Under Jet's original model, the company planned to rely on the membership fees as its exclusive source of profits. In exchange for the fee, Jet gave customers discounts on individual products, funded by the revenue Jet earned on the sale of items sold by third-party merchants on its site.
On top of that, Jet customers also earned the Smart Cart savings by building bigger orders that are more efficient for Jet's partners to fulfill — either because they contain multiple items located in the same warehouse or in a warehouse close to the shopper.
Since the site is now free to use, a large chunk of products on Jet will simply match the lowest price elsewhere on the Web instead of trying to beat it. That said, the Smart Cart savings, where Jet thinks it really differentiates from competitors, will remain.
This means customers won't have to pay anything up front to shop on Jet, which increases the pool of potential shoppers. But that also means it potentially lowers savings. When customers were paying the $50 annual fee, they could expect savings of at least 10 to 11 percent on most orders. Now, since product-level discounts are mostly gone, they're just left with Smart Cart savings, which start at 4 or 5 percent.
The change will certainly raise some eyebrows in the e-commerce industry because of the hype surrounding Jet and how early it has overhauled its business model. Lore was the co-founder and CEO of Diapers.com parent company Quidsi, which he sold to Amazon for more than $500 million. That background helped him convince investors to pony up $220 million in equity and debt before Jet even launched.