Less than three months after it launched, e-commerce startup Jet.com is ditching its $50 annual membership fee.
Jet founder Marc Lore announced in a blog post that the e-commerce site is now “free for all shoppers.”
Eliminating its $50 membership fee was an unexpected shift for Jet, which aimed to combine Amazon-like selection with memberships like those offered by warehouse stores. The membership fees were supposed to be the startup’s sole source of profit.
Lore, who created Diapers.com and later sold it to Amazon, said stronger-than-expected customer orders on Jet.com pushed the company to overhaul its business model. He said customers can still expect to “save money by placing bigger, smarter orders,” with free shipping on all orders of more than $35 and free returns.
“By enabling even more people to embrace this new way of shopping, we believe we can more fully realize our vision of a reshaped e-commerce landscape and deliver unprecedented value to consumers and retailers,” Lore wrote.
Although Jet.com may now be more attractive to some shoppers because it eliminated its membership fee, the most obvious question now is how does the e-tailer plan to make money?
“Without the membership fees, it will be more challenging for Jet to beat Amazon’s prices — its key pitch to customers — while also funding a massive advertising campaign,” The Wall Street Journal said.
Jet initially promised to offer deeply discounted products on its site, some as much as 15 percent lower than Amazon. According to the WSJ, Lore said shifting to a new business model, where Jet will keep sales commissions but eliminate membership fees, means price discounts on products will be more modest. But Lore said Jet’s prices will still beat competitors by at least 4 to 5 percent.
In an analysis prepared for the WSJ, pricing-data provider Boomerang Commerce found that although Jet didn’t list nearly as many items as Amazon, it sold overlapping items at lower prices than Amazon 73 percent of the time.
It’s not known how many, if any, consumers actually paid the now-defunct Jet membership fee. Many shoppers took advantage of Jet’s free trial period and some even obtained free one-year subscriptions.
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