Jet.com is a Hoboken, NJ based start-up that calls itself the ...online version

Question

Jet.com is a Hoboken, NJ based start-up that calls itself the ...online version of Costco". Prior to starting their site in July, Jet had raised $225 million in capital from investors including Goldman Sachs Group Inc. and Google Ventures. Jet's initial pricing strategy was to charge an annual membership fee of $50 and then keep prices low by subsidizing them with the sales commissions it collected from the site's merchants. Jet insisted that their sole source of profits were to be this annual fee. Below is a comparison between Jet and Amazon. Jet announced that they were abolishing this annual fee. Given what we know about Costco and their success with this type of pricing, why might Jet have abandoned Jet's acquisition by Walmart, it.is not relevant to the question being asked.) this model? (Think about this question without regard to Comparison Shopping A September analysis found that online retailer Jet.com is often cheaper than Amazon but sells fewer top products Selected categories Pct of products also carried on Jet Baby Health and beauty Pct that are cheaper on Jet 84% 58% 86% 45% 70% 62% 78% 58% Grocery 1139% 36% Household products Home improvement Pet supplies sex 28% 19% 53% Appliances 11119% 63% Home and garden

Explanation / Answer

Jet abolished the practice of charging an annual fees because though it was one of the revenue components but it used to work as a restraint for many consumers. In the retail space people only like to pay the price of the good and no initial upfront fees or no added delivery charges and stuff. Even though the upfornt yearly fees might be very less. And specially when your close competitor is not charging any such fees. One has to match the actions of the competitor.

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