Unless someone comes along and buys Blue Apron (NYSE:APRN), investors would probably do well to cut their ties to the meal kit delivery service. Another poor quarterly performance showing it continues to lose customers means an acquisition may be its only hope for survival.

The results

Blue Apron is broken. The number of customers it serves tumbled 6% from the year-ago period to 856,000, and plunged 9% from just the second quarter. Although average revenue per customer was up year over year, it fell to $245 from $251 sequentially.

Woman holding pan on fire

Image source: Getty Images.

The company blames the drop-off on it spending less on marketing. It spent $34 million on marketing in the quarter, or some 16% net sales, which was a big decline from the $50 million it spent last year, when it accounted for a quarter of its sales, as well as from the $61 million it spent just before it went public.

Blue Apron says the marketing spend decrease was planned all along, but that makes it seem as though it poured money into marketing ahead of its IPO to simply justify the anticipated offering price at the time. Of course, Amazon.com (NASDAQ:AMZN) acquiring Whole Foods Market disrupted Blue Apron's move to market, and although it went public at a discounted $11 per share, today its stock trades at just over $3 a share.

Heightened competition

While Blue Apron's IPO and subsequent performance was a debacle, it didn't kill off the market for meal kit delivery services. In fact, demand seems to be growing. Supermarket chain Albertson's recently acquired Plated in September, German meal kit specialist HelloFresh went public in October, and Amazon is testing out a meal kit service in the Seattle area, with most expecting Whole Foods to be the ultimate vehicle for the program.

Blue Apron got a momentary bounce from the Plated acquisition as it was believed Albertson's was the forerunner of what would be a rush to scoop up other services, but no one has stepped forward yet. Still, that looks like it's Blue Apron's best hope at the moment.

As more competitors enter the space, and as better-financed rivals begin to sniff around the edges, Blue Apron is losing market share. Although it remains the overwhelming leader, as it has been since the service exploded on the scene, its share is beginning to fall.

Blue Apron meal kit

Image source: Blue Apron.

According to Second Measure, a company that analyzes billions of credit card transactions to gain insights into consumer buying habits, Blue Apron has a 40% share of the meal kit delivery space, well ahead of second place HelloFresh at 28%, and Home Chef with 10%. However, Blue Apron's share fell 17 percentage points from the year-ago period, and with its sales falling as fast as they are, it's predicted HelloFresh will catch up to and surpass Blue Apron sometime in the first quarter of 2018.

And whereas Blue Apron's sales are falling, its rivals are showing growth. Marley Spoon, Sun Basket, and Purple Carrot were all higher in the third quarter, but the latter has posted the most sustained and consistent growth trajectory of all the services. Purple Carrot's vegan menu was probably helped by its partnership with Whole Foods, though that may not last much longer now that Amazon owns it.

It also suggests Blue Apron is going to need a helping hand, too, but it will need to move fast. Already grocery chains like Kroger and Wal-Mart are launching their own meal kits, and Blue Apron may find that if it waits too long, it will be the odd man out with no hope of survival.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.