Jet.com was founded in 2014. How did they get enough traction to be viable when there are so many other online retailers like Amazon, and all the other brick and mortar retailers that also have large online presence.
They eventually launched, with a mixed reception, but they had enough numbers to keep them relevant.
That led to a ton of funding which allowed for extremely aggressive marketing and customer acquisition, not to mention plenty of media coverage.
If anyone can battle Amazon, it's probably Jet. I can see why Walmart would want Jet (and Marc) in their camp.
What's remarkable is Jet was able to pull this off by being in meatspace, by acting as a VC-subsidized arbitrage broker for consumer products, hoping to get enough mindshare to be considered more of a threat than a nuisance so it can get bought out. It worked!
I'd be careful about drawing too many conclusions from this story. For one thing, you are not Marc Lore. With a successful Amazon sale under his belt, he certainly had a leg up on fundraising over almost anyone. His name alone helped to generate buzz.
But even being Marc Lore is enough. I worked for his cofounder from diapers.com and you've probably never even heard of that company—building hype requires a compelling narrative, not just a big name.
I tried this site once and it was a disastrous experience. Their customer service is horrendous, and the complete opposite of Amazon. After that purchase it became pretty clear to me that Amazon has nothing to worry about.
This reminds me, I have around $100 in credits from 1 failed order because they messed up multiple times. Would be awesome if they sold Amazon gift cards.
It doesn't explain the Amazon example you mentioned, but I was under the impression they have special affiliate arrangements with 3rd party retailers and that they were somehow being allowed to invest their affiliate commissions into the consumer (which is typically not allowed).
So if they're making 15% affiliate commissions from B&N they're able to drop the consumer price 10%. They've been focused on scale more than margin since day 1, so it would make sense that they would just operate on something razor thin and continue to drive home that they have unbeatable prices.
For the 3rd party retailers it's a way to compete with AMZN on price without actually having to drop their prices and I can see how that would be attractive to a retailer that's losing market share.
No basis for this, just one man's theory.
The more items you buy, the bigger cut of the commission Jet gives you off. The buyer almost never pays the same cost as what the seller got paid.
http://www.amazon.com/gp/help/customer/display.html/?nodeId=...
Jet had a rule though - No boxes with competitor logo. So you had to pay Amazon $1 per box to ship it without a logo.
An Amazon email just went out they are discontinuing the unmarked boxes for $1 program. Likely directly to fight Jet.
Let me know if you had any more questions about how any of this work.
Source - Worked at a startup that let people sell on places like Jet with Amazon inventory.
They're probably loss leading on almost every product sold right now.
They buy the company because they want something that they can't easily replicate (which, again, is NOT the technology, because they can hire engineers and replicate your work product).
Typically it's one of these things:
a. they want your installed userbase. It's really hard to get people to use something new. If you have a lot of users, they will buy you even if your stuff is total crap so that they can get access to your users.
b. they want your intellectual property, like a patent and/or trademark portfolio. Patents are a great way to make companies think about buying your company instead of just ripping it off and copying it internally.
c. they want to retain the personal goodwill of someone they care about. For example, investors will often buy each others' portfolio companies, even when they're worthless, as a way to save face and ingratiate themselves one to another.
It's important, as entrepreneurs, that we understand what really goes into a big exit, and how it's not tech (unless you have patents, in which case they're buying the patents), but installed base.