NJTechWeekly.com has been following Jet.com, the e-commerce startup founded by Marc Lore, of Diapers.com fame. Lore has been busy working towards a launch this spring.
On Feb. 11, he announced on his blog that the company (now in Montclair but soon in Hoboken) had secured an additional $140 million in funding.
“This new round was led by Bain Capital Ventures, with additional participation from Accel Partners, Coatue, General Catalyst, Goldman Sachs, Google Ventures, MentorTech Ventures, NEA, Norwest Venture Partners, Silicon Valley Bank, Temasek, Thrive Capital and other strategic investors,” Lore wrote.
He said that the money will be used to help the company deliver on its promise of radical price innovation in e-commerce. “We believe that there is big opportunity to deliver meaningful value to mass consumers by optimizing the underlying economics of online shopping and unbundling the embedded retail costs that drive up price.”
Lore went on to explain more about his business model, which is a technology-enabled warehouse price club model. Speaking about the Costcos of the world, Lore said, “Leveraging a membership model, they found ways to take costs out of the system, including placing stores in less desired areas, selling a very limited assortment, focusing on bulk-buying, and leaving products on palettes. In doing so, they unlocked significant savings for members and transformed how people shop.”
Using technology, Lore said Jet will be able to “dynamically adjust prices in real time in response to the unique composition of a shopper’s basket, always maximizing for cost-savings.” Customers will be guided towards orders that are economically more efficient to fulfill.
Jet only profits from the annual membership fee, so the full benefit of that efficiency gets passed back to customers in the form of lower prices. “Best of all, customers save without having to sacrifice service or experience,” he continued.
Lore gave a few hints about how his retail partners will fit into the company. “We see the opportunity to leverage technology and bring price innovation to an unlimited product selection by working collaboratively with our retail partners. We don’t compete with our partners; rather, we empower them with pricing tools that enable them to set different rules based on their business goals and profit targets.”
Many “Jet Insider” customers received their accounts, along with their ranks and perks, via email this week. One such notification gave the customer six months of free membership and unlocked the ability to shop before the public launch. Insiders are being let in on a rolling basis starting in March, the email said.
Readers interested in why Jet is attracting so much money will want to read this interview on Re/Code by Jason DelRay who spoke with Bain Capital’s Scott Friend. “Think of it as the team and the market opportunity it is going after,” Friend said.
Speaking about the technology Friend said, “But what if you had a blank sheet of paper and could design a system for digital that operated more like real-time bidding for advertising? And, in doing so, build transparency into the market so consumers didn’t pay through the nose for inefficient shipping if they didn’t have to? That’s Marc’s dream.”
He also noted that Jet’s project requires a lot of capital to achieve its goals, since Jet will be setting up warehouses for consumable goods.