In big shift, online retailer Jet.com drops membership fee

(Reuters) - Jet.com, the online retailer founded by former Amazon.com executive Marc Lore, said on Wednesday that it dropped its $50 annual membership fee, marking a shift in business strategy for the upstart as it seeks to undercut Amazon and others on price.

Lore said the move, which comes nearly three months after it opened to the public, reflected stronger than anticipated orders from customers. He wrote in a blog post announcing the change that Jet.com had seen "the average number of units per order twice what we expected."

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.

In return for the fee, Jet.com had promised large up-front discounts on items and then further discounts when shoppers added more products to their order baskets, which it calls "Smart Cart" savings.

No one at Jet.com could be immediately reached for comment.

Jet.com has not disclosed sales or membership figures. It was unclear whether the move was in part driven by a concern that it could have trouble building its customer base with a membership fee.

The shift may signal that Jet.com is looking to decrease or eliminate the up-front discounts and look to profit by building scale through bulk orders.

"Our customers are taking every advantage of our dynamic pricing engine to place orders that can be fulfilled at a lower cost - and to have those efficiencies shared with them as savings," Lore wrote in the blog post.

Jet raised $220 million from top venture capital firms prior to its launch.

(Reporting by Nathan Layne in Chicago; Editing by Franklin Paul and Frances Kerry)