Blue Apron (NYSE:APRN) still hasn't recovered from the shock-and-awe havoc (NASDAQ:AMZN) wreaked upon it by announcing it was buying Whole Foods Market (NASDAQ:WFM) for $13.7 billion. From one of the most anticipated IPOs of the year to the worst performing, the meal delivery service has revealed just how shallow its competitive moat is.

Whatever value there is in Blue Apron's service -- which, up until a couple of months ago, was considered somewhat substantial from an investment perspective -- there doesn't look to be much there anymore.

A Blue Apron meal kit delivery

Image source: Blue Apron.

Let me count the ways

There are a lot of reasons to bet against Blue Apron. One of the more glaring ones is the astronomical cost of acquiring customers, which soared from $94 last year to $463 this as it supercharged its marketing spend to attract customers to its service as more competitors moved into the space. Consumers can now choose between Green Chef and Purple Carrot or Home Chef and Hello Fresh, not to mention the services supermarkets like Kroger and Publix have launched. 

A recent Harris Poll says 1 in 4 adults purchased a meal kit delivery last year, and 70% of them continue to purchase more. So, although there's no doubt Blue Apron is at the top of the pack with a near-47% share of the meal delivery service market, its large following is diminishing and its customers are becoming less loyal.

Barron's reports a new survey from boutique research firm M Science indicating Blue Apron is having trouble holding onto the customers it does gain, while those that remain spend less and less over time.

Early customers who started with Blue Apron back in 2015 spent around $221 each quarter at the outset, but today spend less than $50. The report says "roughly 50% of customers used the service for four weeks or fewer, and roughly 75% of customers used the service for 11 weeks or fewer within their first year."

Tablet with Online food delivery app on screen

Image source: Getty Images.

Rampaging elephant in the room

And now Blue Apron has to contend with Amazon moving into the space, perhaps in a big way. Even before Whole Foods enters the mix, Amazon is testing a meal kit delivery service with Prime customers through AmazonFresh and recently filed a trademark with the U.S. Patent & Trademark Office for a service it describes as "We do the prep. You be the chef."

And with Whole Foods, Amazon combines into a single business everything consumers who might use the service are looking for: healthful, organic ingredients and unequaled ease of ordering and delivery. There are very good reasons why the stocks of numerous companies across multiple industries tumbled on the announcement of the merger.

Analysts estimate has anywhere from 55 million to 85 million Prime members in the U.S. who on average spend $1,300 a year on the site. Analytics firm 1010data says just over half of Whole Foods customers are also Amazon Prime members, while 29% of Amazon customers shop at Whole Foods. However, 81% of repeat customers of Whole Foods are also Amazon customers. What this means is that Amazon isn't looking to get new customers out of the merger -- 1010data estimates it will see only a 5% increase -- but it's looking for them to spend more money and a meal kit delivery service could very well pry open their wallets wider.

Slow boil

Of course there is no guarantee Amazon will win the meal kit delivery market. It's entered plenty of businesses over the years, failed to achieve any scale, and ultimately closed down operations.

Yet there are doubts about whether Blue Apron will ever be profitable -- it has warned that's a possibility itself -- and whether it can ever be anything more than a niche service. It will be filing its first financial reports as a public company next week and investors will be able to see how it's business is shaping up. They should probably prepare themselves for the meal prep service burning the cake in the oven.