One of Blue Apron's (NYSE:APRN) major focuses in 2018 has been the development of an on-demand product. It got started earlier this year by partnering with Costco to stock select meal kits in some of its stores. Then, more recently, the company launched a truly on-demand option, delivering its meal kits to people in New York within a half hour through a partnership with GrubHub.

That GrubHub deal, though, raises a few questions about the viability of the new on-demand offering. People usually open one of GrubHub's apps looking for a quick meal, and Blue Apron's semi-prepared meal kits don't exactly fit in with the rest of the selection. It'll be interesting to see how users respond to Blue Apron's presence on the platform.

Blue Apron asserts that on-demand will become a key part of its business -- but its light step into the area doesn't send a message of confidence to investors.

A box full of produce and other ingredients.

Image source: Blue Apron

Partnering for on-demand

Blue Apron's need to partner with other companies in order to get its offerings delivered puts it at a steep disadvantage to companies like Walmart (NYSE:WMT) or Amazon (NASDAQ:AMZN), which are hovering around the meal kit space.

Amazon is offering free delivery from Whole Foods (which carries lots of prepared food) in a growing number of markets. Walmart has expanded its grocery delivery service to 320 of its stores so far, and it's working on its own meal kits.

Blue Apron, by contrast, is ceding control of its brand to partners like GrubHub or Costco, and it's at the mercy of their networks. If Costco decides it doesn't want to stock Blue Apron meal kits anymore -- perhaps directing customers instead to a private-label product -- Blue Apron will be out of luck. If GrubHub can't deliver meal kits in the amount of time it says it will, there's nothing Blue Apron can do about it. And in the meantime, those partners are taking a slice of its business.

That said, Blue Apron isn't in a great position to start offering on-demand delivery itself. It's had enough trouble shipping its weekly packages to consumers on time. But the fact that it doesn't even have its own branded delivery method (with a partner providing the service behind the scenes) is a bit odd, considering management's commentary about how important on-demand will be for the business.

Saving money for everyone

It's no secret Blue Apron has a subscriber-retention problem, even if management won't admit it. Every time someone tries out the subscription service and cancels after just a couple of deliveries, Blue Apron loses money. According to CEO Brad Dickerson, the most common reason for those early cancellations is that customers aren't comfortable with the subscription model, which requires them to manage their deliveries every week.

But just having an on-demand option in Costco or on GrubHub isn't enough if consumers don't know it exists. And Blue Apron also faces a conflict in that a subscriber is potentially worth a lot more than an on-demand customer -- if that customer is the sort who will keep ordering. Blue Apron's on-demand push could siphon off some of its higher-value subscription sales if it's not careful. Of course, Dickerson assured investors "we don't see a lot of cannibalization from this."

At an investors conference in August, he described the challenge the company faces: "How do we make sure that we point the customer who's most likely to be that part of the early drop off on the retention curve -- and maybe shouldn't be a subscriber -- how do we point them to that [on-demand] offering and not spend a lot of money on them at the top of the funnel?"

On-demand meal kits could potentially save money for both Blue Apron (in terms of customer-acquisition spending) and consumers (no wasted food). But figuring out the best way to introduce people to the option is difficult. Meanwhile, the company is working at a significant cost disadvantage to big competitors considering entering the space, which could erode both customer demand and profit margins for these offerings.

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 recommends Costco Wholesale. The Motley Fool has a disclosure policy.