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Saturday May 21st

Online vendor Jet seen as Amazon's first viable rival

E-commerce startup Jet's logo and July launch-day graphic are reminiscent of The Jetsons — but whether the company is a whimsical fantasy or a contender in the online marketplace remains up in the air.

Last week Jet abandoned its $50 membership fee to compete with discount giants, said Ted Zoller, associate professor and director of the Center for Entrepreneurial Studies at UNC's business school.

“They’re trying to steal from Amazon customers, but I think they’re likely going to steal from Costco.com, Sam’s Club, Walmart and even Kmart,” he said.

Backed by millions of dollars from the likes of Google and Goldman Saachs, Jet blends business models from Amazon and Costco.com with novel bargain-hunting technologies. The company uses a bundling mechanism for products that eliminates attendant shipping costs.

Zoller said these features could appeal to retailers such as Google and Amazon, which might seek to acquire the startup.

“The main value is the algorithm technology they’ve developed to make distribution more efficient," he said. "Whereas now (merchandise) is being shipped in big containers on ships across the world, you’re going to see the source of products actually becoming more regional.”

Scott Rockart, assistant professor of strategy and entrepreneurship at Kenan-Flagler, said Jet might succeed as a company if it improves on Amazon's business model, which has maintained low profit margins since its inception.

“…I do think (Jet) may be able to carve out a valid business by targeting specific products that customers buy on a regular basis that may have higher margins.”

But Ashish Arora, professor of business administration at at Duke University's Fuqua School of Business, is skeptical Jet could contend with Amazon.

"My instinct is that Amazon is very efficient at what it does, and they are investing very heavily in growth and expansion," he said. 

The goal isn’t always to make money but to expand market shares with an eye for future revenue, Zoller said. 

“This is about acquiring share, it’s about acquiring your mindset, it’s about acquiring your behavior," he said. "If you’re used to going to Jet to buy, when you’re 30, when you’re 40, when you’re 50, you’re still going to buy from Jet."

Valeria Balshen, a 27-year-old copywriter and marketer for DearLady, an adult novelties retailer, said in a Facebook comment that Amazon conducts most of her employer’s sales.

“I wonder if Jet is doing that yet because that's one of the reasons Amazon started exploding in the last four years," she said. "We had to join up to stay afloat with the competition.”

But online shopping isn't universally favored, even among millennials. 

“I like to hold something in my hand before I buy it," said Allison Dehnel, a 27-year-old entomologist in Lexington, Kentucky, in a Facebook comment. "For this and other reasons related to first-world guilt, an online version of a Costco is highly unappealing to me.”

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