Amazon’s Prices Are Significantly Higher Than Rising Startup Jet.com

NEW YORK (TheStreet) -- Amazon (AMZN) has long billed itself as the place for consumers to find quality products at low prices, but Jet.com is challenging that claim to fame with even lower prices.

The Hoboken, N.J.-based startup is essentially branding itself as Costco (COST)-meets-Amazon, where consumers can pay $50 a year to have access to great prices on products ranging from food to shoes to sporting equipment. The company was started by Marc Lore, whose previous startup Diapers.com was acquired by Amazon in 2010. Having already proven himself in the industry, Lore was able to amass $220 million in funding before he even launched a site.

To reach prices that are lower than Amazon, Jet, which was recently valued at $600 million, has built a dynamic pricing model that lets consumers save when they take actions such as forgoing returns or if they order multiple products from the same retailer (saving on shipping costs). They can also save by paying with a debit card instead of a credit card or by handing over their email address.

"We're trying to create the most transparent e-commerce site out there for both our merchants and consumers," Jet founder Marc Lore told TheStreet in May.

The company estimates that consumers will save about $150 a year by using Jet, and based on some early reviews, it seems as though Jet could easily follow through on this promise.

Jet is still in private beta, but those who have been able to participate in its limited test phase have noted significant savings on the marketplace.

Wells Fargo analyst Matt Nemer tested out Jet.com to compare it to Amazon prices, and of the 25 items he ordered, he found that Jet prices were 36% lower than Amazon's on average, with each of the 25 items beating Amazon alternatives on price.

Amazon declined to comment for this story.

"Of course, this is a small sample set, there are still kinks to work out ahead of the launch, and it is difficult to know how sustainable this price delta will be," Nemer wrote in a research note Wednesday morning. "That said, the initial pricing spread coupled with Jet's plans to spend $100 million in marketing in year 1 make the platform a serious contender for wallet share among early adopters."

Nemer added that Jet offered "a fun and addicting gamification aspect" as well, which could be attractive for consumers. It becomes a game of how much can you save with Jet's "smart cart."

Re/Code's Jason Del Ray also tested out Jet.com and found that prices on Jet.com were about 5% to 6% cheaper than anywhere else online. A Sonos Connect device, for instance, will sell for $301 on Jet, compared to $349 on other sites.

Analysis from data pricing startup Boomerang Commerce confirmed Del Ray's and Nemer's personal experiences, finding that Jet's prices were lower than Amazon 94% percent of the time. The study found that Jet's prices were 27% cheaper than Amazon's prices overall.

TheStreet has not done its own price comparison testing as of yet.

This isn't to say that Jet has perfected the e-commerce experience entirely--it is still in beta after-all, and there are some kinks with the site. Nemer named search and product detail pages as areas that still need improvement on the site.

Nonetheless, early reviews seem optimistic and show that Amazon could have a real contender in the near future.

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