”[Jet’s] value proposition is very simple: you spend $50 per year and you save hundreds of dollars relative to the lowest prices online.” And if you don’t save at least $50 per year, Jet refunds your money.
Jet.com has already raised $220 million and is reportedly planning to raise $300 million more over the next five years, also according to The WSJ, potentially raising the valuation from $600 million to $3 billion during the process.
In tests performed by The WSJ and elsewhere, Jet offered significant savings, but it did so at a great cost to its own bottom line. For example, The WSJ found that for 22 items it ordered on Jet, 12 were shipped by other retailers including Walmart, JC Penney and Nordstrom. Jet’s cost on the items was $518.46, but it charged just $275.55, taking a loss of $242.91. (Shipping is free on orders over $35 on Jet.com).
Eventually, the plan is to wind down the “concierge” service, but it will continue beyond just the early phases of Jet.com’s launch, requiring the startup to have large coffers to draw from while it scales its product selection and partner base.
Working With Retailers
In the meantime, the company is finding that not all online retailers want to work with Jet.com. Lore admits some fashion retailers like Nordstrom have already asked to be removed, and Jet has agreed. “Fashion retailers seem to be less interested in us coming to their store to buy stuff even though we’re sending them volume,” he says.
The problem is that, while these retailers may not mind the sales bump that Jet could provide, they lose the possibility of building a relationship with their customers in the process.
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