In this Market Foolery podcast, Chris Hill and guest Kristine Harjes, host of the Industry Focus: Healthcare podcast, consider the latest on Blue Apron (NYSE:APRN), shares of which took a sharp jump after Barclays analyst upgraded them.

But before anyone decides that the company may be about to turn a corner, let's review the bidding: The founding CEO just stepped down barely half a year after taking his company public; shares have tanked from the IPO price; and the big question is whether the business model could work for any company.

A full transcript follows the video.

This video was recorded on Dec. 4, 2017.

Chris Hill: Shares of Blue Apron up 20% this morning after getting an upgrade from Barclays. That must have been one hell of an upgrade, because 20%? This is a stock that went public in June, and then in the last few days, co-founder Matt Salzberg, who was the CEO, stepped down at the end of last week, and Brad Dickerson, who's the chief financial officer, he's going to be the new CEO at Blue Apron. Do you want any part of this stock? Even with the upgrade, I don't know. I've been reading some stuff this morning, both about Blue Apron but also about HelloFresh, which is doing a ton of advertising, and we can delve into whether or not any of these businesses are going to succeed. It's not like I look at Blue Apron and think, "They're not operating the right way, but HelloFresh, they have the right model." I'm a little skeptical of the business model in general.

Kristine Harjes: Yeah, this company has positioned itself as something that's going to be appealing to the mass market, and that's just not true. There are definitely people who will want Blue Apron who are willing to pay a premium for it -- because let's face it, it's a fairly expensive product. But I just don't see them ever reaching every single home. A larger problem with this kind of business model to begin with is, customers don't often stick around. You get a lot of people that try the service, they do it for a couple of months and then they get sick of it, or maybe they go to a competitor because the competitors are offering a discount for new members. So there's this endless churn of always needing to acquire new members. And as you get farther and farther from your low-hanging fruit, your easy core demographic, that gets more and more expensive, and that's so apparent in this business model, that they're spending so much money to acquire new people. And that's only going to get more difficult.

Hill: Yeah. Customer acquisition cost is one of those metrics that is so important and I feel like doesn't necessarily get as much attention as it should, just because it applies to so many businesses. It's not just membership businesses like this, but even just credit cards. I remember 15-20 years ago, when the idea of negotiating your monthly credit card fee started to gain some traction. And once you dug into, why would a credit card company openly negotiate with a customer, "OK, yeah, we'll lower your fee a little bit," it's because once you find out what the customer acquisition costs are for credit card companies, you realize, right, it's so much better for them to just make existing customers happy rather than trying to go get new ones.

Harjes: Yeah. I think, if Blue Apron wants to succeed, that's the route they need to go. They need to figure out how to keep these customers that come into their ecosystem, and squeeze out more money from them. And I don't see them being able to do that with a huge pool of people. I think, if they're going to succeed, it's going to have to be from a fairly small base that's willing to pay up for some luxury products.

Hill: Is alcohol a solution here, do you think, at all?

Harjes: It's always a solution.

Hill: [laughs] No. I meant, I don't know if Blue Apron sells alcohol, but we've talked plenty of times about what a wonderful, high-margin business that is. And if they could partner with some wine delivery companies?

Harjes: Those exist. I think it's called Drizly. It's an alcohol delivery app. I get their little postcards in my mailbox all the time.

Hill: Drizly?

Harjes: I think that's what it's called. It has to end in -ly in order to be a new tech company.

Hill: [laughs] Yeah, I think that's a federal law.

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