Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
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Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#2Non-paywalled mirror: https://archive.is/QritD
Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#3> 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?
Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#4I 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
Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#5> 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 est…
Amazon has an estimated 7~8% operating profit margin on its retail business [1] which is circa $6bn (on ~80bn revenue) - you could imagine an argument that suggested that competing with them is only possible given a consumer mind-share that's only available if you're practically the single destination for consumers. There are niches in which other retailers can flourish but that, if you want to gain that sort of wallet share, you need consumers to identify you as a place that anything can be bought at a price that makes it not worth shopping around, and that you can't grow into that role, because at any smaller scale, Amazon can (and has shown that it will) outcompete anyone with those ambitions. It's risky, and nobody would even consider it if capital wasn't extremely available at the moment, but if you genuinely believe that they could become a viable Amazon competitor in the retail space, then burning a few hundred million acquiring customers and making a name for yourself in the process doesn't seem so irresponsible.
[1] http://seekingalpha.com/article/3017856-amazons-profitable-r...
Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#6I 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 econ…
> effectively targeting a profit margin of 0%
Why would anybody want to invest in that? What am I missing here?
Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#7I 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 econ…
> effectively targeting a profit margin of 0% Why would anybody want to invest in that? What am I missing here?
IIRC, you have to pay a subscription to shop on Jet in the first place. Every new shopper brings in recurring revenue.
Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#8Competing 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.
Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#9> 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 est…
That concierge model is going to be a post-sale nightmare as well. Returns, chargebacks, etc, with 2 separate credit card transactions from two separate buyers? Ugh.
Re: Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom
#10Had 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.