Will Jet.com Invade the Mighty Amazon?
A new startup called Jet is setting up to steal Amazon’s crown as eCommerce king. For $49.99 a year membership everything is cheaper with Jet, who promise to beat all other online retailers in price by using sourcing algorithms which allow them to reduce supply chain inefficiency, bringing you the lowest prices, all while placing more control in not only your hands, but the hands of those supplying the products to you.
Jet founder and CEO Marc Lore has been quick to distance himself from comparisons to Amazon, despite direct competition between the two. When you take a look at differences in the way they operate you can see why; Amazon is both a retailer and a marketplace for third parties, relying on sourcing large quantities of stock in their controversial warehouses and taking fees from sellers using Amazon as a platform. Jet on the other hand has taken a different approach. They’re choosing not to compete against its own merchants and avoid stepping in to the retailer market completely. They do still run fulfillment centers, but they also allow for ‘trusted third party merchants’ to fulfill orders independently. This model should allow for the cost savings of having local suppliers ship at lower rates to those centers while simultaneously cutting out the reliance on them where a supplier is able to provide the same standard of service without great quantities of stock to be held on behalf of the suppliers — it’s a flexible model designed to increase efficiency, reduce costs and appeal to both suppliers and consumers.
It’s not hard to see why Jet managed to raise $220 million in startup capital from investors before even opening their doors. The key payer here is Lore, who has already founded several successful eCommerce startups. So successful were they that Amazon set up loss-leading copycat services before eventually buying Lore’s out for $550 million, and taking him on as staff for over two years. Now rich in capital and insider information, Lore is taking another shot at the monopolistic giant that bought him out with a superior business model that can’t be reproduced by his former employer.
Also read: Amazon Echo: Spy Tool or Innovation?
Amazon has entrenched itself firmly in its traditional retailer model while using its monopoly to take a big cut from the retailers forced to use their platform. This is in many ways inefficient when compared to Jet’s model, which acts as non-competitive automated price comparison service. Their profit comes from your membership fee, your profit comes from the reduced costs at which the retailers can supply their products to you without the fees Amazon are charging them.
There are many advantages and flexible options being provided by the feisty new startup. Their algorithm increases your available discounts when you make multiple purchases by identifying cost savings made possible by the order you’re already planning. As part of their commerce and consumer friendly approach, they’re turning Amazon’s business model on its head and allowing members to use their discounts on other retailer’s sites, rather than forcing them all on to Jet.
While there are huge startup costs involved in even a lightweight model such as Jet’s, they’re significantly lower than those Amazon are stuck with when they reach comparative scales. Given the negative publicity Amazon has been constantly feeding and battling, Jet looks set to win the hearts, minds and wallets of both suppliers and consumers. They responded very swiftly to my enquiries and confirmed this approach:
Jet.com operates on the philosophy of transparency and trust.We have an amazing structure where the employees can wear what they like and we have standing desks and are planning on the treadmill desks in the very near future. Furthermore, we have no plans in the future to alter the fee structure.
A brief overview of their ‘about us’ and ‘careers’ website pages makes it clear that Jet are addressing some key concerns of the jaded customers and suppliers of Amazon. If only out of interest I would recommend comparing the two, I guarantee one will leave you indifferent and the other inspired. Jet’s pages highlight the respect they have for their employees, and the importance of a workforce with a passion for their work. Many consumers are already seeking out more ethical alternatives so Jet has a lot of fuel to work with. My one complaint is that they can’t confirm a schedule for international rollout — this is the service I’ve been waiting for, and it seems I’ve to wait for it’s U.S. success before it’ll come to me.
Images from Shutterstock and author.