

Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom - WritelyDesigned
http://www.wsj.com/articles/frenzy-around-shopping-site-jet-com-harks-back-to-dot-com-boom-1437359430

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jsnathan
> For example, The Wall Street Journal recently bought 22 items from Jet.
> Twelve were shipped to the Journal by retailers such as Wal-Mart Stores
> Inc., J.C. Penney Co. and Nordstrom Inc., according to sales receipts.

> Jet’s prices for the same 12 items added up to $275.55, an average discount
> of about 11% from the prices Jet paid for those items on other retailers’
> websites. Jet’s total cost, which also includes estimated shipping and
> taxes, was $518.46.

> As a result, Jet had an overall loss of $242.91 on the 12 items. Mr. Lore
> says the loss is unusually large, partly because the items’ cost was low
> relative to shipping charges.

Wow. They must be playing a long game.

Can anyone explain how they expect to get that money back?

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coldcode
I remember my employer once tried to get a contract to build a new online
store for a electronics retailer in the late 90's. They boasted they sold
stuff at less than they paid for it and would someday make it up later. We
lost the bid but they went out of business and never paid the winner, IBM.

If you charge less than you pay for you should go out of business, not raise
more money. Giving money to a negative retailer is gambling not investment.

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LukeB_UK
Non-paywalled mirror: [https://archive.is/QritD](https://archive.is/QritD)

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teh_klev
Thanks...how does one do that with paywalled articles. I've tried to get
archive.is to do this in the past but it just captures the paywalled article
summary/

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treeface
For most of them, you just have to google the article's title and click the
link from there.

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teh_klev
I did try that, even in incognito mode, but still hit the paywall.

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fahim305
This is a losing proposition. I am very familiar with the space (I used to
manage one of the largest categories at Amazon), and there is a lot of blind
faith in Jet. While I do think another player can co-exist in the domestic
e-commerce space, winning on price is going to be a very tough battle for a
variety of reasons (Amazon can strong arm vendors giving preferential pricing
elsewhere), especially if it requires a $50 membership fee. IMO, ways to beat
Amazon would need to focus on the searching/browsability of items, focusing on
certain categories where Amazon has less direct relationships, etc., and I'm
not yet convinced that Jet is focused enough to do that.

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acheron
Competing with Amazon on price is, um, ambitious, but even aside from that,
you also need to compete with them on logistics infrastructure. Amazon has
taught me that a) I shouldn't have to pay any shipping costs, and b) once I
order something it should be at my door within 1-2 days. If you can't do that,
I become annoyed. And I don't see that happening if they're just re-ordering
things from other merchants, none of which can compete with Amazon in the
logistics department either.

So, good luck I guess. Competition is good, but they've got a pretty steep
hill ahead of them.

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jackgavigan
I think the difference between the dot-com boom and today is that back in the
'90s, companies that were essentially speculative ideas with no proven market
were receiving high valuations, whereas today companies that are targeting a
proven market are receiving high valuations because they need to raise (and
spend) a lot of money in order to successfully penetrate the market and grow
quickly enough to achieve the economies of scale they need to compete
effectively.

Marc Lore's a good bet for this particular market. He's already built a
successful e-commerce company from scratch and sold it to Amazon. It appears
that his plan for Jet.com is to tailor prices for each individual shopper in
real-time, effectively targeting a profit margin of 0%. People in the US are
familiar with the Costco/Sam's Club retail model (i.e. where you pay a
membership fee to access discounted prices), and real-time, personalised
pricing is incredibly powerful. You get to price off an individually-defined
demand curve for each customer, and if people get familiar/comfortable with
discounts that are applied to a shopping basket, rather than individual items,
you reduce the competitive impact of a low price advertised by your
competitor.

Also, it looks like Jet.com plans to operate as a marketplace as well as a
traditional e-commerce company: [https://developer.jet.com/getting-
started](https://developer.jet.com/getting-started)

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dempseye
> effectively targeting a profit margin of 0%

Why would anybody want to invest in that? What am I missing here?

~~~
5outh
IIRC, you have to pay a subscription to shop on Jet in the first place. Every
new shopper brings in recurring revenue.

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marcusgarvey
So Jet is a very risky bet. And partly backed by Norwest Venture Partners.
Which is in turn owned by Wells Fargo. Who is apparently violating the spirit
of the Volcker Rule, if not the letter.
[http://www.reuters.com/article/2013/02/21/us-wellsfargo-
priv...](http://www.reuters.com/article/2013/02/21/us-wellsfargo-
privateequity-idUSBRE91K06420130221)

Remember this at the next bailout. [http://www.cheatsheet.com/business/stock-
news/3-reasons-the-...](http://www.cheatsheet.com/business/stock-
news/3-reasons-the-dodd-frank-act-doesnt-solve-too-big-to-
fail.html/?a=viewall)

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downandout
Given the level of investment here, I have to hope that there is much more to
this company's model than is discussed in the article - otherwise this is a
100% guaranteed loss for investors. When that loss happens, it will be bad for
any other tech startups that try to raise money after it.

The money actually being used to fund this black hole is coming from large
institutions that trust the judgment of the VCs and usually have no say in the
funds' investment decisions. Tech valuations are only high at the moment
because there is currently an imbalance of investment capital chasing private
tech deals. One sure way to correct that imbalance is for VCs to betray the
confidence that institutions are placing in their judgment by blowing hundreds
of millions of dollars in massive, obvious blunders like this.

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swingbridge
Had a beta access code and the site is a mess. They boast about having the
lowest prices on the web but if you actually check their prices they don't. On
many items they were quite a bit more expensive than other well known sites
(but we're still quoting "savings" in the checkout cart.) Some items were
cheaper but not by much. If their model is to beat everyone on price then
that's a giant race to the bottom. If you claim to be a better deal but are
actually more expensive, well then you're just dillusional.

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wintom
Have you been on there recently? I must admit that early on it was messy...
but you know its a startup in beta...

However, I disagree on the price bit. Their selection isnt as large as amazon
yet but I have found them to be 5%-15% cheaper on all items that they do have.

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xur17
I agree - their prices are definitely lower.

It concerns me a little bit that they're losing money on each order - that's
fine if they plan to have the same discounts at scale, and are just testing,
but if they are just using low prices to get people to join, it seems
troubling.

~~~
swingbridge
The business model sounds deeply flawed. The fact that they've been burning
cash like crazy (like building a fancy HQ before even getting any revenue)
isn't a great sign. I wish them luck but things are going to get real ugly
real quick if they don't figure this thing out fast.

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bgold777
This is a great time to shop on jet.com. They are absorbing all of the costs!!
If you really want to buy something cheaply you should do it now, before it
goes under.

This is a great example of trying to get too big too fast without even testing
the business model.

