Jet.com beats Amazon and Walmart on price

Discussion
Jul 23, 2015
George Anderson

There’s a new low-ball retailer in town and it goes by the name of Jet.com. The site founded by Marc Lore, former co-founder and CEO of Quidsi (Diapers.com, Soap.com, etc.), promises the lowest prices online. So far, according to new price comparison research, the site is doing just that.

Earlier this week, Profitero did a price comparison of 16,028 exact match SKUs across seven categories (baby, beauty, electronics, grocery, household, office supplies and pet) and found Jet’s prices were nine percent lower overall than Amazon and six percent below Walmart.

The amount of the price disparity varied by category. Jet was 12 percent cheaper than Amazon on pet supplies. The only category in which Jet came in second was grocery. There, Walmart’s prices were two percent cheaper than the well-funded startup (backers include Goldman Sachs and Google).

Although Jet’s prices were cheaper overall, the Profitero research found Amazon and Walmart were able to offer lower prices on individual items, particularly in the electronics and office supply categories.

"Jet is pricing aggressively at launch, especially on key household essentials such as baby, beauty, pet supplies, and household products," said Keith Anderson, VP strategy & insights at Profitero. "Price competition is at the center of Jet’s strategy, and the price comparisons Jet includes on its own product pages are likely to intensify competition."

Price comparison chart

Source: Profitero eCommerce data, 7/21/15

The Jet model works much like a warehouse club. The site charges $49.99 a year for membership and promises to keep product markups to a minimum. In an interview on CNBC’s "Squawk Box" on Tuesday, Mr. Lore said Jet was would also keep prices lower than rivals through the use of proprietary technology that pulls cost out of the supply chain.

"If you have two things in your basket and you shop for a third thing, the cost of getting that product to you varies dramatically based on what’s in your basket," he said. "If we can get that thing to you in the same box in close proximity to you, the shipping cost is much lower."

For its competitors, one of the most dangerous aspects of Jet’s entry is that the company is currently focused on gaining members, not making money. In fact, Jet is selling products on its site that it doesn’t stock. In those instances, Jet will order the item from another merchant and sell it to its customers at a loss. The Wall Street Journal placed an order that included 12 items not sold on the site. The result was Jet paid nearly double for the goods than it charged the customer.

According to Mr. Lore, it will take roughly 14 or 15 million customers generating revenues of $20 billion to achieve the scale Jet will require to become viable for the long haul. While it may be losing money on sales right now, Mr. Lore believes Jet will reach the $20 billion figure within five years.

"But then the opportunity is this is a $1.2 trillion market in 10 years," Mr. Lore said in the "Squawk Box" interview. "There’s an opportunity here to create a multi-hundred-billion-dollar business. So yeah, there is plenty of upside once you get to $20 billion. That’s the idea."

What do you think of Jet.com’s business model? Five years from now, we will be saying Jet.com was a success or failure? If you’ve joined the site, what has been your experience?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This has to be The Emperor’s New Clothes if I’ve ever seen it. If you read the Wall Street Journal article, it’s a matter of trying to hang on with enough venture capital money until they can be profitable."
"My experience has been that Jet needs to grow the assortment. Amazon can claim "endless aisle" with a large degree of credibility. I found Jet’s assortment to be more like the contents of a physical Target store than an e-commerce juggernaut."

Join the Discussion!

20 Comments on "Jet.com beats Amazon and Walmart on price"


Sort by:   newest | oldest | most voted
Bob Phibbs
Guest
4 years 3 months ago

This has to be The Emperor’s New Clothes if I’ve ever seen it.

If you read the Wall Street Journal article, it’s a matter of trying to hang on with enough venture capital money until they can be profitable. Which, with a business model of being a third party scouring the net to out-do Amazon, I just don’t get it. My expectation? Complete failure.

Max Goldberg
Guest
4 years 3 months ago

Jet is an online version of Costco — make money on membership and keep margins low. Mr. Lore successfully built Quidsi, a service that was so challenging to Amazon that Bezos and Co. acquired the company, so I would not bet against him. As long as his investors keep opening their deep pockets, Jet has a long runway.

I was a beta member of Jet but did not find items that I wanted. They have since expanded their product lineup and I expect to become a regular customer.

