Jet.com took off in supersonic fashion in July with a $225 million war chest and a subscription model positioning it to be the Costco of Web marketplaces. The subscription model was scrapped last month and this week Fortune reported that founder Marc Lore had secured as much as $500 million more in funding to help fuel its new trajectory.
It will need a good portion of those funds to pay for marketing that will keep it high profile entering the all-important holiday shopping season. “Word on the street is that Jet has only about $63 million left of the $225 million it started with. It now has to spend to drive people through the funnel and expand brand awareness,” says Tom Caporaso, CEO of Clarus Commerce, which operates FreeShipping.com, a subscription-based marketplace.
Jet was moved to re-route a business plan aimed at deep-discount buyers when it found them coming in at higher price points than originally forecasted. That influenced the upstart marketplace to keep a portion of third-party commissions, ditch the membership fee, and still drive volume by delivering the remainder of those 8 to 15% fees to customers through discounts.
“It will be interesting to see if four or five percentage points off the price moves the needle away from Amazon,” Caporaso says.
This week FreeShipping.com, which charges a monthly fee and returns 10% cash back to subscribers on all purchases, announced it would up the return to 20% among 30 of its participating retailers from Thanksgiving through CyberMonday.
