Amazon's Biggest Threat Is Here: Jet.com

Marc Lore founded Diapers.com in 2005, which was acquired by Amazon.com, Inc.AMZN in 2010. Lore is back in the game with a new website Jet.com that is promising shoppers lowest prices of goods on the web and eventually heat up the competition for Amazon.

Lore was on CNBC recently to discuss what the website is all about, how it plans to make a profit and how it keeps costs low.

A Shopping Club

"It's a shopping club that allows you to save on everything you already buy, from toothpastes to TVs, small sizes, large sizes," Lore said. "You can save 10 to 15 percent versus lowest prices online."

Profit Generation

Lore was asked how the company is going to make a profit if it will be selling goods 10-15 percent lower than their cheapest prices online. He replied, "Two ways that we do it. First we only profit from the $50 membership fees. So, all the profit [we make] selling products we put back into price."

He continued, "All the commission that we get from 3rd party merchants goes back into price, that's first. Second thing is we built this proprietary technology that actually pulls cost out of the system. We are pulling supply chain costs out of the system."

The Key: Dynamic Re-Pricing

On how the company pulls supply chain costs out of the system, Lore said, "We are dynamically re-pricing products as you shop to reflect the true marginal costs of getting that product to you. So, if you have two things in your basket and you shop for a third thing, the cost of getting that third product to you very dramatically based on what's in your basket."

"If we can get that thing to you in the same box in close proximity to you, the shipping costs are much lower."