Marc Lore, a former banker and serial entrepreneur, is best known for creating Amazon competitor Diapers.com. After years of price wars with Amazon, Lore and his co-founder, Vinit Bharara, agreed to sell to that fierce competitor for a whopping $550 million in 2010.
Today, Lore is back on his own, building a new business model, and hoping to this time successfully lay siege to all of Jeff Bezos's online retail empire.
The plan isn't simple, but the basics are straightforward. Jet, essentially, will be a wholesale club, along the lines of Costco. It plans to save shoppers money by nudging them to lump together purchases that will ship together, opt for slower shipping speeds, and select other options that can bring supply-chain costs down. Jet doesn't plan to make a profit on any individual transaction. (It promises prices will be 10 to 15 percent lower than elsewhere online.) Instead, the company's sole revenue will come from charging consumers for annual membership, which is expected to cost around $50.
With the help of $80 million in funding from venture capital firms such as NEA, Accel Partners, and Bain, Lore is now preparing for Jet's launch in March. As he hires a staff of more than 100 and builds out the company's headquarters outside of New York City, Lore took a moment to tell Inc. about his new business strategy, what he's doing differently from Amazon, his radical approach to transparency, and how he'll build an admirable company culture from scratch.
When did you know it was time to leave Amazon and start Jet?
When I left Amazon, which was about a year and a half ago, I moved out to California with my family, and we were out there in Napa, and I just spent a lot of time thinking--reflecting on the experience, reflecting on commerce. When I was able to step away and look at it from afar, I came up with this idea.
Most companies today are so focused on shipping speed. I think that's a relatively small, niche market, and I think the next [e-commerce] wave [which is predicted to grow to a $300 billion market] is going to care more about price than service. And Jet is positioned to be ready for that next wave.
If we compare Amazon to Walmart, and you're building the Costco of online shopping, how can you actually make prices lower than those found on Amazon?
Costco created a $60 million market-cap business, 21 years after the founding of Walmart. Coincidentally, here we are 21 years post-Amazon's founding, and we believe we've found a way to pull costs out of the system to bring dramatically lower prices to consumers.
But the way we pull costs out of the system is very different than Costco. We make all of the costs of shipping and supply-chain and payment processing very transparent to consumers. It lets you shop smarter, create a more economically efficient basket, and pull costs out of the system. You can also pull your credit-payment card out of the system by changing your credit card to save money. You can buy something non-returnable to save money. You can slow ship speeds down to pull costs out of the system. But primarily what you pull out of the supply chain is fulfillment costs.
Sounds complicated. How will this slate of options be presented to shoppers?
We try to make it incredibly simple for consumers. Here's how it works: Every product has a starting price. That will be, on average, 5 to 6 percent below the lowest price online. That member-price never changes. Then you have something called the smart-cart bonus. It starts at zero, but as you start building your basket, that smart-cart bonus can increase. It makes the price [for an individual item] get lower.
If you as the consumer see some big bonuses on items, you'll know it's more efficient to ship that item with your other items in "My Basket." That's it. You never have to pick the retailer, you just shop on price. We have one common shipping policy across all merchants. One return policy. And one customer service center number. It's very clean.
To what extent are you targeting women shoppers with the site?
[Consider] the personality and brand and colors: The fact that we chose purple as a primary color; the Jet box has purple in it. Also, you'll see the "J" character [which is the company's logo] gets dressed up in different outfits and colors, so the way the brand looks and feels definitely will appeal to the female audience. If the studies are right, women control 80 percent of household spending. But I want everyone to feel brilliant shopping on Jet.
Amazon has gotten a lot of criticism for being a tough place to work. As you work on the new office in Hoboken, New Jersey, and fulfillment centers around the country, how are you building the company from the inside?
It's really important for a company to have a clear mission and set of values. One of the problems I see that I'm trying to correct in this business is that companies have these laundry lists of values, like 10 or more of them. They all look kind of similar, and they're hard to actually live--and no one actually remembers what they are! It just becomes something nice to put on the wall.
What I chose this time was to only have three values. What are the three things we are going to be known for, that we are going to do, and live, more than any other company in the world? The three values are "work transparently," "play fairly," and "trust explicitly."
In terms of transparency, we are completely transparent with our compensation system, so everyone knows what everyone on their level makes. After the board meeting, we will give the entire board presentation to the whole company. We are transparent about financing, valuation, and number of shares outstanding. And we believe that's super empowering. We don't ask people to sign non-compete agreements, we don't ask people to sign non-solicit agreements. This also feeds into "trust explicitly." We believe that people are good, and that believing so brings out the good in people.
Was this in a reaction to anything you experienced during your two years at Amazon?
I was there two years and five months. I think I learned from a culmination of things. I think working in three different banks early in my career taught me how a culture could be that I didn't want or like. And, yeah, there were some things at Amazon that I didn't like, and didn't want to replicate in my future companies. I think transparency is lacking at a lot of companies.