Jet.com To Compete With Amazon.com, Inc. (AMZN) Through Wholesale Shopping Model


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As shoppers continue to look for better ways to save on their purchases, Jet.com aims to take on Amazon.com, Inc. (NASDAQ:AMZN) by offering an attractive wholesale shopping model. According to Jet executives, what they aim to do Amazon is what Costco Wholesale Corporation (NASDAQ:COST) did to Wal-Mart Stores, Inc. (NYSE:WMT). As such, they don’t seek to drive Amazon out of business, but to offer shoppers a better way to save on their shopping.

Seeing that the founder of Jet.com is the same man who co-founded Diapers.com, there is a good reason Amazon may be concerned if not worried about Jet.com.  Diapers.com was sold to Amazon in 2010 for about $550 million through its parent Quidsi Inc. Marc Lore, who co-founded Diapers.com, moved to Amazon when the former acquired Quidsi Inc, but left employment with Amazon in 2013. Now he is aiming at his former employer with Jet.com.

Sacrificing delivery speed for cost

According to media reports, Jet.com has already raised about $80 million through venture capital as well as debt. The business is designed to serve cost-conscious customers who may be willing to accept lower prices for a little bit longer delivery periods. Amazon.com, Inc. (NASDAQ:AMZN) has particularly been wooing shoppers with speedy deliveries.

Jet.com has a business model where users will pay an annual subscription fee to access the site. However, once that is done, subscribers will enjoy lower prices that are at least 5% cheaper than, say, Amazon, or similar e-commerce platforms. As such, it is estimated that the shoppers who subscribe to Jet.com could make an average saving of $150 per year.

Multiple revenue sources

The reason Jet.com can afford to take on Amazon.com, Inc. (NASDAQ:AMZN) with lower prices is that its business model gives it various revenue sources. For instance, the company will mostly look to the annual subscription fee as its primary revenue source, but still gain from percentages it earns on every sale made through the site. Jet.com looks to fulfill annual transactions of about $5 billion by 2020.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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