Jet.com heats up competition with Amazon, membership fees zero

Jet.com, an online retailer founded by Marc Lore, announced on Wednesday that it was dropping its annual membership fees of $50 for its customers.

Launched only in late July, the start-up is considered by many as a strong new competitor to big names in the business like Amazon and Walmart.

Lore made the announcement via a post on Medium, saying, “The response to Jet’s core value proposition has been stronger than we anticipated. With the average number of units per order twice what we expected, Smart Carts have been the rule, not the exception.”

Initially, just like Costco Wholesale Corporation, Jet planned to make profit from the membership fees, with every other saving passed on to the buyer. The offered discount of nearly 7 percent on most individual products was essentially the reward for the membership fee and a way to attract new shoppers.

He explained that the customers have been benefitting from the dynamic pricing engine to place orders that can be fulfilled at a lower cost. In turn, Jet’s retailers are reaching new customers while capturing more efficient and profitable orders.

“It turns out 4 to 5 percent is enough of a discount for shoppers,” Lore told Re/code’s Jason Del Rey. “Conversions are incredible, and [they] don’t get that much better as we reduce prices.”

Lore was the co-founder and CEO of Diapers.com, which he sold to Amazon for $540 million. Jet raised $225 million in equity and debt before it even launched.