But you have to give Jet credit for a strategy that, however sophisticated the machinery underlying it, sticks to the basics. Jet thinks it can win by saving you money.
The long-awaited startup is coming out of beta and launching its online marketplace today with the promise to get you the best price for any product you want to buy. Jet wants to be the place you think of first when you need to restock everyday stuff—toothpaste, toilet paper, a new speaker, or pretty much anything (besides fresh produce—for now).
The catch? Similar to Costco or Sam’s Club, you pay a $50 membership fee to Jet each year to have access to its goods. With your card, the company promises low prices and savings, claiming members will save an average of $150 a year.
As a shopper, you already have plenty of options from major megastores—Amazon, Walmart, Costco, Target—to smaller niche retailers online and IRL. You likely already have a favorite place to get discounted electronics or deals on household products.
But Jet thinks it can elbow its way into retail by changing how it works. “We’re trying to do something different in that, pretty much anything you want to buy from TVs to toilet paper, you could get 10-15 percent off what you normally spend, without doing anything other than coming to our site and becoming a member,” Liza Landsman, Jet’s executive vice president and chief customer officer, says.
Now that it’s live, we’ll finally get a chance to see if Jet is the next big thing—or the next big bust.
How It Works
Unlike other online retailers, Jet’s revenue comes only from membership fees, not sales. This gives the company every incentive to charge the lowest price possible for items to get you to sign up.
Behind the scenes, Jet uses a pricing engine to help you find the lowest price. Let’s say you decide you want to shop for that toothpaste, toilet paper, and shower speaker. On top of its already lower sticker price, the site offers additional savings if you, say, buy the toothpaste and toilet paper from the same retailer, or from the same location. (Jet sells some merchandise itself but mostly acts as a marketplace for third-party sellers.) The company says you can gain additional savings by, for instance, waiving the option for free returns or, eventually, opting for slower delivery.
Earlier this year, Jet founder and CEO Marc Lore told my WIRED colleague Issie Lapowsky that Jet’s tech resembles a real-time financial trading service. With the help of this service, Jet not only allows you to find the cheapest available price for a product but also recalculates your shopping cart as you add more products, applying rules based on what the retailers themselves are offering and showing you in real-time how to get more savings by, say, buying two products together. More stuff may mean more discounts.
For retailers, this set-up might seem like a nightmarish recipe for losing money. But Jet says that it doesn’t undercut retailers since it isn’t itself taking a cut, unlike some other online retailers. In fact, for products that aren’t already in its inventory or from one of its partners, the Wall Street Journal reports that Jet is actually buying products at their regular prices from those outside retailers (and paying for shipping charges) while still offering the discounted price to its customers. At times, Jet is taking the loss, it seems, in the hope that it can keep you coming back.
Future of Retail
But if Jet is forced to pay the difference to deliver goods to you on the cheap, the company may have a difficult time becoming profitable (this challenge has stymied Amazon for the past two decades). In fact, for Jet to succeed—and to fend off retailers such as Amazon, Walmart, and Costco—it will likely need to prepare for several years of losses, if not more. Jet’s model can only succeed at a huge, huge scale—and to get there, it’ll need lots and lots of people like you.
Of course, that may very well happen. According to Forrester Research, 69 percent of the US online population “regularly buys products online.” This year Americans are expected to spend $300 billion online, a number that will likely only keep on growing. “You’ll see more people adopting e-commerce and buying more,” says eMarketer retail analyst Yoram Wurmser. “There’s a lot of room for growth.”
By appealing to the more frugal side of all of us, Jet and its backers expect this audacious startup can not only save us money, but truly challenge Amazon in the process. “Jet is legitimate. It’s small, it’s a startup, but it’s got a good model,” Wurmser adds. “I think Jet does represent a competitor because they can undercut prices.” And, after all, who doesn’t want cheaper stuff? It just has to solve one of the most tantalizing paradoxes of retail: making more money by letting you pay less.