
Facing Cash Crunch, Retailer Jet.com Racing to Complete Funding Round - ykumar6
http://www.wsj.com/articles/retailer-jet-com-close-to-finalizing-550-million-cash-infusion-1446659335
======
dewitt
I put in an order when Jet launched. No joke, from the best I can tell, they
sent someone to a physical Walmart, where they purchased the product at full
retail, _for more than they charged me_ , packaged it up, and shipped it to me
with free two-day delivery.

But they'll make it up on volume, right?

Smart people have said, "do things that don't scale." I guess Jet took that at
face value.

~~~
dangrossman
I ordered a wireless router from Jet. They filled my order by ordering it on
Newegg and having it shipped to me. If they don't have stock of something on
their website, they'll buy it somewhere else rather than lose the sale.

~~~
jsprogrammer
Subsidized, out-of-stock products for everybody!

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code4tee
The company is burning cash like crazy, they totally threw their business plan
(to only make money via membership fees) out the window within a few weeks of
launching and now they've slashed their originally proposed valuation by 50%
in what would seem like a desperate move to get some cash in to keep the fire
burning.

All for what? To try and compete with the likes of Amazon and Wall-Mart on
price and logistics!?!?! Call me pessimistic, but this looks like its going to
end in an expensive train wreck.

~~~
danieltillett
When someone is losing money someone is making money. While business does not
need to be zero sum, most of the time it is.

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unclebucknasty
Jet.com doesn't seem to understand that Amazon can take losses in retail
because they have margin from other sources--like AWS--as well as an overall
ecosystem. And now, Amazon shows quarterly profits. They can go even deeper
with discounts in retail.

Jet is just not going to win by simply undercutting Amazon as a pure retail
play. They're just adding to the already exorbitant burn rate generated by
their marketing team.

Unless there's something yet-to-be-publicized about their model, participants
in this round are just adding their cash to the bonfire.

~~~
jaredsohn
I don't generally disagree with your comment, but I don't think Amazon had
other sources in its earlier days (at least not AWS).

~~~
wspeirs
Amazon didn't have other sources, but they also didn't have a ton of
competition or one "big guy" like Jet has with Amazon.

~~~
unclebucknasty
Exactly this. Jet.com is literally building a business model for the mid-to-
late 90s, as if there is no one in the space.

They are throwing tons of cash at poaching Amazon's (et. al.) customers and
largely competing on price. It's completely nuts.

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blhack
What does jet do, exactly? Going to jet.com seems to suggest that they sell
laundry detergent and laptops...but this honestly just looks like every other
"build yer own ecommerce" website that is just an amazon webstore.

Like... _why_ would they be getting a $500M investment?

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mattmaroon
Say what you want about Jet in particular but there's a real market
opportunity here. Nobody but Amazon has much of a business in the "everything
store" category, and Amazon's prices have gotten high.

Compare almost anything there to the price at your local Wal-Mart, Target,
etc. and there's a significant gap. Significant enough that you could buy it
at retail prices, sell it at Amazon prices, ship it from UPS, and still break
even.

If nothing else we need a solid competitor to keep them honest.

~~~
dikaiosune
I'm curious to see what items this applies to. I buy most things from Amazon,
and when I comparison shop the prime shipping usually negates any price
difference with other online retailers, and the price is very rarely beat by
any in store prices where I live. Anecdotal to be sure, and I stick to items
fulfilled by Amazon or direct from Amazon (mostly due to prime), but I see a
lot of savings this way. And that doesn't include my time savings which has a
measureable value top.

~~~
dayaz36
Actually most stores now do price matches to Amazon (including best buy and
target among others), so there is no use for Amazon for me now. I used to go
to best buy just to test the equipment before buying on Amazon, now I just
show them the Amazon price on my phone and they match it. No shipping fee no
waiting and cheaper. I think I'm going to have to try Jet.com now that Amazon
is worthless

~~~
MichaelGG
I guess you're one of the folks that would not pay a premium to simply not
deal with ever having to set foot in a Best Buy. Returns? Gotta go to the
store. Want a sightly different model (for instance the newer Canon Powershots
are a downgrade) - wait for them to get stock. Plus the obnoxiousness of going
to those stores.

It's great you like getting out, dealing with retail and advertisements. But I
think you aren't representative.

~~~
mattmaroon
Returns are WAY better at a big box store. Here's the Amazon return process.

1\. Go to site, fill out a form to get a shipping label.

