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Amazon Made This Man Wealthy — Here's How His New Company Will Try To Take It On
In 2010, Amazon bought Quidsi — the e-commerce company responsible for Diapers.com, Soap.com, Wag.com, and other sites — for $540 million.
Quidsi's founders, Marc Lore and Vinit Bharara, made a killing, but the sale wasn't entirely sweet.
Before the acquisition, Amazon had more-or-less declared a pricing war against Diapers.com. Amazon started offering deep discounts on diapers. Not long after Amazon started its aggressive price chopping, Quidsi sold.
Back in May, the first details started trickling out about Jet, new e-commerce startup Lore was building to take on Amazon.
Since, details about the venture have been scant, even as the company raised $80 million in September and started offering non-employees stock to sign up early. Lore described Jet as a "a new shopping experience that will empower customers like never before" and "the most brilliant way to shop."
Finally, a new profile in Businessweek by Brad Stone explains exactly how Jet will work:
Like Amazon, the site will sell just about everything — but it promises its prices will ultimately be 10 to 15% lower than they are anywhere else. In exchange, people will pay a $50 annual membership fee. It's like Costco, but online.
Jet plans to achieve these super-low prices in a couple of ways.
Buyers will be able to get lower prices by combining multiple orders into a single shipment. For example, if you want to buy a soccer ball and shin-guards, you'll see a list of sellers that offer both, and will save about $5 if you choose to go with one of those options, since the seller will be able to put the products in one box. You can also save money by ordering from a more local retailer or by accepting slower delivery speeds than Amazon's famous 2-day free Prime service. If you choose to pay with a debit card instead of a credit card, you can save 1.5%.
So far, Jet has signed on Sony Store, TigerDirect.com, Sears, and hundreds of smaller retailers. Jet will offer a set of custom online pricing tools to retailers, to will help them lower prices for buyers who are cheaper to ship to.
Jet says it will pass on every possible saving to consumers, so it won't make any money per transaction. Instead, it will make all its money from the $50 annual membership fee.
The company is betting on the fact that people will be willing to dish out the fee once they see how much money they save on Jet.
"We need to open people’s eyes a little bit," Mike Hanrahan, Jet's CTO, told Businessweek's Brad Stone. "If we can educate them that, 'Look, instead of buying one thing every week, come back every two weeks and buy two things and you will save a few percent,' it’s actually a lot of money."
The site will launch for private testing later this month.
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