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Blue Apron IPO'd in June 2017 at a $2bn valuation
Yesterday, it closed at a stock price of $9.01, representing a market cap of just under $120mm
What happened and what can we learn?
Yesterday, it closed at a stock price of $9.01, representing a market cap of just under $120mm
What happened and what can we learn?
When $APRN IPO'd, it had a lot going for it:
- Leading brand in growing meal-kit market
- Subscription business model
- Massive TAM (everyone who ate food...)
- 40%+ YoY growth
- Leading brand in growing meal-kit market
- Subscription business model
- Massive TAM (everyone who ate food...)
- 40%+ YoY growth
The issue, however, was the unit economics. They just weren't sustainable
The S-1 listed CAC at $94, but the true CAC was higher
From 3/31/16 to 3/31/17 they added 387k customers and spent $179M in marketing. CAC ~ $460*
The S-1 listed CAC at $94, but the true CAC was higher
From 3/31/16 to 3/31/17 they added 387k customers and spent $179M in marketing. CAC ~ $460*
*This CAC of $460 is inflated as it doesn't account for churn
But the real CAC is certainly greater than the $94 listed in the S-1
High CAC isn't bad in itself. But when customer LTV is lower than CAC is when you run into issues
But the real CAC is certainly greater than the $94 listed in the S-1
High CAC isn't bad in itself. But when customer LTV is lower than CAC is when you run into issues
At IPO, $APRN had gross margins of ~31% and the average order value was $57.23. This means GM per order was ~$17.74
Even if CAC was at $200, this means customers needed to buy 12 orders just for the company to break even on CAC
And most customers didn't get that far
Even if CAC was at $200, this means customers needed to buy 12 orders just for the company to break even on CAC
And most customers didn't get that far
We don't have exact retention rates, but Second Measure aggregated credit card data to estimate retention
As seen here, ~50% of Blue Apron's customers churn in 2 months. Even if this is a rough estimate, it's nearly impossible to earn back CAC at this churn rate
As seen here, ~50% of Blue Apron's customers churn in 2 months. Even if this is a rough estimate, it's nearly impossible to earn back CAC at this churn rate
As the country learned about Blue Apron, lots of people tried it for the first time. Revenue grew
But a much smaller group found enough value in the product to buy it month after month for an extended period of time, which is what the business model required
But a much smaller group found enough value in the product to buy it month after month for an extended period of time, which is what the business model required
The bottom line is they poured marketing dollars into acquiring customers that were leaving long before those dollars were paid back
What could Blue Apron have done better?
What could Blue Apron have done better?
1. Generate quicker CAC payback
Consumers notoriously churn higher than enterprise customers
In this case, raising prices to raise margins or being more efficient with marketing spend would've created sustainable unit economics
Consumers notoriously churn higher than enterprise customers
In this case, raising prices to raise margins or being more efficient with marketing spend would've created sustainable unit economics
2. Increase retention through customer engagement
Blue Apron spent ~70% of marketing on offline and referrals
What if they had spent more on content, community, or influencers (or guidance)?
Radio, direct mail and TV can be cheaper. But they aren't as engaging
Blue Apron spent ~70% of marketing on offline and referrals
What if they had spent more on content, community, or influencers (or guidance)?
Radio, direct mail and TV can be cheaper. But they aren't as engaging
2. (Cont'd)
A big thing that hurt Blue Apron was competition.
Not only did HelloFresh, Sun Basket, Plated and others enter the scene, but restaurants like Chic-fil-a also made meal-kits
A more in-tune customer based would've been a huge differentiator
A big thing that hurt Blue Apron was competition.
Not only did HelloFresh, Sun Basket, Plated and others enter the scene, but restaurants like Chic-fil-a also made meal-kits
A more in-tune customer based would've been a huge differentiator
3. Segment audience to double-down on top segments
Delivered meal-kits aren't for everyone, but they should've increased loyalty and growth in top cohorts
At a Goldman retail conference, CEO Linda Findley Kozlowski said this is one of their top priorities
Delivered meal-kits aren't for everyone, but they should've increased loyalty and growth in top cohorts
At a Goldman retail conference, CEO Linda Findley Kozlowski said this is one of their top priorities
Blue Apron has a shot to fill a functional need in the grocery delivery space if they double-down on the customers that love their meal-kits already
And even if they don't succeed in the public markets, it'll be a great case study in the food delivery saga of the 2010s
And even if they don't succeed in the public markets, it'll be a great case study in the food delivery saga of the 2010s
