Jet.com: the next Pets.com or the next Amazon?

[brahmanknight]

http://www.wsj.com/articles/frenzy-...jet-com-harks-back-to-dot-com-boom-1437359430

Online marketplace Jet.com Inc. has almost no revenue, years of likely losses in its future and a strategy that includes underpricing mighty Amazon.com Inc. on millions of items. Jet also has perhaps the highest valuation ever among e-commerce startups before their official launch.

The Hoboken, N.J., company is absorbing steep losses on many orders filled as part of a trial run that began in March, largely because Jet hasn’t signed up enough partner merchants or opened enough warehouses to directly sell much of the merchandise shown on its website.

When a Jet customer buys items that aren’t in its inventory or available from partner merchants, a Jet employee buys the items from another website and has them shipped directly to the customer. That is expensive for Jet because the company often pays high shipping costs plus any difference between its advertised price and the amount charged by the outside website.

A Jet employee placed some of the Journal’s orders with JCPenney.com, Walmart.com, Nordstrom.com and Walgreens Boots Alliance Inc. ’s Drugstore.com, using email addresses that didn’t match the Journal’s email.

Each concierge order also was made with a different credit-card number, making it hard for retailers to tell Jet was the buyer. Jet’s product descriptions and images sometimes were identical to the retailers’ own listings.

Marc Henderson, founder of fragrance retailer Scenting.com, says he had no idea that Jet was placing orders on his website until a Journal reporter told him about seeing a recent one. Mr. Henderson says he was having a “weird feeling” about sales quadrupling in the past month for 6.7-ounce bottles of Calvin Klein’s Obsession for Men cologne.

 

[UCFKnight85]

Oh yea, a business whose entire model is selling things below their own cost.

What a future they have*

 

[ReginaeUCF]

Oh yea, a business whose entire model is selling things below their own cost.

What a future they have*

If you do this on a large enough scale it actually does work. Huge companies do this all the time. Cisco for example simply requires salespeople to meet an average markup, essentially. Have a friend who used to sell for Cisco and he sold, mostly seafood, for up to 200% loss because he could sell other seafood for a 300% profit. It's dumb IYAM

 

[UCFKnight85]

If you do this on a large enough scale it actually does work. Huge companies do this all the time. Cisco for example simply requires salespeople to meet an average markup, essentially. Have a friend who used to sell for Cisco and he sold, mostly seafood, for up to 200% loss because he could sell other seafood for a 300% profit. It's dumb IYAM

Aside from hyper growth companies, like Amazon was, I have never heard of a company where the long term strategy is to sell below cost and run negative margins. Unless this Jet.com is going to charge people to use the site and somehow offset those margins, then I don't get how this is a business. I imagine the owners are just praying that they can achieve hyper growth, get some stupid people to notice, and sell the platform to someone who thinks they can eventually make it profitable.

Your example makes no sense either. If I can sell a certain seafood at 300% margins, why would I ever sell a different type at 200% loss? Why would I sacrifice 200% margin just for the sake of selling stuff?

 

[UCF-icenhl-06]

Aside from hyper growth companies, like Amazon was, I have never heard of a company where the long term strategy is to sell below cost and run negative margins. Unless this Jet.com is going to charge people to use the site and somehow offset those margins, then I don't get how this is a business. I imagine the owners are just praying that they can achieve hyper growth, get some stupid people to notice, and sell the platform to someone who thinks they can eventually make it profitable.

Your example makes no sense either. If I can sell a certain seafood at 300% margins, why would I ever sell a different type at 200% loss? Why would I sacrifice 200% margin just for the sake of selling stuff?

yes its a membership model.

 

[UCFKnight85]

yes its a membership model.

Did it say how much per person? I was stuck behind WSJ firewall.

 

[brahmanknight]

Did it say how much per person? I was stuck behind WSJ firewall.

Just Google "jet.com WSJ" and it takes you behind the paywall for almost all WSJ article ( at least on a desktop or laptop ).

 

[Good Knight Sweetheart]

I miss the Pets.com sock puppet.

.

 

[Game_Day_Sports]

I miss the Pets.com sock puppet.

.

You don't even want to know what that poor sock puppet is doing these days. It is a sad fall from glory to glory hole for the sock puppet. Tonight on Where are they now.

 

[chemmie]

Your example makes no sense either. If I can sell a certain seafood at 300% margins, why would I ever sell a different type at 200% loss? Why would I sacrifice 200% margin just for the sake of selling stuff?

Loss leaders are a common tactic in all areas of retail. This is why grocery stores have either Coke or Pepsi on sale every other week, usually at a loss. Getting people in the doors is more important than losing a little bit on a single product when the chances are greater that they will end up buying more products.

 

[Good Knight Sweetheart]

I figured that sock puppet had a dark side.

.

 

[Bob the Citronaut]

I can sit at home and do nothing and make no money. I don't understand making sales at cost or below.

 

[UCFKnight85]

Loss leaders are a common tactic in all areas of retail. This is why grocery stores have either Coke or Pepsi on sale every other week, usually at a loss. Getting people in the doors is more important than losing a little bit on a single product when the chances are greater that they will end up buying more products.

I know what a loss leader is, although I'd question how well discounting Coke works as one.

I don't get how selling a different fish at 200% negative margin helps sell the other.

 

[fabknight]

I know what a loss leader is, although I'd question how well discounting Coke works as one.

I don't get how selling a different fish at 200% negative margin helps sell the other.

It used as bait.

 

[ReginaeUCF]

Aside from hyper growth companies, like Amazon was, I have never heard of a company where the long term strategy is to sell below cost and run negative margins. Unless this Jet.com is going to charge people to use the site and somehow offset those margins, then I don't get how this is a business. I imagine the owners are just praying that they can achieve hyper growth, get some stupid people to notice, and sell the platform to someone who thinks they can eventually make it profitable.

Your example makes no sense either. If I can sell a certain seafood at 300% margins, why would I ever sell a different type at 200% loss? Why would I sacrifice 200% margin just for the sake of selling stuff?

It's an awful idea.
The strategy, as I understand is, is to accomplish XX% margin on an accounts orders over a month.
If that means you give them their dinner rolls at a loss but sell them "shrimp" at a significant margin, it offsets.
My buddy explained it all as a cash flow strategy - as long as more cash comes in than goes out Cisco is happy (and stupid, IMO). But, if the strategy is to ensure the restaurant can't ask their competition, which they have driven out on cost, for pricing on something they feel like they have won.

 

[Happy Hands]

Jet's "Beauty of the Week" is usually a hot business model.