Jet, the e-commerce startup founded by former Quidsi CEO Marc Lore that plans to compete with Amazon using a dynamic pricing model, just raised $US140 million in new funding in a round led by Bain Capital.
The funding comes not long after the company raised $US80 million in September 2014.
Jet launched for private beta in January, and will open to the public later this year.
“We are building a more efficient online shopping ecosystem where everybody wins,” Lore wrote in a company blog post about the news. “It’s a big bet. One we hope you will take with us.”
Here’s how Jet will work, from a profile in Businessweek by Brad Stone:
Like Amazon, the site will sell just about everything — but it promises its prices will ultimately be 10 to 15% lower than they are anywhere else. In exchange, people will pay a $US50 annual membership fee. It’s like Costco, but online.
Jet plans to achieve these super-low prices in a couple of ways.
Buyers will be able to get lower prices by combining multiple orders into a single shipment. For example, if you want to buy a soccer ball and shin-guards, you’ll see a list of sellers that offer both, and will save about $US5 if you choose to go with one of those options, since the seller will be able to put the products in one box. You can also save money by ordering from a more local retailer or by accepting slower delivery speeds than Amazon’s famous 2-day free Prime service. If you choose to pay with a debit card instead of a credit card, you can save 1.5%.
So far, Jet has signed on Sony Store, TigerDirect.com, Sears, and hundreds of smaller retailers. Jet will offer a set of custom online pricing tools to retailers, to will help them lower prices for buyers who are cheaper to ship to.
“At Jet, we see the opportunity to leverage technology and bring price innovation to an unlimited product selection by working collaboratively with our retail partners,” Lore writes. “We don’t compete with our partners; rather, we empower them with pricing tools that enable them to set different rules based on their business goals and profit targets.”
Jet says it will pass on every possible saving to consumers, so it won’t make any money per transaction. Instead, it will make all its money from the $US50 annual membership fee.
The company is betting on the fact that people will be willing to dish out the fee once they see how much money they save on Jet.
Lore’s history with Amazon is interesting. In 2010, Amazon bought Quidsi — the e-commerce company responsible for Diapers.com, Soap.com, Wag.com, and other sites — for $US540 million.
Quidsi’s founders, Lore and Vinit Bharara, made a killing, but the sale wasn’t entirely sweet.
Before the acquisition, Amazon had more-or-less declared a pricing war against Diapers.com. Amazon started offering deep discounts on diapers. Not long after Amazon started its aggressive price chopping, Quidsi sold.
Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.
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