Amazon may have some serious competition from domestic companies in Asia, but here in the West, the only company that really stands a chance is Jet.com. The e-commerce startup finally launched earlier this year after spending several months building itself up, and it looked really promising. What made Jet.com so interesting is that all of the commissions it collects from sales is used to make prices ridiculously low, which it’s able to support with a $49.99/year membership fee. Surprisingly, the company announced earlier today that it’s actually dropping that fee, which makes us wonder how Jet.com intends to maintain its low prices. It’s a little worrying, to be honest.
Jet.com Inc. is already abandoning the main business model behind its new discount-shopping site, a surprising turnabout for what many viewed as the most promising challenge to Amazon.com Inc. in years. The Hoboken, N.J., startup said Wednesday it will do away with the required $50 annual membership fee less than three months after launching the site. Jet had insisted the fee would stand as its sole source of profits, giving back commissions it collects on the sale of merchandise to customers in the form of lower prices. The move casts doubt on the viability of one of this year’s most-hyped startups, and suggests Jet had trouble signing up customers through free trials. Even before it opened the site to the public in July, Jet had raised $225 million in capital from investors including Goldman Sachs Group Inc. and Google Inc.’s Google Ventures. Without the membership fees, it isn’t clear how Jet will sustain lower prices than Amazon’s–its key pitch to customers–while also funding a massive advertising campaign. Jet projected it wouldn’t reach profitability until 2020. Jet’s founder, Marc Lore, who also created Diapers.com and later sold that company to Amazon, liked to say his new site would be akin to an online Costco.
