Jet.com will take on the likes of ecommerce giants Amazon and Walmart with its launch on Tuesday, according to USA Today.
“You can save 10% to 15% on just about any product online, Jet.com CEO Marc Lore told USA Today. “We make all of our profit from the membership – $50 a year.”
Jet has built a subscription model much like Costco and Sam’s Club, charging consumers $50 a year to belong after a 90-day trial and it doesn’t get any of the sales revenue. Consumers will be able to save through actions like sourcing items from nearby merchants, enabling bigger baskets from the same merchant, tweaking return policies and opting for different payment methods or longer shipping times.
In both cases shipping costs are reduced, and sellers can determine how much of the savings to pass along to buyers, while also maintaining margins. Jet.com says its model will allow sellers to offer prices that are 10% to 15% lower than anywhere else online.
Lore told USA Today that by making all of their profit from its membership, it allows the company to pass back all the product sales to the customer.
“So we really have a different relationship with the consumer,” said Lore.
Jet was founded by Lore, who started Quidsi (parent of Diapers.com) and sold it to Amazon in 2010 for $550 million, after Amazon crippled it through a price war. Lore then worked there for two and a half years before moving on. His non-compete agreement with Amazon ends early this year, according to Bloomberg Businessweek.