Jet.com Launches Next week to Rival Amazon after Raising $220 Million
Jet.com is a new wholesale shopping start-up, which is creating waves in the market place. A recent round of venture capital funding witnessed the company raise $220 million in efforts to empower the company to take on the e-commerce giant Amazon. Jet.com last month launched in Beta for 10,000 insiders to test out its new platform. I’m sure I'm not alone in wondering why a company would want to try and take on Amazon, one of the largest online stores in existence today.
Jet promises to offer prices 10% to 15% lower than anywhere else online, including Amazon. Their business model allows for products to be up to 8% cheaper straight of the mark. Customers will then be rewarded with discounts if they combine multiple orders into single shipments, waive the ability to return an item or use their debit instead of their credit card. Find out more regarding Jet and what CEO Marc Lore has in store before their launch in T-minus 5 days.
The most interesting element of this company’s business model is the way that it makes its money. Rather than charging a commission on top of the product price similar to Amazon, the company utilises another popular method we have seen here in Australia. A Costco-esq style model means Jet.com takes a payment of $50 per year which gives shoppers access to its website.
The founder and CEO, Marc Lore recently told the media that the company already has 5 million products confirmed for its beta version of the site and is aiming to have 10 million products available for the launch next week, Monday 20th July.
What I really like is that Jet have implemented some intriguing marketing tactics such as its referral program to select the lucky 10,000 insiders. Those 10,000 people are then incentivised to generate as many referrals as possible to win a sneak preview into the rest of the year and 6 months free membership. The number one member, however, wins a whopping 100,000 stock options in the company which doesn’t sound too shabby at all.
“Opening up to so many users this early isn’t conventional, but it’s so core to our values of transparency and trust. We really want to make these people feel like they are insiders.” Commented Marc Lore, CEO of Jet.com.
The website is very clever in its set up too as feedback from a variety of insiders online mention how infectious its gameification of the shopping experience and the prevalent sense of saving every time you basket an item is. Each time you add something to your basket, Jet.com triumphantly notifies you of your saving making your entire shopping experience feel like a huge bargain.
The saving doesn’t stop there though as once you get into the checkout process, not only is the saving per item compared to competitors displayed, but you can also increase your savings by using “Smart Kart” which congregates items into one delivery. As you progress through the checkout process you get given another option to save money by choosing not to have the ability to return the product. Plus if you opt to purchase with your debit card additional savings again are thrown in too, but this isn’t new as most companies now provide cheaper rates for debit cards compared to credit cards. Jet’s promise on cheaper pricing is supported by a recent study conducted by Boomerang Commerce, who found that Jet’s prices were 27% lower on average than Amazon’s. Their report analysed 200 products and Jet worked out to be cheaper 188 times.
Feedback from the insiders have praised the design and user-interface for feeling sleek, minimalist and smooth to glide across with your mouse. Whilst the website is still in its beta phase and bugs are constantly being fixed, there was a unanimous decision that prices were cheaper. Customer service, another huge pillar in the company’s business model, also received a positive thumbs up by some insiders who commented on the fact that when a delivery was late or a mistake had been make, they were notified well in advance - something big e-commerce stores still fail to accomplish today.
An additional service that makes Jet.com appear to have a very bright future ahead is its “JetAnywhere” service. This interesting concept allows you to earn points by shopping at one of their 700+ retail partner's websites. After making your purchase, you'd need to email Jet.com your receipt which will earn you JetCash credits that can be used towards future Jet.com purchases.
However it’s not all positive news and reviews for the brand, as even if the company manages to rustle up 10 million products before their launch next week, its still a drop in the ocean compared to the hundreds of millions of products which Amazon houses. Amazon also has Amazon Prime, which gives away free apps everyday and provides access to tonnes of regular and audible books. Jet.com is marketing itself as being 10-15% cheaper but will it be able to maintain this once the big boys catch on and start lowering their prices? Ultimately whilst the service provides great savings if you only wish to buy a couple of items, the service might not suit you.
On a final note it’s worth mentioning that this battle is personal. In 2010 Amazon bought Lore’s start-up, Quidsi for $540 million. The Jet.com CEO increased his wealth exponentially but the deal wasn’t smooth. Amazon initiated a pricing war and started heavily reducing its prices for the same products that Lore’s company sold affecting his profits and ultimately the value of his business. So, it's very likely that the competition between the two will be very interesting to watch over the course of 2015.
Personally, I'm looking forward to seeing whether customers like being given the power to save money from the decisions they make within the check out process, or whether the additional time consumption doing so will push them away from Jet.com.