Jet, the pure-play e-commerce retailer that has promised the lowest prices on the web, is abandoning its membership-based model, founder and CEO Marc Lore said Wednesday.
In a blog post, Lore said the move is the result of better-than-expected commerce on the site, with most shoppers taking advantage of dynamic price options at checkout, which help lower the cost.
Before its launch in July, Jet CRO Scott Hilton had told Retail Dive that the fee would be a “no-brainer” for shoppers because savings from low prices would quickly more than pay for it.
This is quite a switch, considering how Jet staked so much on its membership fees supporting its lowest-prices-on-the-web business model.
While Lore in his post said the move was made to be able to reach more consumers, that could mean that the retailer has found that the $50 annual fee is acting as a deterrent.
“The response to Jet’s core value proposition has been stronger than we anticipated,” Lore wrote in his post. “With the average number of units per order twice what we expected, Smart Carts have been the rule, not the exception. Our customers are taking every advantage of our dynamic pricing engine to place orders that can be fulfilled at a lower cost — and to have those efficiencies shared with them as savings.”
“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,” he also said.
While Jet’s membership fee was half that of Amazon’s, closer to Costco’s basic membership fee of $55, Amazon’s $99 provides membership with not only free two-day shipping on many items, but also opportunities for same-day and even one-hour delivery in some areas. Prime members also have access to its entertainment streaming services, including music, shows, and movies, some of it original programming, photo storage, and an e-book lending library.
Amazon also limited dynamic pricing opportunities for Prime members, who can opt for slower shipping speeds in exchange for credits that go toward books or movies not found in the Prime programs.
While Jet was previously oriented to offering the lowest prices on the web, it has encountered some problems with that, too. Retailers have taken issue with being undercut by Jet, for example, something that led to some confusing pricing details on the site. Beyond that, some experts have told Retail Dive that Amazon isn’t competing on price as much as it once did any more. Rather, its superior search, added Prime benefits, and huge assortment are working to draw in shoppers and keep them there.
In fact, Amazon’s membership model has been so successful that the retailer has put a lot of effort in increasing benefits to Prime members, cutting down on the number of people who can share accounts, and providing more opportunities, like this summer’s Prime Day, for non-Prime members to try out the service.
That leaves Jet in a curious position, left to compete on price without the safety net of a membership base.