Nikki Baird
Guest
Nikki Baird
4 years 3 months ago

My experience has been that Jet needs to grow the assortment. Amazon can claim “endless aisle” with a large degree of credibility. I found Jet’s assortment to be more like the contents of a physical Target store than an e-commerce juggernaut. And as they add assortment, their costs will grow — so I don’t know if they can make those price gaps last.

Richard J. George, Ph.D.
Guest
4 years 3 months ago

I think it is worthy of consideration. The challenge for Jet.com will be to get to the targeted number of customers to be able to generate the economies of scale to reflect it lower pricing model. If Amazon and Walmart quickly and emphatically respond the probability of success will decrease.

I have joined the site. It is not as easy to navigate as Amazon, nor do the discounts clearly make sense. For example, the discount on the 27-pack of Scott 1000 bath tissue (Jet.com price = $19.57) is only 20 cents. It does have a cheaper membership than Amazon Prime. However, it does charge a shipping fee of $5.95 for orders less than $35.00.

I like the fact that new competitors are moving into this space. The question is will Jet.com have staying power.

Tom Redd
Guest
4 years 3 months ago

I am a Jet member and was very impressed with their pricing — especially in cameras and household. I am on the hunt for a camera and compared prices between Jet and Amazon. Jet was over $150 cheaper for the same model! Their pricing model and related algorithms seem to work well.

As their merchandise mix/assortment expands then we will see Amazon deeper in a worry/attack mode and will see Prime Days each week!

Lastly, Jet will also keep their assortment focused and not try to sell everything and anything that is saleable as Amazon does — from sump pumps to bananas.

Ian Percy
Guest
4 years 3 months ago

Sounds like they’ll be going the same route Amazon’s been on for a long time. If they’re wise and lucky they’ll do it in a much shorter time.

I’m going to join, if only to express my admiration for the courage and cajones Marc Lore clearly has.

Steve Montgomery
Guest
4 years 3 months ago

The internet has spawned a number of companies that believe in the strategy of making friends now and making money later. This only works if their investors are willing to bet that someday in the undefined future enough scale will be achieved to make it work. As we all know, this is not always the case.

In Jet.com’s case it has elected a business strategy that says it sells items cheaper than two very large internet companies who have been in the low-price game for some time. IMHO Walmart and Amazon will be here long after Jet.com is gone.

Gene Detroyer
Guest
4 years 3 months ago

The business model is good. It works for clubs and there is no reason it should not work online, except …

  1. Jet will need to develop the BEST infrastructure and supply chain versus competitors.
  2. Jet will need critical mass in terms of customers.
  3. Jet will need critical mass in terms of their product offerings.

I search the items on my last Amazon orders. Jet did not carry over 50 percent of the items I got from Amazon. Knowing that, why would I go to Jet? Online is about ease and convenience. I want a 100 percent chance you can fill my order, I will be satisfied but annoyed if you run at 95 percent. At 50 percent, I don’t even go to your site.

Gordon Arnold
Guest
4 years 3 months ago
When the desire is to make membership the recipe for success ahead of profit most start-ups will get burned and thrown away. Someone did a very good Zig Ziglar impression to get these banks to take their eyes off of the ball and buy into the dream. The support for concern for this plan is simply seen in Amazon’s stumbling efforts to sell their Prime memberships. Selling price is something anyone can do simply by having the lowest. Selling memberships to get into the e-club market is another kind of sales that not only needs large membership numbers but needs members to remain loyal for the products initially sought as well as considering the retailer as a primary source for all the needs and wants that can be sourced by the retailer. Doing these sales and services for a reasonable profit is good for the business too. Just before the beginning of this miserable economic depression got started, about 10 years ago, discount retailers flooded their shelves with two or more levels of quality for… Read more »
Ed Rosenbaum
Guest
4 years 3 months ago

Success is built on the long term. What you did for me today is what you have to do for me tomorrow and all the tomorrows to come. Amazon has and continues to do exactly that. Their performance continues to be what they deliver day after day. Jet.com has to prove it every day. Can they do it without exhausting the pockets of the investors? We will see.

Diana McHenry
Guest
4 years 3 months ago

For me, I need to trust a retailer to do business. Consistency and fairness matter and build my trust. I’m glad there’s competition in this space. I’m glad Jet has a mobile app already. I logged into it and looked for my household’s favorite flavor of Clif Bar. Not available. OK. What else is available? There are 12-packs of bars online, and the price varies from below the competition’s price to above, depending on the flavor. Jet’s price range was $7 between high and low cost for the 12-pack of bars. Hmm. Why is one box $9 and change and one $16 and change? I’ll keep checking Jet out. This is one small data point.

