Blue Apron (NYSE:APRN) may have pioneered the meal-kit business, but brick-and-mortar grocery stores aren't going to let it steal its business. Wal-Mart (NYSE:WMT), the nation's largest grocery retailer, started listing several meal-kits developed by third-party brands like Takeout Kit and Home Chef on its website. Both meal-kit providers offer their own subscription services, but Wal-Mart will facilitate one-time purchases of their recipes.
Wal-Mart also announced a partnership with Tasty to enable customers to order all the equipment they'd need to create a recipe at home. And next year, it will integrate Tasty's recipes with its online grocery order and pickup, so customers can easily add all the necessary ingredients to their cart. Amazon.com (NASDAQ:AMZN) has a similar partnership with AllRecipes for its AmazonFresh service.
Winning on convenience
While it's getting better, Blue Apron's service is notoriously inflexible. It's hard to stop and start deliveries on short notice, and the recipe options are somewhat limited. While that's great for people who stick to the same routine most weeks, it's not for those who decide they want to try cooking something new at home together. Interestingly, the latter appears to be Blue Apron's target market.
With over 4,200 Supercenters and Neighborhood Markets in the United States, Wal-Mart has the retail footprint to ensure there's an easy place to pick up all the ingredients needed to make a decent meal at home. Online grocery and pickup is available at 1,100 stores and will expand to another 1,000 stores next year. There's no need to wait for shipping, and nor do you have to pray that Blue Apron delivers the correct ingredients on time.
Amazon, likewise, aims to deliver superior convenience than Blue Apron. AmazonFresh subscribers (limited to select markets) can opt to get groceries delivered to their door the same day they order. Customers can also pick up orders at established pickup locations. The purchase of Whole Foods earlier this year opens the door to expand those services nationwide.
Wal-Mart's competitive advantages
Wal-Mart is not only the nation's largest grocery retailer, but it's also the second-largest online retailer after Amazon. Though it's carving out a part of the burgeoning online grocery market as well with its in-store pickup strategy, once again, it trails Amazon in that department.
By meeting customers where they already are, both Wal-Mart and Amazon have a huge advantage over Blue Apron.
Blue Apron, on the other hand, doesn't have much of anything to protect itself against big competitors coming into the market. Whenever it pulls back on its marketing spend, it loses customers. Its customers don't stick around long, deciding Blue Apron might not quite fit their lifestyle or seeking out the next promotional offer from one of its competitors.
Wal-Mart and Amazon already have the scale to support one-off purchases and deliver them quickly. Blue Apron, with just 3.6 million orders last quarter, doesn't have the scale to maintain the same type of business model, but it appears many of its customers do not offer repeat business.
Wal-Mart (and Amazon) is much better positioned to take on customers who don't fit into Blue Apron's subscription plan. If Wal-Mart ramps up its partnership with Tasty quickly next year, it could result in fewer gross additions if and when Blue Apron ramps up marketing again.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.