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Marketplace

Brash new competitor challenges Amazon

Andy Uhler Jul 23, 2015
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Amazon is set to release earnings on Thursday. And now its got more competition in the retail game.

This week, Jet.com launched, boasting plans to lure you away from Amazon with the lowest prices on the internet. Founder Marc Lore seems to relish competing with Amazon. In 2010 Amazon bought his startup Quidsi for half a billion dollars.

Charla Mathwick, a marketing professor at Portland State, says it may seem crazy for Jet.com to boast that it’ll take over the online retail market from Amazon. “But it all depends on what their goal is,” she says. “Acquiring customers is going to be a big challenge for a company like this if the goal is to try to really take on Amazon. But I don’t know if that’s what they’re doing. If the goal is to demonstrate a superior pricing algorithm, you may not need huge numbers of customers, you just need enough to demonstrate that the algorithm works.”

Mathwick says Jet.com is looking for the impulse buying that has fallen off as customers stop going to malls and grocery stores.

Jet’s business model is something akin to a combination of Amazon Prime and Costco. A $50 membership fee will get you free shipping and those low prices. Mike Maughan is with Qualtrics, an online data company. He says in the end it will boil down to customer experience. Jet has to make you feel like you’re getting more than just a good deal.

“I think it’s incumbent upon Jet.com to demonstrate and provide an incredible customer experience,” Maughan says. “Price isn’t everything. If it’s all that someone’s got, it won’t last, and I don’t think it’s sustainable.”

Maughan says the question is “Is there an appetite for a competitor to Amazon? Amazon is very popular, and a lot of people use it, but it is not used ubiquitously. Still, only about 10 percent of retail shopping happens online.”

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