Shares of meal-kit maker Blue Apron (NYSE:APRN) fell over 6% on Jan. 16 after One Click Retail's 2017 Grocery Report indicated that Amazon (NASDAQ:AMZN) had made huge gains in the U.S. grocery market. The report claims that Amazon generated $2 billion in food and beverage sales last year, and it accounted for 18% of all online grocery sales in the U.S.

More specifically, weekly sales at Amazon Fresh, its online grocery service, "more than doubled" over the course of the year, rising from about $3 million in January to over $7 million by the end of 2017 to hit an estimated $350 million in total sales. The biggest growth driver was Amazon's acquisition of Whole Foods, which closed last August.

A shopping cart icon on a smartphone.

Image source: Getty Images.

The report didn't mention Blue Apron or any other meal-kit makers, but it wasn't hard to connect the dots. Over the past two years, Amazon signed meal-kit partnerships with Marley Spoon and Martha Stewart, then test-launched its own meal-kits, which all complimented the Whole Foods acquisition.

Concerns about Whole Foods and Amazon Fresh cast a long shadow over Blue Apron's IPO last June, which bombed during its market debut. The stock now trades nearly 70% below its IPO price, the company laid off hundreds of workers last October, and CEO Matt Salzberg announced his resignation a month later.

Blue Apron's stock looks cheap at 0.7 times sales, but most bulls seem to have given up, with 38% of the float being shorted as of Jan. 10. But is Blue Apron's time really up? 

What happened to Blue Apron?

Blue Apron's growth has been decelerating at an alarming rate. Its revenue rose just 3% annually during the third quarter, compared to 18% growth in the second quarter. On a sequential basis, its number of customers fell 9% to 856,000, its average revenue per customer dropped 2% to $245, and its average orders from customer dipped from 4.3 to 4.2.

Blue Aprons' meal-kits.

Image source: Blue Apron.

On the bottom line, its net loss widened from $37.4 million to $87.2 million between the third quarters of 2016 and 2017. Its adjusted EBITDA also came in at a loss of $48 million, compared to a loss of $34.6 million in the prior-year quarter. Both figures also widened on a sequential basis.

Blue Apron's biggest problem is the competition. In addition to Amazon and its Whole Foods network, it needs to counter other major players like Sun Basket, Green Chef, Albertson's Plated, and HelloFresh, a rapidly growing German rival that went public last year and claimed that it would overtake Blue Apron in the U.S.

Blue Apron's loss of customers, its waning customer loyalty, layoffs, and abrupt CEO change all indicate that it's not up to the task. At this point, Blue Apron shouldn't be cutting costs to protect its bottom line. It should be focusing on revenue and customer growth, boosting its marketing efforts, or buying up smaller players -- even if it means using a secondary offering to raise cash or taking on more debt.

Will Amazon land a killing blow?

When Amazon cut the price of Amazon Fresh to $14.99 per month for Prime members in late 2016 (down from its annual fee of $299), it clearly wanted grocery deliveries to become part of its Prime ecosystem.

Amazon hasn't disclosed any membership figures for Amazon Fresh. But research firm CIRP estimates that Amazon has 90 million Prime members in the U.S. who spend about $1,300 annually on the site, compared to $700 for non-members.

This gives Amazon Fresh a massive potential market that dwarfs Blue Apron's base of less than a million customers. Therefore, it will only be a matter of time before Amazon -- along with other meal-kit makers -- push Blue Apron out of the market it once dominated.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.