Jet.com Pulls Annual Membership Fee, Says Smart Carts Strategy Is Catching On

Jet.com, the massively funded Amazon challenger, has opted to drop its annual membership fee just as many users’ three-month paid trials are nearing their end.

The site launched at the end of July with the promise of giving consumers the lowest prices anywhere by selling products at nearly cost. The company’s initial revenue strategy largely relied on the $49.99 annual membership fees.

On top of discounts on all products, Jet.com’s pricing engine is designed to bring consumers more savings when they are willing to play along during the ordering process by building a so-called Smart Cart. The engine recommends savings opportunities such as increasing item quantities, buying items that ship from the same location, waiving returns and using a low-fee payment method.

“We’ve been thrilled by the positive response to Jet since launch. Our customers are building bigger carts than we expected, taking full advantage of our dynamic pricing engine to shop smarter and unlock more savings. Now, without a membership fee, we are opening up the power of the Jet platform to even more people,” the company wrote in an email to consumers announcing the change.

Founder and CEO Marc Lore told Re/Code in an interview that eliminating the membership fee was not a scramble to bring in more customers, but instead a reaction to the fact that customers are quickly catching on to Smart Carts. Lore said the Smart Cart discounts of four to five percent were enough to appeal to customers, and larger upfront discounts didn’t have a material impact on sales. The company will now rely on sales margins from the products sold through the site and Jet.com partners.

Lore added that sales have exceeded Jet.com’s early goals: Consumers bought $10 million worth of goods from the site in August and $20 million in September.