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Will Amazon.com, Inc. (AMZN)’s Knees Buckle From Jet’s Pricing Pressure?

E-commerce is a vicious industry and Amazon.com, Inc. (NASDAQ:AMZN) would vouch for it, as even its razor thin margins might still not be good enough for customers looking for a cheap online shopping experience.  On CNBC, Marc Lore, founder and CEO of Jet, an e-commerce site scheduled to be launched in April this year, explained how his platform’s algorithms are going to steal the show from Amazon.

Amazon.com (NASDAQ:AMZN), The Washington Post (NYSE:WPO), Berkshire Hathaway Inc. (NYSE:BRK.A), Apple Inc. (NASDAQ:AAPL)

“[…] Because the way that we built the technology that looks more like a real time trading system than it does an e-commerce site, we are able to dynamically re-price products as you shop to steer you towards more economically efficient orders, which are not only cheaper, but also come faster, so that’s the real secret sauce of the Jet business model […],” explained Lore.

Simply put, the algorithmic edge that Jet has over Amazon.com, Inc. (NASDAQ:AMZN) involves re-pricing products for its customers depending on the proximity of their last order in terms of shipment. For example, if you order a product from a certain location and place it in your basket, then other items from the same vendor will appear cheaper, as there won’t be any additional delivery charges for them.

The $50 membership fee is how Jet makes most of its profits, which is also cheaper than Amazon.com, Inc. (NASDAQ:AMZN)’s Prime service. In the past, Jet has been able to get a $140 million funding with the help of Bain Capital. The soon to be launched company is currently worth about $600 million.

“[…] We only make profits from membership, so all the commission, profit, anything we make on selling products goes back to the customer in form of low prices. That is how we are able to get such big discounts […],” said Lore.

Amazon.com, Inc. (NASDAQ:AMZN)’s CEO, Jeff Bezos is not a man who lets his guard down, and has a fierce reputation of driving businesses that hinder his overarching plans for Amazon, to the ground. Jet might need more than a few efficient algos to survive in the cut throat e-commerce business for the long run.

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