Jet rolling on $20 billion runway
Boasting a proprietary dynamic pricing algorithm, the new online shopping club Jet.com officially launched on July 21 with plans to reach a lofty sales milestone faster than other retailer.
For Jet.com’s members only business model to work CEO and founder Marc Lore needs to secure 15 million users who spend $20 billion by 2020. The company contends those numbers are doable because it has created an entirely new business model that allows members who pay a $49.99 annual fee to determine how much money they save coupled with the fact that the company is vying for share in a truly massive market. By Lore’s estimate the e-commerce market in the U.S. grows to $1.2 trillion within 10 year.
"We have a very simple brand promise," Lore said. "Pay just $49.99 a year and you will save on pretty much anything you want to buy online.”
The savings are achieved thanks to a proprietary, dynamic pricing algorithm that Jet.com says finds savings in real time and shows customers the items that bring down costs when bought together. Members also save by making choices that avoid costs normally baked into online retail prices.
"Our platform is engineered more like a financial trading system than a traditional e-commerce marketplace," said Lore. "Because Jet's business model is to only profit from membership fees, not from the products we sell, all cost savings are passed back to the customer."
Jet promises radical price innovation in e-commerce by optimizing the underlying economics of online shopping and unbundling the embedded retail costs that drive up price, creating an entirely new business model that works better for both shoppers and retailers, according to the company. In a jab at Amazon.com, the company noted that unlike any other marketplace Jet empowers both shoppers and retailers to make e-commerce more efficient.
Retailing Today first reported on Jet.com in late March when it appeared the site was ready for launch in late May. Lore appeared on CNBC Tuesday morning to explain how Jet.com plans to make money.