from Hacker News

Frenzy Around Shopping Site Jet.com Harks Back to Dot-Com Boom

by WritelyDesigned on 7/20/15, 4:04 AM with 21 comments

• by jsnathan on 7/20/15, 10:40 AM

  > 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?

• by LukeB_UK on 7/20/15, 7:22 AM

  Non-paywalled mirror: https://archive.is/QritD

• by fahim305 on 7/21/15, 9:51 PM

  This is a losing proposition. I am very familiar with the space (I used to manage one of the largest categories at Amazon), and there is a lot of blind faith in Jet. While I do think another player can co-exist in the domestic e-commerce space, winning on price is going to be a very tough battle for a variety of reasons (Amazon can strong arm vendors giving preferential pricing elsewhere), especially if it requires a $50 membership fee. IMO, ways to beat Amazon would need to focus on the searching/browsability of items, focusing on certain categories where Amazon has less direct relationships, etc., and I'm not yet convinced that Jet is focused enough to do that.

• by acheron on 7/20/15, 12:36 PM

  Competing 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.

• by jackgavigan on 7/20/15, 10:56 AM

  I 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

• by marcusgarvey on 7/20/15, 2:07 PM

  So Jet is a very risky bet. And partly backed by Norwest Venture Partners. Which is in turn owned by Wells Fargo. Who is apparently violating the spirit of the Volcker Rule, if not the letter. http://www.reuters.com/article/2013/02/21/us-wellsfargo-priv...

  Remember this at the next bailout. http://www.cheatsheet.com/business/stock-news/3-reasons-the-...

• by downandout on 7/20/15, 2:19 PM

  Given the level of investment here, I have to hope that there is much more to this company's model than is discussed in the article - otherwise this is a 100% guaranteed loss for investors. When that loss happens, it will be bad for any other tech startups that try to raise money after it.

  The money actually being used to fund this black hole is coming from large institutions that trust the judgment of the VCs and usually have no say in the funds' investment decisions. Tech valuations are only high at the moment because there is currently an imbalance of investment capital chasing private tech deals. One sure way to correct that imbalance is for VCs to betray the confidence that institutions are placing in their judgment by blowing hundreds of millions of dollars in massive, obvious blunders like this.

• by swingbridge on 7/20/15, 1:01 PM

  Had 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.

• by bgold777 on 7/23/15, 2:49 AM

  This is a great time to shop on jet.com. They are absorbing all of the costs!! If you really want to buy something cheaply you should do it now, before it goes under.

  This is a great example of trying to get too big too fast without even testing the business model.