Jet.com ditches subscription fee

Discussion
Oct 08, 2015

Jet.com was launched less than three months ago with a simple proposition: a tremendous selection of products sold at lower prices than could be found at other online sites. The operating model for the company — founded by Marc Lore, who previously co-founded Quidsi (Diapers.com, etc.) — would be to get by on lower margins than rivals by, similarly to Costco, charging customers an annual $50 membership fee. Now, it appears, we’ll never know if the paid membership concept would have worked since Jet announced yesterday that it will make the site free for everyone.

In a company blog post written by Mr. Lore, he noted that the average number of units per shopping cart has been double what Jet had projected when it launched. By eliminating a subscription fee, "we believe we can more fully realize our vision of a reshaped e-commerce landscape and deliver unprecedented value to consumers and retailers," he wrote.

[Image: Jet.com]

Jet, which has received hundreds of millions in funding, appears to be unconcerned with profitability at this point in its development. The company has launched a message ad campaign in its attempt to recruit more customers.

"They’re just trying to get a huge number of customers and will figure out revenue opportunities later," Forrester analyst Sucharita Mulpuru told Reuters.

Liza Landsman, chief customer officer at Jet, told USA Today that the site did $10 million in sales during August and $20 million in September. According to ChannelAdvisor, Jet is currently the fourth largest online marketplace and could move up to number three by the end of the year.

How will Jet.com’s decision to eliminate its annual membership fee affect its growth trajectory? How do you expect Jet’s aggressive push for growth to affect online retailing this holiday season and beyond?

Braintrust
"We lose so many challenges by stopping just short of the victory ribbon either because we get smug and cocky and think we are sure winners, or because we lose our courage and abandon the plan. They are now playing the same game everyone else is. Disappointing really."
"It seems like I have the dissenting voice here and possibly am the only one who tried the site. First, my experience with Jet.com has been horrible. The shopping cart was glitchy and on most items I chose quantities were limited."
"I initially thought the subscription cost was keeping shoppers from using it. Why would they want to lock themselves into a brand new site with a $50 annual fee when they could pay Amazon double that amount to get access to even more products with faster shipping and a ton of other perks?"

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14 Comments on "Jet.com ditches subscription fee"

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Keith Anderson
BrainTrust

Jet is realizing that speed to scale is its main imperative at this point. When shopper data suggested it could maintain conversion rates while relaxing its discounts, perhaps it saw a different path to profitability.

As I published here, it’s a positive sign that Jet is iterating quickly based on actual data.

And it’s also good to see Jet making changes aimed at improving the outcome for merchant and brand partners.

Max Goldberg
BrainTrust

Eliminating the membership fee should help growth and cause early adopters to stick around. Jet is following the Amazon model of aggressively pushing for new customers and not worrying about profitability. And why shouldn’t they? Amazon has shown that it can be successful, so successful that they bought Quidsi, Marc Lore’s last venture.

Dick Seesel
BrainTrust

Jet.com appears to be going for volume over margin at this early stage of its development, and eliminating the fee only reinforces that strategy. We’ll see how long the push for market share over profitability is sustainable — it worked for Amazon, but not everybody can replicate a business model that started with a single-minded focus on books. We’ll also see how patient the investors in Jet.com turn out to be, since e-commerce is in a far different place than during the original “bubble” of 1999.

Tom Redd
Guest

My read: Jet is after the new jet set — Generation Z and the earlier last Millennials. This is the trendy segment. This segment signs up fast, uses something, stays or splits. Seems that they are doing the “who wants to shop at Costco like Mom does” approach. Or the “if Uber can take over the cab world we can take over retail” approach.

Jet will do well with a small section of shoppers and then merge with some retailer.

Ian Percy
BrainTrust

I hope Jet.com is successful regardless. But I thought they had figured the membership model out in minute detail. I too would have liked to have seen the model given a real chance. We lose so many challenges by stopping just short of the victory ribbon either because we get smug and cocky and think we are sure winners, or because we lose our courage and abandon the plan.

