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Amazon competitor Jet may not deliver in time for Christmas

jet.com delays

This is a big moment for e-commerce startup Jet.

It’s only six months old and trying to compete with companies like Amazon and Costco. It sells everything from groceries to appliances to books to clothes at a discount of 5% to 10% — depending on how many items are in a customer’s cart.

Its first holiday shopping season is an important test.

Last week, the company told more than 400 customers it might not be able to deliver in time for Christmas.

It cited the “nationwide shipping delays that have affected many of our fulfillment partners.”

Retailers and analysts have reported that online shopping sales have surged this year.

Jet is erring on the side of caution and “communicating super early about any potential impacts caused by industry-wide delays,” said Jet’s chief customer officer, Liza Landsman, in a statement.

“We and our partners are still hitting the overwhelming majority of estimated delivery dates,” Landsman added.

The way Jet operates, it doesn’t have most of its inventory sitting around in its own warehouses. It has a network of stores and fills customers’ orders based on price and location.

“Because [Jet’s] model requires other people to ship on their behalf, it will create more difficulty for them to ensure that people get their items on time,” according to Satish Jindel, president of delivery tracking company ShipMatrix.

Amazon has a decade of experience in expedited shipping through its Prime service. But Jet doesn’t have yet have an option for speeding up delivery on orders. (It is still guaranteeing two-day shipping for some items depending on where customers are located.)

Jindel added that Jet’s strategy of transparency is smart: “They’re doing the smart thing by alerting customers,” he said. “Customers can pay extra money and go somewhere else.”

That’s not exactly ideal for an upstart with a lot to prove.

The company launched in July to much fanfare. Its founder, Marc Lore, sold his previous company, Diapers.com, to Amazon(AMZN, Tech30) in 2010. He raised $220 million for Jet before it even launched.

Come November, Jet was already seeking new money from investors: $500 million in funding, according to VC Experts. So far, it has secured $350 million of it.

PrivCo analyst Evan Danckwerth, who follows Jet, said the need for cash is not surprising. “It’s a company buying fixed goods — that’s expected,” he said.

Jet is on track to spend roughly $100 million on getting new users this year, according to PrivCo, which values Jet at $1.35 billion.

At launch, Jet charged customers $50 membership fees, but abandoned those charges after only three months.

Last week, it hit two million members. Jet said it’s projecting to bring in $44.9 million in gross merchandising revenue this year.

Jet said that customers affected by any shipping delays will receive credit for their troubles.

Related: Has Gilt Groupe hit the clearance rack?

CNNMoney (New York) First published December 22, 2015: 12:03 PM ET

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