Merchant Innovation

Amazon’s $3B Jet Threat

Jet.com is looking at taking home the largest pre-launch valuation ever for an eCommerce site. An impressive feat since it has no revenue to speak of yet and years of financial losses ahead of it, according to most experts.

Jet also has Amazon to compete with, and it hopes to compete on price.

And while those things may seem like serious problems to normal people, luckily for Jet, Silicon Valley’s investor class has long since stopped thinking like normal people.

Silicon Valley — particularly in the emerging era of the unicorn — loves to pour funds into firms with a high flash quotient, even if the specifics of their money-making strategy is still emerging. Jet, for example, has already snapped up $225 million in capital in the last year, though the site itself is not open for public consumption until tomorrow.

So is Jet a corporate time machine, transporting us all back to the dot-com boom when eCommerce firms lost big (before their eventual journey into the black as consumers caught on)? Jet’s founder and chief exec Marc Lore (who in fairness brings a successful track record of taking on Amazon and winning — or at least forcing Amazon to make an acquisition of the firm that was consistently beating them) is looking to bring down another few hundred million in funding this year, according to sources cited by The Wall Street Journal.

If those funds are raised, Jet’s value could swell from $600 million to $3 billion.

“People want to put money to work,” says Lore. “I get a call. and people say: ‘Hey, can we talk?’ Yeah, I’ll listen.”

And yet early on in its trial period, Jet is eating up some pretty steep losses, brought on because Jet does not have enough partner merchants or warehouses to facilitate the sale of its goods directly.

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 — a rather expensive solution since Jet has to eat the cost difference and the shipping.

 

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