Amazon’s Diaper Deal Spawns New Rival
Co-Founder of Quidsi Launching Jet.com, a Discount E-Commerce Site
Marc Lore, right, with his Quidsi co-founder Vinit Bharara, in 2010, the year the parent company of Diapers.com and Soap.com was sold to Amazon. BLOOMBERG NEWS
The co-founder of Diapers.com, which was bought by Amazon.com Inc. in 2010, is preparing a new e-commerce site aimed squarely at his former employer.
The online marketplace, Jet.com, has grand ambitions, including a planned half-billion-dollar marketing budget and projections for $5 billion in annual sales by 2020, according to slides distributed to potential merchants.
Marc Lore, the man behind the new site, became wealthy when Amazon acquired Diapers.com parent Quidsi Inc., which also owned Soap.com, for about $550 million. He left Amazon in 2013 to begin work on his new venture.
To its planned battle with Amazon, Jet will bring Mr. Lore’s record in building out Quidsi and $80 million in venture capital and debt. While Amazon has been working to speed deliveries through a widening network of warehouses, Jet is targeting cost-conscious customers who may be willing to sacrifice speed for lower prices.
“It’s about saving money. That’s a much bigger opportunity than sites that are focused on convenience” like two-day delivery, Mr. Lore said in an interview Wednesday. He said the site may appeal to companies that don’t sell their merchandise through marketplaces today.
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The site will be a marketplace akin to eBay Inc. ’s, but with membership fees like Costco or Sam’s Club. People familiar with the matter said Jet plans to undercut rivals by using the commission it collects from merchants to lower prices. The company has told potential merchants that its prices will be 10% lower on average than the other prices on the Web.
A spokesman for the company confirmed that TigerDirect.com, Sony Store and Sears Hometown & Outlet Stores are among the initial retailers who will sell on the site, as reported earlier by Bloomberg Businessweek.
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Jet’s only source of revenue, Mr. Lore said, would be a $49 annual membership fee, half the price of Amazon’s Prime unlimited-shipping membership.
Despite Mr. Lore’s pedigree, Jet will face big challenges, including Amazon’s brand name, convenience and estimated 30 million Prime Members who pay $99 a year for unlimited two-day shipping and other goodies like streaming video.
Jet likely will offer fewer items than rivals and may struggle to attract vendors that prefer to sell merchandise through their own websites. With no other source of revenue, there will be continuous pressure to bring in new memberships.
The company has been giving away free memberships to people who sign up for the site in advance and persuade their friends to do the same. Some will win one- or five-year memberships. As another come-on, Jet is rewarding the most prolific members with stock options of between 10,000 and 100,000 shares.
In general, merchants are responsible for shipping goods directly to customers. Mr. Lore said Jet will warehouse some merchandise, primarily consumables like diapers and toilet paper.
The company plans some operational twists. Merchants can propose lower prices for their goods based on their estimated shipping costs, as well as the total size of an order, according to people briefed on the plan. As a result, items warehoused near a shopper may be cheaper than those stored across the country.
Jet in December won an auction for the customer lists and some other assets of failed shopping website Hukkster, with a $65,000 winning bid. Hukkster notified shoppers when retailers lowered their prices on items they were watching and made money on referral fees.
Mr. Lore has hired several Quidsi executives to help get Jet off the ground, including Scott Hilton, his former vice president of operations. Before starting Quidsi with his friend Vinit Bharara, Mr. Lore founded a sports collectibles site that he eventually sold, and worked for several banks.
Jet, with about 100 employees, will operate from an office in Hoboken, N.J. Mr. Lore wrote on his blog that he expects to double the workforce by the end of this year.
Amazon declined to comment.
