Meal kit delivery provider Blue Apron (APRN) has thrown a lot at the wall to see if something sticks to help it pull out of its downward spiral. Not much has worked, and now even its tried-and-true strategy of increasing the amount of money it spends on marketing isn't working either.
Blue Apron reported second-quarter marketing costs increased to $34.6 million, or 19.3% of revenue, from $34.5 million, or 14.5% of revenue in the year-ago period, but the number of customers plunged 24% to 717,000. And that smaller group of customers ordered 22.5% fewer meals. In fact, Blue Apron customer metrics fell virtually across the board. The only increase was in the number of orders per customer, which rose to 4.4 orders from 4.3.
|
Metric |
Q2 2018 |
Q2 2017 |
% Change |
|---|---|---|---|
|
Orders (in thousands) |
3,122 |
4,033 |
(29.2%) |
|
Customers (in thousands) |
717 |
943 |
(24%) |
|
Average order value |
$57.34 |
$58.81 |
(2.6%) |
|
Orders per customers |
4.4 |
4.3 |
2.3% |
|
Average revenue per customer |
$250 |
$251 |
(4%) |
Data source: Blue Apron quarterly SEC filing.
Blue Apron says this is all part of its "transition" as it enters a new multiproduct, multichannel phase, but you would hope some of its efforts would stem the slide in performance. Unfortunately, almost all of the metrics worsened compared to the first quarter, though it did spend $4.7 million less on marketing this quarter.
Spend more, get more
Typically when Blue Apron spends more on bringing in more customers, it tends to actually do so. Ahead of its IPO last year, the meal kit delivery company ramped up its marketing spending from $51 million in 2015 to $144 million in 2016, and those efforts led to the number of customers doubling by the end of 2016.
After going public in 2017, however, Blue Apron slashed its marketing budget by 31% and 33% in the third and fourth quarters, respectively, and its customer numbers eroded fast. Customer counts dropped 6% in the third quarter and 15% in the fourth, when it began to accelerate its marketing again in the last week of the year.
Now not even those tricks work, and there could be a number of reasons why, including the increased amount of competition in the market. And it's not just coming from rivals like Hello Fresh, which surpassed Blue Apron earlier this year to become the biggest meal kit delivery service, but also from supermarkets, which are finding that customers prefer picking up meal kits when doing their grocery shopping instead of paying inflated prices to have them delivered.
Image source: Blue Apron.
Not delivering the goods
As Blue Apron has proved, it costs a lot of money to acquire new customers, and though existing customers spend more the longer they stay, it turns out they actually don't stick around very long. It's estimated that Blue Apron only retains 15% of its customers; Hello Fresh is even worse off with just an 11% retention rate.
Increasingly, stand-alone meal-kit companies are being acquired by larger players in the grocery space, such as happened when Plated was acquired by Albertsons and Home Chef was bought by Kroger (NYSE: KR). But in other cases, the funding is drying up. Chef'd, which ceased operations in late July before finding a buyer a week later, was taking many of the same steps as Blue Apron, like partnering with grocery stores and building out its distribution, but couldn't be saved.
Blue Apron has always had that one remaining marketing arrow in its quiver to boost membership rolls, but now that it shot it and it fell wide of the mark, there might not be much hope left for this holdout.