They are now playing the same game everyone else is. Disappointing really.

Steve Montgomery
BrainTrust

Who knew that selling for little or no profit and being successful could work, or at least work for a while? That if you find success in that investors will throw money at you? That should you go public, shareholders would run up the price of your stock on the hope that one day you would make money? This is such a far cry from what happens in most of the retail (real) world.

Mel Kleiman
BrainTrust

This is sure to accelerate growth and also loss of profits at least in the short run. If they can get enough traction they can then sell to someone and make all the investors happy before the model blows up.

Ken Lonyai
BrainTrust

It seems like I have the dissenting voice here and possibly am the only one who tried the site.

First, my experience with Jet.com has been horrible. The shopping cart was glitchy and on most items I chose quantities were limited, which goes against their whole quantity discount premise — and promise. When I called, multiple times, their “Jet Heads” each came up with a different story (excuse) — from being a startup, to only being allowed to buy 10 items per order, and more.

Next, they claimed that they would offer the lowest prices possible and make money on the membership fee. If that’s gone, what’s the new business model?

Lastly, they fired a shot across the bow of Amazon and claimed they can beat their prices. Particularly in the area of food, healthcare sundries and CPG, Amazon is beatable by a plethora of websites, so what’s the big deal?

It seems very plausible that things are not as they seem at Jet, which time will tell. I still can’t imagine Amazon has any concerns about them.

Mel Kleiman
BrainTrust

P.S.: To the earlier comment — The Jet.com site is down at the moment.

Danny Silverman
Guest

I have to agree with Ian and the other naysayers. Rather than taking their hundreds of millions and investing in true innovation in the online shopping experience, which is desperately needed, they’ve hinged everything on the oldest play in the book (price). As they aggressively pursue their land grab, they will leave more deflationary pricing and more shopper confusion in their wake. Definitely a disappointment.

Jonathan Marek
Guest

“We’ll never know if the paid membership concept would have worked”? I think this decision must have been made because it wasn’t working!

These guys have a huge bar to get over, up against Amazon and Costco and others with the scale to do things they cannot. Hope they’ve got a lot of cash and watch the burn rate.

Craig Sundstrom
Guest

“Appears to be unconcerned with profitability at this point in its development….”
Or ever, if it can’t differentiate itself from dozens—hundreds; thousands?—of other sites that claim to sell stuff for less (and no, I don’t think the mere mention of Marc Lore does much toward that goal).

Ed Rosenbaum
BrainTrust

Jet has started out to be the hot item in their world. I am not sure eliminating the annual membership fee is an act of proudly saying “see we are better and have grown faster; so we don’t need your money.” It could be a defensive tactic designed to lure more buyers to the site because business has to get better in order to show profitability to the investors. Either way, the tactic is a good one. But will it make them successful?

Arie Shpanya
Guest

I initially thought the subscription cost was keeping shoppers from using it. Why would they want to lock themselves into a brand new site with a $50 annual fee when they could pay Amazon double that amount to get access to even more products with faster shipping and a ton of other perks?

However, the fact that Jet shot up to #4 on ChannelAdvisor shows that it’s going to be a real contender in the online retail space. I think Jet’s presence will intensify price wars and the need for distinct value propositions.

wpDiscuz
Braintrust
"We lose so many challenges by stopping just short of the victory ribbon either because we get smug and cocky and think we are sure winners, or because we lose our courage and abandon the plan. They are now playing the same game everyone else is. Disappointing really."
"It seems like I have the dissenting voice here and possibly am the only one who tried the site. First, my experience with Jet.com has been horrible. The shopping cart was glitchy and on most items I chose quantities were limited."
"I initially thought the subscription cost was keeping shoppers from using it. Why would they want to lock themselves into a brand new site with a $50 annual fee when they could pay Amazon double that amount to get access to even more products with faster shipping and a ton of other perks?"

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