Our prices are cheaper than Amazon: Jet.com CEO

Promising cheaper prices than Amazon.com, online shopping club Jet.com opened for business Tuesday, aiming to deliver increasingly bigger savings to members who buy multiple items in a single order.

Jet uses a proprietary technology engine to link items that when purchased together cost less to deliver.

After a free three-month trial, Jet memberships run $49.99 a year, half of the annual cost of Amazon Prime, which features free two-day shipping and other benefits, including streaming video and streaming music.

"There are 90 million households in America that don't have Prime," Jet co-founder and CEO Marc Lore told CNBC's "Squawk Box." "This is going to be the fastest and cheapest shipping option for those households."

"You can save 10 percent to 15 percent versus the lowest prices online," he said. "All the everyday essentials, you get in one to two days. And then everything, two to five days."

Amazon was not immediately available to respond to CNBC's request for comment on Lore's low price claims.

Piper Jaffray Internet analyst Gene Munster told "Squawk Box" last week that Lore is an online retailing "rock star," and Jet has a good chance of succeeding. If that happens, Amazon is more likely to buy it than to copy it, Munster said.

Lore is no stranger to e-commerce and Amazon. He was the co-founder of Quidsi, the company behind Diapers.com and Soap.com, which Amazon bought for $550 million in 2010. He said he has not recently spoken to Amazon founder and CEO Jeff Bezos.

New Jersey-based Jet—which raised $225 million in four rounds of funding, according to CrunchBase—hopes to reach $20 billion in revenue and 15 million users by 2020, a level Lore considers "economically viable."

"We only profit from the $50 membership fee," he told CNBC Tuesday. "So all the profit we make selling products we put back into price. All commission we get from third-party merchants goes back into price."

According to its website, Jet offers free shipping on orders over $35, and free returns within 30 days. Users can waive free returns on most items to get more savings. Jet.com only ships to the 48 contiguous U.S. states and the District of Columbia. For orders less than $35, there's a $5.99 shipping charge.

On the technology side, Jet's algorithms dynamically reprice items based on what a consumer already has in his or her cart.

"Certain items will be considered 'smart items' and they'll get better pricing," Lore said—because they will cost less to deliver when purchased together with other "smart items."

"As a consumer you are empowered to pull costs out of the system," he said. "We make all the supply chain costs transparent in the form of low prices."

Jet sells everything from beauty products to appliances to electronics to home decor. The fashion category is expected to launch in two weeks.

"There's a small percentage of products we are getting from third-party merchants that aren't direct merchants on the platform," Lore said.

To fulfill those orders, Jet is buying some of those products directly or sending users off-site, he said. "We know that we will have the products on the platform soon, and we don't want to disrupt the consumer value proposition today."

But in a world where Amazon and others are trying to deliver products in matter of hours, Lore said he's not necessarily going to try to compete on speed.

"When you are getting the product faster, an hour [or] two hours, that's expensive. You're adding costs to the system," he said. "We're trying to educate and train people to pull cost out of the system—so building bigger baskets, smarter baskets to save money."

Sign Up for Our Newsletter Morning Squawk

CNBC's before the bell news roundup
Get this delivered to your inbox, and more info about about our products and services.
By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.