Why Jet.com Was Rerouted

Share this content:

The Amazon competitor most likely scuttled its subscription-based plan when it discovered small commissions and higher volume worked better.

Jet.com burst upon the scene in July with $225 million in seed money and a bold plan to carve out a piece of Amazon's customer base by guaranteeing the lowest prices on the Web. It would take no commission dollars from sellers, instead passing them on as savings to customers and subsisting on their $50 annual subscription fees.

But, to the surprise of the e-commerce community, Jet this week made a 180-degree course correction, deciding to keep some of those seller commissions after all. “It's been amazing to see how deeply this idea has resonated with our customers and retail partners,” wrote Jet.com founder and CEO Marc Lore in a notice announcing the change. “I am therefore incredibly excited to announce that we've decided to drop the membership fee and make Jet free for all shoppers.”

More likely what got Lore excited was price tests showing that an incredibly high volume of bargain hunters transacting at price points high enough for Jet to drop the fee and still make money. Third-party sellers pay commissions to marketplaces on sales ranging from around 8-15%.

“They came out and said ‘We're going to have the lowest prices on the Web,' and gave the full 10 or 15 percent discount to the buyer. But now they've rolled the discount back to four or five percent and still see the needle moving, so they'll make money keeping a bigger portion of the commission,” observes Clarus Commerce CEO Tom Caporaso, who operates FreeShipping.com.

“I think this shift in business structure will help Jet attract more shoppers,” says David Spitz, CEO of ChannelAdvisor, whose platform connects suppliers with online retailers the likes of eBay, Alibaba, and Amazon. “The Smart Cart will be the key for Jet to continue to make money without the membership fee. Jet can find ways to add margin to orders as consumers add items to their Smart Carts, such as fulfilling products from one warehouse to eliminate shipping costs.”

The Smart Cart operates on a proprietary Jet.com algorithm that locates the sources where products can be purchased and fulfilled at the lowest prices. Today, however, Jet needed to get its computer scientist working on getting the machine itself aloft. At press time, Jet had crashed and was unable to be boarded.

Sign up to our newsletters

Company of the Week

PAN Communications is an award-winning integrated marketing and public relations agency for B2B technology and healthcare brands. PAN's data-driven approach allows the firm to specialize in public relations, social media, content and influencer marketing, and data and analytics. PAN partners with brands to create unique, integrated campaigns that captivate audiences.

Find out more here »

Career Center

Check out hundreds of exciting professional opportunities available on DMN's Career Center.  
Explore careers in digital marketing, sales, eCommerce, marketing communications, IT, data strategies, and much more. And don't forget to update your resume so employers can contact you privately about job opportunities.

>>Click Here

Relive the 2017 Marketing Hall of Femme

Click the image above