Jet.com, the e-commerce startup founded by Marc Lore, the former founder of Diapers.com, is finally saying how it intends on beating Amazon.com when it opens up shop next month.
In a Bloomberg BusinessWeek story, Brad Stone reports today 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 Diapers.com.)
Jet.com 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. The company also said savings will come from making the process more transparent to the consumer, and offering more ways to save money.
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 BusinessWeek.
Jet.com 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, TigerDirect.com, and hundreds of smaller retailers. Jet opens for private testing later this month.