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Amazon.com, Inc. (AMZN) Can’t Afford to Ignore Jet.com

Amazon.com, Inc. was in the center of a battle for dominance in the online retail market when news broke in July that Jet.com was planning to steal market share from Amazon. Amazon had been the unchallenged leader in the Internet retail space as it boasts the biggest ecommerce site where you can buy just about anything sold on the planet. However, its lead is being challenged by high-flying Jet.com.

Amazon.com (AMZN) Shipping Box

The arrival of Jet.com in the online retail space in July jarred Amazon to the reality that its reign in the market can’t continue unchallenged. Jet came out as the Costco of the Internet where you can get huge discounts when you buy many items. In July, Jet.com said it would charge an annual fee of $50 and you get to buy goods on the site without any markup price added to it. Jet.com wanted to challenge Amazon with cheaper prices and it claims that its goods will be 10% to 15% cheaper than what bigger rivals offer.

Jet.com might be a real threat to Amazon

When Jet.com was unveiled in July, the retail space largely ignored the firm because it appeared too small to take on Amazon and win. The startup came to the market with $220M in funding to challenge Amazon that was valued at almost $300B. Critics of Jet.com’s founder, Marc Lore hinted that he was looking for a way to be acquired by Amazon – after all, he sold his previous site Quidsi to Amazon for $550M.

However, latest news shows that Jet.com is serious about challenging Amazon.com Inc. . To start with, Jet.com has secured $350M in its latest round of funding and the startup is now a unicorn with a $1B valuation. The firm also has verbal commitments for another $150M. The caliber of people that are backing the startup shows that Jet.com might be a major threat to Amazon. Its Series B round was led by mutual funds giant Fidelity, and includes some Series A investors such as Bain Capital, Alibaba and Google Ventures.

Amazon has a target on its back

Amazon.com Inc. has maintained its lead in the online retail space with low prices and a fast shipping process. However, last month, Jet.com scrapped its $50 annual fee in sharp contrast to the $99 that Amazon charges its Prime members. Jet still boasts bigger discounts without charging an annual fee.  Marco Della of USA Today notes “USA TODAY created identical baskets on Amazon and Jet.com, the Jet.com total was roughly 30% less than the Amazon tally.”

Amazon still has the lead in the online retail space but it can’t afford to ignore Jet.com. The startup reports that sales in September were $33.2 million, a 65% jump over the previous month and it expects more than $500M in annual sales. Lore says, “We realize the market for private company investments is competitive, but our hard work continues to pay off.”

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Victor Alagbe is a seasoned business and finance writer with a specialty in writing about how to invest for the long-term in healthcare, pharmacology, energy and tech stocks. His long-term focus is on stocks that provide a nice mix of growth and income. For the short term, he passionately writes about trading stock options for the excitement and leverage that stock options offer.

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