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E-commerce startup Jet.com launches, with eye on Amazon

The new online retailer officially opens for business Tuesday with plenty of buzz, thanks to a $225 million purse and a CEO who's no stranger to Amazon's playbook.

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A countdown clock on Jet.com has been ticking down for days before the official launch. Jet.com

Is it possible to beat Amazon at its own game? That's the multibillion-dollar question e-commerce newcomer Jet.com is looking to answer.

Jet's much-anticipated website opened for business Tuesday, with its bold claim that it can undercut prices from just about any online retailer -- including Amazon, which is already known for low prices. The Hoboken, New Jersey, startup, backed by $225 million in funding, offers annual memberships of $50 for its US Internet shopping club, which offers about 7.5 million products for sale, including TVs, toilet paper, hangers and T-shirts -- just a fraction of Amazon's total US listings.

The launch serves as Round 2 for Marc Lore, Jet's founder and CEO. In 2010, he sold his 5-year-old startup Quidsi, owner of Diapers.com and Soap.com, to Amazon for $545 million after Amazon initiated a price war against his company. Lore eventually left Quidsi in 2013.

Jet is part of a fresh wave of competition against Amazon, the reigning worldwide leader of online retail by revenue. Other retailers are starting to develop new membership programs to rival Amazon's $99-a-year Prime service, which offers unlimited two-day shipping and other perks. Along with Jet, Walmart is experimenting with a $50-a-year three-day shipping program called ShippingPass, and eBay is piloting a loyalty program in Germany called eBay+.

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It will be difficult to go toe-to-toe against Prime, which includes an estimated 44 million accounts in the US. Amazon demonstrated the challenge last week when it staged a 20th anniversary sale called Prime Day that resulted in huge sales and hundreds of thousands of new Prime members. Also, Jet expects to take on big losses as it expands, but it will face a tough road trying to undercut Amazon, which routinely forgoes profits so it can elbow out competitors.

An Amazon representative declined to comment on Jet's launch.

While it's "flattering" to be compared to the e-commerce market leader, Jet is working on offering something different than Amazon, Liza Landsman, Jet's chief customer officer, said in an interview. She said Jet plans to make a profit only off its membership fees, using a network of 2,200 retailers and its logistics software to cut down on the number of shipments and distance shipped to help save money for both retailers and customers.

The startup's immediate goal will be bringing in new members, following a pilot program this year that included 100,000 people. To get the word out, Jet plans to spend $100 million over the next year, pitching itself broadly, not just to those in Amazon Prime or members of other buyers clubs, like Costco's or the Walmart-owned Sam's Club.

"We're going to be really focused on getting a great number of consumers onto the platform, making sure their experience is so great" that they keep coming back, Landsman said.

Jet will be available in the contiguous 48 states and Washington, DC, offering free shipping for orders of $35 or more and a $6 flat fee for smaller orders. Other discounts will also be available, such as when a member agrees to waive the ability to return an item. To coax people into signing up, Jet will give early users free membership for six months.

The company will offer customers goods in three ways: either through sales from its own warehouses; through third-party sellers on its site, such as ASICS or Lenovo; or using a so-called "concierge" service, in which Jet will buy items on other retailers' websites that it runs out of or doesn't have. While costly, the concierge service will ensure Jet's online shelves are well-stocked for its early days while the company works on building out its warehouses and inventory.

"The catalog is great now but will continue to grow over time," Landsman said.