2\. Print said form. That's pretty much all I use my printer for in 2015. I
even upgraded to a wireless one so I don't have to plug my damn laptop into it
every time I want to return something.

3\. I probably threw away the Amazon box. Gotta dig up a suitable one from the
pile of spares I have in the attic just for returning stuff to Amazon.

4\. Print packing slip, insert in box.

5\. Gotta bust out the old packing tape. You know that stuff always comes out
of the little guides on the side no matter how careful you were, so you have
to unstick it. Do so while seething in rage that nobody has yet invented
packing tape that doesn't stick to itself. Maybe a ratcheting roll that can't
reverse?

6\. Shellack that damn label to the box with tape. I don't have shipping
labels for my printer because what am I, FedEx? So I cover it in like 8 strips
of tape.

7\. Go to whichever shipping service Amazon sent it from because unless you
ordered a tiny USB cord, it's too big to fit into their drop box. It could be
USPS, FedEx, or UPS, all of which are located next to the Best Buy where I
could have just dropped the damned thing off in way less time and without
having to fight a roll of packing tape.

~~~
x0x0
You can do a UPS pickup; they come to your door. You can leave the package in
the mailroom at work for free. You can drop it off in a random UPS store by
walking in, making eye contact with the clerk, then setting it down on the
counter. It's a 3 minute process to rebox, particularly if you have a tape gun
from the last time you moved (seriously, buy one of these!)
[http://www.amazon.com/Duck-Standard-
Includes-54-Yard-669332/...](http://www.amazon.com/Duck-Standard-
Includes-54-Yard-669332/dp/B0058I1R0Q) (amazon link, natch :D)

 _or_ you can spend 40-60 minutes driving to best buy or some other store.
Even if the drive is 10 minutes each way, that's how long it costs from the
time I touch my car keys to the time I'm back in my house -- walk to the
parking lot, drive, park, walk, counter, stand in line, reverse the process.

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cs702
Not knowing much about the company's internals, my guess is this will end
badly.

Consider:

* Fidelity is supposedly leading the investment in Jet.com -- not exactly a leading VC or PE investor.

* The investment totals $500 million -- not exactly a small one-off deal that flies under the radar.

* Jet.com is on track to burn all that cash in a year or so -- not exactly a lot of runway.

\--

Edit: added "or PE" to first bullet point in response to comment below.

~~~
mattmaroon
When companies do rounds in that price range, it's often (maybe almost always)
from PE or something other than VC. VC funds are usually not big enough for
that. I wouldn't take that as a negative indicator.

~~~
cs702
Fidelity is not a leading PE firm either.

~~~
TheBiv
But they are a market maker probably positioning themselves to be the firm
that takes them into an IPO

~~~
umeshunni
That's a very long term bet at this point.

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powera
I honestly want a list of Jet.com's newest investors so I can remember to
never do business with them. This is the most obvious tire fire of an
investment I've ever seen in my life (I missed seeing the late 90s dot-com
bubble in person).

The brand is completely irrelevant, they only have sales because they're
losing money on each unit, they're losing $50 million per month and plan to
keep losing that much ... what exactly is supposed to be good about this
model/company?

~~~
brk
Many of the same things were said about Amazon back in the 90's. I was _sure_
they were going to go down in flames when they moved from selling just books
to selling everything...

Though to be honest, I don't think Jet is the next Amazon.

~~~
sixQuarks
No, I remember Amazon well in its early days and it was nothing like Jet.
Kozmo is a better comparison

~~~
TillE
Amazon was a pretty successful bookstore, and then they acquired CDNow and
became a pretty successful music shop as well. They weren't selling things for
crazy low prices, they were just convenient and had a huge catalog.

By the time they moved to selling everything, it seemed like a stable
business.

~~~
dragonwriter
> Amazon was a pretty successful bookstore, and then they acquired CDNow and
> became a pretty successful music shop as well. They weren't selling things
> for crazy low prices

Yes, they were. They built their customer base from day one on extremely deep
discounts; that was always their big selling point.

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c-slice
Whoever designed their color scheme was nuts. The hue of their purple is
incredibly nauseating, at least to me.

~~~
cglace
When I first saw their site I had to check a few times to make sure it was
actually the billion dollar startup I had heard so much about.

