NJ Business Profiles: Jet.com — The Heavyweight Ecommerce ChallengerRoie Raitses
In the war between brick-and-mortar stores and online retail, eCommerce continues to gain ground and legitimacy as more customers forgo their trips to the store to purchase their goods online.
Behemoths of apparel like Sears, Macy’s and J.C. Penney have all announced significant store closures. The competition that existed between Radioshack, independent electronics retailers and Best Buy has ended, leaving behind only the one that most successfully translated their business to an online storefront.
Online physical sales have reached a market cap of $300 billion as of 2017, and according to Marc Lore, they will more than triple in the coming three years.
The Start of Something Special
Before he was the CEO of eCommerce for the largest physical retailer in the U.S., Marc was a guy from a working-class neighborhood in New Jersey. Even as a child, Marc was an entrepreneur, trading stocks and playing the baseball card market by 14 years of age. Graduating high school with a 3.9 GPA, Marc matriculated to Bucknell University where he studied Business Management and Economics.
After graduation, Marc worked in risk management for a few notable financial companies before he founded his first company, The Pit. Surviving the initial decline of the dot-com bubble, The Pit allowed sports memorabilia to be valued and traded like stocks through their own proprietary platform. In 2001, Marc Lore sold his very first company for $5.7 million to Topps trading card company. Though the company was now owned by Topps, Marc went along with the deal, moving him and his family to Seattle to run a division of the trading card conglomerate.
Marc spent several years influencing the next decade of Topps market strategy and quietly planning to launch his next company while enjoying spending more time with his family. Marc wanted to compete with up-and-coming Amazon.com in specific areas, tailoring a few specific categories of consumable goods to their own individual online storefronts. His company 1800Diapers, became Quidsi, the parent company of Diapers.com, Soap.com and others.
After a chance meeting with Jeff Bezos, Marc continued to build Quidsi into a niche-dominating eCommerce site. Amazon saw that it now had strong competition in consumables and entered into a pricing war with Marc’s company. After months of Amazon selling diapers and other products at a loss, Quidsi conceded, agreeing to be acquired by the eCommerce giant for $545 million in 2010. Again, Marc Lore was part of the deal and started working inside Amazon at the executive level.
Building The Challenger
As part of the acquisition, Lore was locked into a noncompete for five years and was unable to create another company. While working at Amazon, Marc wasn’t satisfied with what the company offered in terms of pricing to customers and how employees were treated. Envisioning an alternative to Amazon, Marc began to lay the groundwork for Jet.com.
Recognizing that Amazon was tailored to fit the needs of the upper-middle-class and upper-class, Marc sought to create an online platform that offered a better pricing structure. Initially, Jet.com was designed to be the online version of Sam’s Club or BJ’s; a seller that offered lower prices on products but also required an annual paid membership for access. The pricing model was conceptualized to decrease costs based on ease of shipping and grouping shipments, resulting in lower prices than the competition.
Despite Marc having made millions from selling his companies and his time at Amazon, he was still in need of quick business funding. Due to his previous successes, investors were lining up to put their money into Marc’s new company, one investor going so far as to write him a check for $1 million at a friendly lunch.
Jet.com was going to get away from the west coast and open their office in Marc’s home state. Jet.com built offices in Hoboken, NJ and officially launched in March of 2015.
The Wrong Foot
Marc Lore expected Jet.com to be a cash burning affair for several years. The majority of the seed money that the company had been infused with during its first rounds of funding were going towards a massive marketing campaign while the company executed a plan aimed at getting influencers to see the appeal of their online platform.
The $50 annual membership fee dissuaded many from joining Jet.com as they wouldn’t earn the cost back immediately.
By the end of 2015, the membership fee had been dropped. The company competed on pricing with Amazon, offering slightly lower prices on thousands of products if customers were willing to wait an extra day or two for their products and grouped shipments. The success of Jet.com was anything but immediate. Despite the lower prices, it was difficult to break consumers out of already established behaviors.
Marc’s new company was beginning to make an impact on the market, but he still needed fast cash for his business to continue operating. Jet.com engaged in subsequent rounds of funding throughout 2016 to accumulate hundreds of millions of dollars to take on Amazon. By June of that year, the company was valued at $1 billion and sold to thousands of customers every day, but it wasn’t enough.
Change From The Inside
Marc Lore is an anomaly in the business world. He’s been the CEO of multiple companies and founded not one, but two major competitors to the undisputed champion of online shopping. Lore has been a west coast CEO and an east coast CEO. He creates an employee culture that prizes trust, fairness and transparency, and in the early days of Jet.com, he refused even to have a desk, instead moving around the office to assist wherever he could be useful.
Though growth was slow and cash was being burned at a rate that would make most CEOs run for the door, Jet.com was headed in the right direction. Then the rumors started swirling.
In the summer of 2016, it was rumored that Walmart was looking to acquire Jet.com to bolster its online division. On August 8th, Walmart announced that it had acquired the company for an eye-popping $3 billion.
Analysts called the move the biggest acqui-hire in history.
Walmart left no doubt about why they had made the deal when they immediately installed Marc Lore as the president and CEO of Walmart eCommerce in September. Founding two of Amazon’s most formidable competitors and working inside of the leading online seller, Marc Lore presented Walmart with their best chance at making a run at the future of online retail.
Jet.com is now a part of Walmart’s brand, running as a major online contender for virtually all consumables.
The Future Of Online Commerce
In the months since Marc Lore has taken over Walmart’s online operations, the company has acquired a number of smaller companies, created a program for startups to work with the retail giant and has shaken up the interior structure of the company.
Marc Lore was named one of the smartest people in technology by Fortune Magazine and won Entrepreneur of the Year from E&Y.
The war between Walmart and Amazon continues to heat up, with one of the companies storing one of their greatest weapons in Fast Capital 360’s backyard, New Jersey.
Whether your business is ready to take on the Amazon’s of the world or is looking to make a splash in your local competition, Fast Capital 360 can help. We make online business financing easy.