Merchant Innovation

Jet.com Drops Membership Fee

Hmmmm, less than three months out there for mass public consumption and it seems the widely ballyhooed Jet.com has decided to make a pretty big change. It is dropping the $50 membership fee. Curious since, until this moment, those memberships were intended to be the bulk of how the site makes money.

Jet.com is largely considered the biggest threat to Amazon’s dominance in the eCommerce marketplace, and the move to drop the fee that until now it had insisted was its sole source of profit is surprising — and that’s putting it mildly.

With the membership fees as the revenue generator, Jet’s plan was to compete with Amazon by continually underpricing the powerhouse on the path to profitability by 2020. Without that revenue stream, it is hard to know how Jet will compete with Amazon on price and, minus the ability to do that, how they will compete with Amazon at all.

Marc Lore, Jet’s founder and former successful Amazon competitor with Diapers.com, noted yesterday that the choice came down to merchant preference.

“We came up with a solution that’s better for investors, customers, retailers,” he said.

That solution will see a damper on discounts. Lore anticipates prices will now only be 4–5 percent lower than that of its rivals, as opposed to the widely reported 15 percent at launch.

Jet, it seems, has fallen into the discounting dilemma. Consumers love them and are drawn by them; suppliers don’t love them and make their products less available.

Reports by The Wall Street Journal in July stated that Jet was making good on its lower prices, but that it had far less merchandise than Amazon. Moreover, the concierge service tactic the site was using to keep its shelves full — order goods from other retailers when it did not stock them directly — caused a minor tempest when some retailers objected to being included without their knowledge in the program.

Lore said Jet had effectively ceased the concierge program, which has lowered inventory.

Lore has said he is in talks with some luxury manufacturers, and the site is hoping to expand its partnerships.

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