Alibaba Group Holding Ltd (NYSE:BABA) may have made a stealthy move in Jet.com, investing in the e-commerce startup that has promised to give Amazon.com, Inc. (NASDAQ:AMZN) a run for its money in the lowest price category. Sometime early this year Jet disclosed that a strategic investor participated in its $140 million round of funding but failed to name the investor. However, people with insider knowledge can disclose that Alibaba is actually the strategic investor talked about although no one is willing to disclose exactly how much Alibaba invested in Jet.
If indeed Alibaba invested in Jet, it would be the first time the Chinese giant e-commerce provider has invested in a U.S. direct competitor of Amazon.com, Inc. (NASDAQ:AMZN).
Jet.com was founded by Marc Lore, who was also built several online shopping sites that were sold to Amazon for $550 million as Quidsi. Lore joined Amazon team after the deal but bolted out a few years later to concentrate on Jet.com, whose focus is to undercut Amazon in the lowest-price segment.
Jet opening lowest-price war
If all goes according to plan, Jet is expected to launch its lowest-price consumer marketplace in a week’s time. Jet is looking at a business approach that will enable it to turn over more benefits to shoppers so that they can rely on the platform for the cheapest prices on the Web. The business model that Jet is hoping to adopt is one where it charges users $50 a year for access to millions of items available at unbeatable prices. Unlike Amazon, Jet promised never to compete with merchants.
By investing in Jet, Alibaba Group Holding Ltd (NYSE:BABA) is taking the war right to Amazon’s doorstep in the U.S. market.
Cloud computing competition
Alibaba Group Holding Ltd (NYSE:BABA) competes with Amazon in several areas. Both companies seek the attention of third-party retailers as well as direct consumers in the e-commerce market. Beyond e-commerce, the companies also compete in the cloud computing category. Amazon is trying to expand its cloud computing division AWS internationally, but Alibaba is trying to hold its progress in China through its own version of cloud service.