Jet.com Is Either The Future Of Retail Or A Doomed Wacky Scheme

brilliant_jetThis week, a new e-commerce site launched to about 10,000 beta users who signed up for a preview. The easy-to-remember name of this new site is Jet.com, and its goal is to remove some of the inefficiencies of shopping online. Will they succeed?

This isn’t the team’s first war with Amazon: they founded Quidsi, the company behind Diapers.com, Soap.com, and Wag.com. Amazon waged price war on those sites, and the company eventually admitted defeat by being acquired by Amazon.

Jet’s founder told the Washington Post that it’s targeting a novel group of consumers: older millennials. That’s a generation of people who are in their late twenties to early thirties and who are not terrified of computers, yet who also don’t see the appeal of using Amazon Prime to order their paper towels. Founder Marc Lore explained to the Washington Post that he wants to compete on price, and that means flipping around the process of shopping. Instead of letting users throw whatever they want in their cart and calculating shipping once they’re ready to check out, how Jet works is that it figures out in real time how much to charge for different items based on the customer’s address. Along the way, users also get incentives to choose items that happen to come from the same vendor or the same warehouse as the items they’ve already chosen, incentivizing customers to make shipping easier on the suppliers.

More importantly, by signing up partners across the country instead of building its own massive warehouses, Jet is able to build a massive inventory without constructing massive warehouses.

The cost of “free” shipping and returns is built into the prices at all retailers, and the novel thing that Jet offers is the ability to waive free return shipping in exchange for a small discount.

What’s interesting, though, is how Jet acquired their big user base before launching. While 10,000 beta users were allowed to shop yesterday, they claim to have signed up 350,000 users who are waiting to be allowed behind the virtual velvet rope. Yes, people are always interested in new and exciting ways to shop, especially if it’s something exclusive that not everyone has access to.

Jet did something a little different, though: they were able to sign up so many people before the site launched by holding a contest. Early adopters would get 6 months of their membership for free (a $25 value) but the top referrer would get 100,000 stock options. The winner of that contest was a 28-year-old Pennsylvania man who spent $18,000 advertising on sites that give users prizes for performing online tasks like registering accounts. He signed up about 8,000 people and won the contest. Jet isn’t a public company, but those 100,000 shares could be worth as much as $20 million.

This guy used a get-rich-quick scheme and got rich [CNN]