Mulpuru, who told Fortune that the company will need to continue to gain investments and to experiment in order to compete. “It’s going to take a lot of time for Jet,” Mulpuru said. “They are so far behind Amazon, they are not even in the same playing field.”
There’s another possibility for Jet: Following in the footsteps of Lore’s last retail venture, Quidsi. Amazon acquired Quidsi and its basics-focused retail sites Diapers.com, Wag.com and Soap.com six years ago for $500 million, and hired Lore in the process.