Jet.com, the hyped-up Amazon.com competitor is close to raising somewhere between $500 million to $550 million in a funding round led by Fidelity Investments. Sources suggest that this round of investment would value the one-year old startup of at least $1.5 billion.
Founded in 2014 by a former executive of Amazon, Jet is working aggressively to undercut Amazon’s prices and attract customers quickly. This e-retailer website offers household items, electronics, pet supplies and more. As a means of achieving its target of overtaking Amazon, it raised $220 million even before launching its website and removed its subscription membership fee a few months after opening its doors in July.
Jet has adopted unique ways to have its loyal customers by allowing them to save on orders, including discounts for paying with a debit card or give up their right to return products they buy, said Scot Wingo, chairman of ChannelAdvisor. Customers can also save more by buying more items that reduces the number of shipments.
Amazon may have spent years and many millions developing a complete logistics infrastructure, but the approach of Jet is to offload some burden by teaming up with retailers and tapping into existing local inventory.
“They are growing very rapidly. Some consumers want more control. They are willing to give something to get something,” said Wingo, owner of the firm that helps stores sell online.
In this fund round which is set to raise $500 million and more, Fidelity is expected to invest $100 million. Jet Spokesperson Meghan Chisholm and Fidelity spokesman Charles Keller declined to comment.
According to Jet financial plan reviewed by WSJ, the Jet estimated capital was around $63 million at the end of last month while its expenses lined up for November and December was already $76 million. It is still vague if it is merely a hiccup on Jet’s radar or an indication of something bigger, but it is quite sure that the company has come across some issues since its launch in July. In the matter of three months, it removed the subscription fee which was the company’s guaranteed source of revenue. However, if the startup fails to secure $500 million in funding, it may have to revisit some other aggressive alternate plans for 2016.