David Livingston
Guest
4 years 3 months ago

I’m going to say failure because of a bad first impression made with a goofy video. Eventually the novelty will wear off. Selling things at a loss that they don’t even stock, my guess is the model will not work. My gut feeling is their goal is not to make money doing business but maybe selling the business to Amazon down the road. The customer list will be more valuable than the business.

Cathy Hotka
Guest
4 years 3 months ago

Imagine visiting the local T.J. Maxx only to be greeted by someone who tells you that you have to pay $49 to get in. Would you enter?

I’m sure there are people who’ll play along, but those of us who are children of Depression-era parents probably won’t want to.

Lee Kent
Guest
4 years 3 months ago

I see Jet’s approach in several area as very smart. The membership concept is a winner but to me, the idea of being your key replenishment site for standard goods such as baby, pet supply and household goods — this is the real winner.

This is sort of like the next step for subscription services. Annual fee, lowest price, continuous replenishment. No need for huge assortment across all categories. However, they could take another Costco approach and bring in items that may not be restocked.

Yep, I see this as a true winner. And love the algorithms to add certain items and reduce cost even more.

… And that’s my two cents.

Chris Petersen, PhD.
Guest
4 years 3 months ago

I think that Amazon already has their version of a membership model … it’s called Prime and has 44 million members paying $99 per year.

Walmart is piloting their own version of this online model for $49 per year. So Jet is not the only game in town playing the club game online.

The issue for Jet will be the staying power of venture capital to consistently undersell Amazon and Walmart on price. Those giants will not remain quiet. It will take LOT of money to consistently differentiate on price long enough to attract enough paying members.

Oh, one more thing … SERVICE! A lot of people shop Amazon not because of the lowest price, but because of the amazingly consistent service like email notification, shipment tracking, returns etc.

Jet’s long-term success will depend as much on service quality as low price.

Craig Sundstrom
Guest
4 years 3 months ago

“For its competitors, one of the most dangerous aspects of Jet’s entry is that the company is currently focused on gaining members, not making money”

Yes, I think it will be very successful…at not making money.

Seriously though—well, MORE seriously perhaps—success will come based on how good their “use of proprietary technology that pulls cost out of the supply chain” is and whether they can reach critical mass before they run out of money…let’s call that the “Jet Lag Period.” But the name itself will disappear: either they’ll fail, or succeed and be bought out.

Fred Blanton
Guest
4 years 3 months ago

It can be a success only if there is substantial savings and if they can deliver on time and compete with Amazon, Walmart/Sam’s and Costco….

Arie Shpanya
Guest
4 years 3 months ago

Jet only launched two days ago officially, but it’s already giving retail a run for its money. It seems like it will create a race to the bottom, but it still has a long way to go if it is going to beat trusted household names.

Sure, it has low prices, but what about reviews or impeccable customer service? It makes sense that it is just competing on price for now to attract members, but the other things it’s able to offer will decide whether it is ultimately a success or failure.

Kai Clarke
Guest
4 years 3 months ago

Jet has an interesting business model in that it is copying Amazon, and trying to be like Costco, yet doesn’t have the infrastructure in place to support this. Unfortunately the investment of resources necessary to do this is substantial, and consumers won’t wait 5 years for it. I am a Jet subscriber and so far, the items which I have tried to order were not available yet.

Onn Manelson
Guest
4 years 2 months ago

Jet.com’s main objective now is to acquire new subscribers, therefore their price margins have secondary importance. Retailers will need to keep this in mind, while keeping a close eye on pricing and margins, and not try to match price at all costs.

Amazon has been the leader on pricing up to now, so it will be interesting to see how this new ecosystem plays out.

wpDiscuz
Braintrust
"This has to be The Emperor’s New Clothes if I’ve ever seen it. If you read the Wall Street Journal article, it’s a matter of trying to hang on with enough venture capital money until they can be profitable."
"My experience has been that Jet needs to grow the assortment. Amazon can claim "endless aisle" with a large degree of credibility. I found Jet’s assortment to be more like the contents of a physical Target store than an e-commerce juggernaut."

Take Our Instant Poll

Will Jet.com be a failure or success five years from now?

View Results

Loading ... Loading ...