[jsnathan]

> For example, The Wall Street Journal recently bought 22 items from Jet. Twelve were shipped to the Journal by retailers such as Wal-Mart Stores Inc., J.C. Penney Co. and Nordstrom Inc., according to sales receipts.

> Jet’s prices for the same 12 items added up to $275.55, an average discount of about 11% from the prices Jet paid for those items on other retailers’ websites. Jet’s total cost, which also includes estimated shipping and taxes, was $518.46.

> As a result, Jet had an overall loss of $242.91 on the 12 items. Mr. Lore says the loss is unusually large, partly because the items’ cost was low relative to shipping charges.

Wow. They must be playing a long game.

Can anyone explain how they expect to get that money back?

[coldcode]

I remember my employer once tried to get a contract to build a new online store for a electronics retailer in the late 90's. They boasted they sold stuff at less than they paid for it and would someday make it up later. We lost the bid but they went out of business and never paid the winner, IBM.

If you charge less than you pay for you should go out of business, not raise more money. Giving money to a negative retailer is gambling not investment.

[gearhart]

Amazon has an estimated 7~8% operating profit margin on its retail business [1] which is circa $6bn (on ~80bn revenue) - you could imagine an argument that suggested that competing with them is only possible given a consumer mind-share that's only available if you're practically the single destination for consumers. There are niches in which other retailers can flourish but that, if you want to gain that sort of wallet share, you need consumers to identify you as a place that anything can be bought at a price that makes it not worth shopping around, and that you can't grow into that role, because at any smaller scale, Amazon can (and has shown that it will) outcompete anyone with those ambitions. It's risky, and nobody would even consider it if capital wasn't extremely available at the moment, but if you genuinely believe that they could become a viable Amazon competitor in the retail space, then burning a few hundred million acquiring customers and making a name for yourself in the process doesn't seem so irresponsible.

[1] http://seekingalpha.com/article/3017856-amazons-profitable-r...

[tyingp]

That concierge model is going to be a post-sale nightmare as well. Returns, chargebacks, etc, with 2 separate credit card transactions from two separate buyers? Ugh.

[gmarx]

volume