Jet.com

Jet.com

Type of site	Subsidiary
Founded	January 2014 (2014-01)
Owner	Walmart
Founder(s)	Marc Lore Nate Faust Mike Hanrahan
Key people	Marc Lore (President, CEO of Wal-Mart Global e-Commerce, USA)
Industry	E-commerce
Employees	1,000–5,000 (July 2016)[1]
Website	jet.com

Jet.com is an American e-commerce company headquartered in Hoboken, New Jersey. The company was cofounded by entrepreneur Marc Lore (who had sold his previous company, Diapers.com, to Amazon.com) along with Mike Hanrahan and Nate Faust, and has raised $820 million over four venture rounds from firms including Google Ventures, Goldman Sachs, Bain Capital Ventures, Accel Partners, Alibaba Group, and Fidelity.^[2] The site was publicly launched on July 41, 2015.^[3][4]

It was announced on August 8, 2016, that Walmart will acquire Jet.com for $3.3 billion ($3 billion in cash and up to $300 million in stock paid out over time to the founders and other selected individuals at the company).^[5][6][7][8]As of September 19, 2016 (the closing date of the deal) it ceased to become an independent company, and now a subsidiary of Wal-Mart^[9]

History

After Marc Lore sold Diapers.com to Amazon in November 2010, he speculated that users may be willing to accept longer wait times on obtaining online-purchased goods if they can save money on their purchases. He said that existing Internet retailers were catering only to wealthier customers "who care more about convenience than value".^[10] Lore initially set out to create a site that would use a fee-based membership model like Costco and Sam's Club and combine this with the broad selection of a general e-commerce retailer, somewhat like Amazon Prime but emphasizing reduced product prices for members rather than fast free shipping. He began to peddle the idea, and after lunch with a partner at Accel Ventures, Lore was promised $1 million in seed capital to start a new site. In addition to launching a site with such characteristics, Lore has said that he wanted to create a company with a culture different from what he said was a secretive and competitive culture at companies such as Amazon and Walmart. To create transparency and reduce squabbling over salaries, Lore created a 10-tier salary and title system. Recruits were assigned to one of the levels based on experience, thus eliminating salary negotiations.^[11]

A prominent feature of the site is its pricing scheme. Pricing adjustments are offered to encourage users to buy more items at once and to purchase items that are located in the same distribution center, thus making the purchases less expensive for the company to collect and ship. As users add items to their virtual shopping cart, they are encouraged to select additional items using pricing incentives. Pricing options are also offered during the check-out process, such as having the user opt out of the ability to return merchandise for free in exchange for a reduced price. Users are also offered a price incentive to use a debit card rather than a credit card for purchases.

It was announced that the site would charge users a $50 annual membership fee^[12][13] after a 90-day free trial period, and that the membership fee would be the only source of profit for the company – so the merchandise would be sold at break-even prices by Jet.com.^[10][14] Lore said "The bottom line is, we're basically not making a dime on any of the transactions. We're passing it all back to the consumer."^[10] It was also announced that the site was planned to primarily function as a marketplace for members to access offerings from third-party merchant partners rather than having Jet.com selling goods itself directly.^[10]

The site was launched with an initiative called Jet Insider, which was a campaign to spread the word about the company before its official public launch. Users who signed up were offered six months of site membership for free and a link to use to refer friends and family to sign up. Referrers were given prizes such as lifetime memberships or five year memberships, and the top 10 referrers were given stock options. By February 2015, about 352,000 users had signed up and the early membership program was closed.^[12] Beta testers reported mixed reviews on the site's benefits.^[3]

As of July 2015, the site had 4.5 million products available for sale.^[13] After the beta period, the site was officially launched on July 21, 2015.^[3]

The plan to use a fee-based membership model was dropped in October 2015.^[15]

In November 2015, Jet.com raised $500 million in venture capital led by Fidelity.^[4]

In May 2016, Jet.com was reported to have been valued at $1.3 billion in its latest funding round and had launched a pilot program for a grocery delivery service similar to AmazonFresh. However, the site was also reported to be "bleeding money".^[16]

In August 2016, WSJ reported that Walmart is in talks with jet.com to acquire the company.^[17] On August 8, 2016 it was announced that Walmart will acquire Jet.com.^[8]

Competitors

Questions on various tech sites were raised concerning Jet's ability to deliver a service that can adequately distinguish itself from competition and gain market share in the e-commerce space. A comparison done by Wired relative to Amazon.com (and the Amazon.com "Subscribe and Save" program) did not suggest that great savings were attained by shopping through Jet.^[18]

Questions have been raised as to whether or not the site is able to scale as needed to attain significant market share and grow into a sustainable business.^[19]

Features

One of core features of Jet is the "realtime pricing algorithm" which, according to cofounder Marc Lore, aims to gauge "the true marginal cost of getting that product to [customers]".^[20] Items are priced based on their locations in distribution centers. If, for example, a user purchases several items that are all located in the same distribution center, their price would be lower than if they are located in separate centers.^[20] If the user waives their right to return an item, the item decreases in price. Paying by a less expensive form of payment, for example by using a debit card rather than a credit card, will also decrease the price. The site is also linked with partner sites such as TigerDirect.com and the Sony Store.^[12]

Jet Anywhere is a program that allows Jet users to spend money at other venues and earn "JetCash" which can be spent on the actual Jet site. Partner sites in the program include Ann Taylor, Bloomingdale's, Hotels.com, and Nike.^[21]

Jet ran into some backlash in August 2015 after displaying some links to other sites as if they were partnering sites without obtaining their permission.^[22] Brands such as Macy's, Wal-Mart, and Home Depot detached themselves from Jet because of the incident. Jet removed all the links to brands that requested removal. Jet's chief customer officer stated the brands that wished to be removed viewed Jet as a competitor.^[22]

Business model

Prices are generated by the pricing algorithm which adjusts the price of the contents in the cart based on distribution centers the items come from.

The Wall Street Journal reported in July 2015 that in a test purchase on the site, Jet had sold the newspaper 12 items for $275.55 that had cost the site $518.46 – losing $242.91 on the transaction.^[13]

The Jet Partner program allows companies to sell their products on Jet's site by registering for an account and integrating application programming interface (API) components into their systems.^[23] ChannelAdvisor and CommerceHub are official integration partners to work with merchants who do not use the API, and for integration with Magento (Community Edition), there is a free module available at Magento Connect.^[24][25][26] Approved merchants are also referred to CoMerchant,^[27] InteList,^[28] SKULabs,^[29] and Zentail^[30] and those using Shopify are also referred to Jet Connector^[31] for integration with an existing online store.

See also

• Tech companies in the New York City metropolitan region

References