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swingbridge
Oh man. You'd have to be seriously high on jet fumes to throw more money into
the this sinkhole. I don't see this playing out well.

~~~
hluska
Good wordplay!! :)

------
invalidfunction
Jet is starting to look like yet-another-startup run by a rich guy who thinks
throwing exhorbent amounts of money at a problem solves everything

------
krishnakv
The first I heard about jet.com was through this hanselminutes podcast -
[http://hanselminutes.com/494/jetcom-scales-with-azure-f-
and-...](http://hanselminutes.com/494/jetcom-scales-with-azure-f-and-more-
with-rachel-reese).

Their tech stack looks interesting and despite the anecdotes from this thread
and the fact that I haven't ordered anything from them yet (I am outside the
U.S), I am inclined to give them the benefit of the doubt.

The Amazon monopoly needs some competition and better it come from a company
that's innovating with a better tech stack. I am confused about why they
decided to get off a membership model, though...

------
fraserharris
Jet.com's strategy is to get large enough that the brands have to list on
their site (like they do an all major marketplaces). Many of the larger brands
are currently sitting on the sidelines "seeing how it goes". You can think of
their current strategy as "buying one side of a two sided marketplace". This
may or may not work, but calling the strategy stupid just demonstrates a lack
of familiarity with ecommerce marketpaces.

If Jet.com's strategy does work then its cemented itself as a multi-billion $
marketplace. In an era of near-zero % interest rates, funds are willing to
take that risk for the potential return.

------
lhnz
Earlier this year the CEO said “I don’t have any more plans to raise more
capital.” And at the time there he downplayed the size of the investment given
that it was before the product was released. Back then it was implied that it
would help ensure that they'd not have to raise money for quite a while.

I wonder what happened to that plan.

------
bondibox
A couple points that have been missed in the comments. #1 Amazon is just now
starting to turn a profit. That's 20 years of losses. #2 Amazon seller's fees
are huge, especially for items less than $10. I can sell Samsung 18650
batteries in my online store for less than Samsung sells the same battery for
on Amazon. Customer demand is only one side of the coin, there is also vendor
demand to consider.

------
ericcholis
As somebody who works in ecommerce, I don't see the upside for a merchant to
list there. The omnichannel solutions pushed pretty hard to onboard merchants
to it.

Maybe somebody could persuade me

------
ckurose
Also, where are they spending this much on marketing, they've got almost no
marketing presence imo?

~~~
clientbiller
They spend over $100k a month just on paid advertising.

~~~
dangrossman
Per the article, their advertising budget is $300 million for the first year,
and they spent $25 million on marketing last month.

------
brianmcconnell
I had never heard of them until now. I don't think this is going to have a
happy ending.

------
mrdrozdov
Is Jet doing anything exciting on the Software Engineering side of things?

~~~
icebraining
Apparently, they have a pretty large stream of real-time price updates,
powered by F# on Azure. Hanselminutes had an episode with (one of?) their
senior software engineers recently[1]. According to the podcast, they're
calculating prices based on a lot of factors, then sending them so fast to
Google (Shopping, I suppose?) that Google's API was the bottleneck.

[1] [http://hanselminutes.com/494/jetcom-scales-with-azure-f-
and-...](http://hanselminutes.com/494/jetcom-scales-with-azure-f-and-more-
with-rachel-reese)

------
bhouston
Jet.com is going to flame out so quickly, and fairly predictably as well to a
lot of outsiders. I wonder what the Jet.com investors were smoking, must have
been some good stuff.

~~~
exclusiv
I agree, but until then check them out. I just got a great deal on a new
router. They are the cheapest in many categories and shipping was pretty quick
too.

The only thing that could make sense is to lose money on a sale but acquire
email and purchase data to resell. Or it could include building a big
retargeting ad network for new product launches from CPG and electronics
manufacturers. That's what I would do if I could blow money in the ecommerce
space.

They could sell data to Facebook if they wanted to in order to improve their
purchase based targeting. I'm sure Twitter would love to have purchase info on
their users too to make them more relevant as an ad network.

Traditionally manufacturers know very little about most their customers
because retailers keep that tight.

So they run coupons, rebates, other incentives and purchase data from cc
processors among other things.

So an Amazon that cooperates more with manufacturers and other ad networks
could be a decent play.

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ckurose
Arg paywall! Clicking through from this link goes under it to full story:
[http://www.techmeme.com/151104/p16#a151104p16](http://www.techmeme.com/151104/p16#a151104p16)

~~~
mst
It's the WSJ. Paste URL into google. Click link. Presto!

~~~
heroh
this means you are allow Google to datamine every click

you should be running an add-on to scrape all tracking off Google

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burger_moon
Without any paywall -
[http://pastebin.com/17fwFaut](http://pastebin.com/17fwFaut)

~~~
mkorfmann
<3

