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Jet, the new shopping site that launches on Tuesday, promises shoppers “the lowest prices on everything.” To hammer home the point, the online mall will compare its price with Amazon’s price on every one of its product pages.
As a way to prove its marketing promise, Jet tested its service with some customers who were given early access by showing its prices against those found on multiple competing websites. But after some people were confused by the appearance of the various competitors, Jet has decided to show its prices against just one competitor, Amazon, which typically has very low prices.
“So it’ll be very easy for customers to understand that savings means savings compared to Amazon,” Jet CEO Marc Lore said of the changes in an interview on Monday. “They’re clearly the dominant player, so they’re a great reference point.”
Lore said about 90 percent of Jet’s product listings at launch will show Jet’s discounted price compared with Amazon’s lowest price for the same item. The remaining 10 percent of Jet product pages will be updated with Amazon price comparisons over the next two months.
There are some caveats. While Amazon often has the lowest prices, it doesn’t always. When that’s the case, Jet will discount the product below the lowest price found elsewhere on the Web, but will still show Amazon’s price for consistency’s sake, the company said.
The Amazon prices also won’t factor in the fact that some of the products wouldn’t carry shipping fees for Amazon customers who pay $99 a year for Amazon Prime. Jet, meanwhile, charges $5.99 for orders under $35, while Amazon also charges delivery for orders of this size for non-Prime members.
“If you have Prime, you’re not our target customer,” Lore said, explaining the rationale. “You’re getting video, you’re getting faster shipping. It’s a completely different animal.”
An Amazon rep declined to comment.
Jet.com is essentially a discount shopping club that charges members $50 a year for access to the “best price on more than 10 million products.” Partnering retailers such as NewEgg and Barnes & Noble pay Jet a referral fee or a commission for items selling on Jet. But instead of pocketing the fee like most shopping marketplaces, Jet will pass that along to its shoppers in the form of a discount. Jet can get away with discounting below Amazon’s lowest prices by breaking even on product sales and relying on membership fees for future profits, Lore has said.
For now, though, Jet is losing significant money on some orders, as the Wall Street Journal reported on Sunday. That’s because the company is currently stocking its virtual shelves with some products that neither it nor its current retail partners are currently making available on Jet.com. In some cases, Jet is buying the product from the retailer at full price, having it shipped directly to the Jet customer and eating the difference on the discount.
Lore told Re/code that this is simply a “bridge” to make sure Jet’s catalog isn’t disappointing to shoppers while it brings on hundreds of new partnering retailers that will start selling the same products themselves.
Shoppers will also be able to order products from third-party retailers that aren’t available on Jet under a program called Jet Anything, which is expected to launch later this month, according to Lore. The program allows members to input links to products found elsewhere on the Web and still get a discount.
Jet has raised more than $200 million in equity and debt financing, which for now gives it the cushion to absorb these losses. Lore said he continues to talk to potential new investors about raising more money for Jet, but insisted that another financing round is a ways off.
“Until we have some history of actually being in operation, it doesn’t make sense to do a round,” he said.
Jet also stands out by applying additional discounts to orders if multiple items come from a single warehouse, or, ideally, a single warehouse that is also located close to the shopper. Discounts are also applied if shoppers do things like waive their right to return an item or pay with a debit card instead of a credit card.
Lore and Amazon have plenty of history. Amazon bought Lore’s first company, Diapers.com parent Quidsi, for $550 million after waging a diaper pricing war. Lore then spent a couple of years at Amazon before leaving to eventually create Jet.
This article originally appeared on Recode.net.
