Jet.com Drops Paid Membership Model
The young online retailer has ditched a membership program that differentiated the company from the competition. What's next for the Amazon challenger?
Jet.com launched with a whole lot of ambition and an intriguing membership model. In an effort to beat online retail titan Amazon.com, Jet debuted this year with even lower prices, but you had to be a member to access them. For a $50 fee, and the knowledge that some retailers weren’t keen on putting their goods on Jet’s digital shelves, consumers had access to an Amazon alternative that was building a lot of momentum.
As Associations Now‘s Ernie Smith wrote earlier this year:
“The company launched in July after months of preparation and is already said to be the fourth-largest online marketplace based on sheer sales numbers. That’s pretty impressive for a company that didn’t exist a year ago.”
Why Jet Jettisoned Membership
But earlier this week, Jet surprised many by announcing that it would trade its paid membership model for a more traditional, open-to-everyone strategy. The company’s leadership said the change won’t result in radical departure from Jet’s core tenets.
“We may be dropping the membership fee, but our promise to our customers will remain in place: the ability to save money by placing bigger, smarter orders; 24/7 support from the Jet Heads, our world-class customer service team; free shipping on orders over $35; free returns within 30 days; and the opportunity to earn savings at Jet by shopping on other great sites via the Jet Anywhere program,” Jet cofounder Marc Lore wrote in his announcement on Medium.
Lore and his company are betting that the success of its Smart Cart feature, which increases discounts, depending on how many items customers place in the cart, can compensate for the loss of membership revenue. Commissions Jet collected from retailers that were previously passed on to consumers in the form of discounts will now be taken as revenue.
As Liza Landsman, Jet’s chief consumer officer, told USA Today, that wasn’t the original plan, “but we saw people diving into Smart Cart use in a bigger and faster way than we anticipated, so we ran the numbers and realized we could continue to offer consumers savings at between 4 percent on the low end and 17 percent on the high end without a membership.”
Can Jet sustain itself without memberships? That remains to be seen, but Lore told The New York Times earlier this year that he predicted it would take five years for the company to reach a point where it wasn’t losing money on every shipment, and that was with memberships in place.