There was an interesting article in Bloomberg Businessweek about a .com startup determined to take on Amazon. Usually, that kind of statement is the standard marketing bombast that means nothing. But in this case, the company – Jet – was started by Marc Lore, the founder and former CEO of Diapers.com. Diapers.com was sold to Amazon for $550 million and Marc went on to work for the company for more than two years. Further, this online marketplace is backed by more than $80 million in venture capital.
The company will start limited sign-ups on February 20th with a business model that resembles Alibaba and EBay in that it will function as a marketplace selling a wide variety of goods from other merchants that compete to sell their wares on the site. After a 90 day trial, customers can join Jet by paying $49.99 per year. Jet is claiming that their prices will be 10 to 15 percent lower than anyone else on line in large part because of logistics efficiencies.
“Shoppers can squeeze out more savings if they can control the urge for instant gratification and let Jet figure out how to deliver the goods as economically as possible. For example, prices can drop when a shopper combines multiple orders into a single shipment or is willing to wait for a seller offering a more economical shipping option… Although shopping can appear to be free, it’s often baked in as higher prices.”
And whereas there is a movement among etailers to offer quicker and quicker delivery service, Jet is trying to get shoppers that behave as if they are in a discount warehouse retail environment like Sam’s Club, BJs, or Costco. In those club membership chains, customers save money by buying in bulk. And at Jet, when members add more and more items to their shopping cart, they will see the price for each product fall. If purchasers are willing to wait more than a week, and goods can be sent via ground, and prices fall further. Buyers will also garner savings by purchasing from suppliers located near them.
In short, a big part of their differentiation will be based on competing on cost effective routing. If you want to offer customers more cost effective delivery choices, the e-commerce software needs to make delivery promising part of the buying process. This requires advanced routing software tightly integrated to the e-commerce front end. John Lewis in the UK has these kinds of capabilities (See Best Practices in Omni-channel Home Delivery). They are far from trivial.
Will these routing efficiencies allow Jet to compete with Amazon? That, of course, remains to be seen. But as a logistics guy, I love a business model based on better supply chain efficiencies.