Amazon Prime competitor Jet.com is dropping its $49 membership fee

The shift eliminates what was supposed to be the shopping site’s main source of revenue, as it had sought to operate much like membership-based retailers like Costco Wholesale Corp, which earn the bulk of their profits from annual fees.

The shift is a bold move considering that Jet had called its extreme discount model the “biggest thing in shopping since… shopping.” She also says Jet may yet offer a paid-membership service, which would provide members with additional savings opportunities. Now that it’s dropping the membership fee, the company will try to make profit on each sale. “It turns out 4 to 5% is enough of a discount for shoppers”. “So we take commissions we get from merchants and it comes off the price”.

Jet.com did not return an email seeking comment on whether or not customers who already paid the $50 membership fee would be reimbursed.

Jet will still offer low prices through its “Smart Cart” technology that reduces prices when consumers buy multiple products in a bundle. Dubbed its “concierge” service, Jet often bought goods from other companies’ sites and ships them direct to its own customers.

Clearly, the young e-commerce contender with more than 0 million in venture backing is rethinking its business model in a big way just months after launching.

Lore was the co-founder and CEO of Diapers.com parent company Quidsi, which he sold to Amazon for more than 0 million.

Landsman says Jet did $10 million in sales in August and $20 million last month, far exceeding its projections. It plastered the coupon codes on buses, subway posters and taxi cabs in a projected $100 million marketing push during the first 12 months from the July launch, adding to pressure on the company to find a way to make money quickly.

In a blog post, Lore said the move is the result of better-than-expected commerce on the site, with most shoppers taking advantage of dynamic price options at checkout, which help lower the cost. Boomerang looked at 16 categories where both Jet and Amazon sell products, picking out almost 1,600 items listed as best sellers on Amazon in those categories.

Jet is also recruiting these partners with free software tools.

Still, in the announcement about abandoning the membership fee, chief executive Marc Lore also highlighted sunnier news for Jet: The average number of items per order has been double what the company expected. It found that Jet had only 31% of those items, though its prices were lower for 73% of the overlapping items.

“A lot of brands and retailers were telling us, ‘We love that you’re brand-friendly and if you just didn’t have these (discounted) starting prices, we’d be really interested”, Lore told Del Rey. Retailers have taken issue with being undercut by Jet, for example, something that led to a few confusing pricing details on the site.