Blue Apron to trial same-day on demand delivery service in the Bay area
“Consumers in the entire Bay Area will be able to select up to two meals from the entire two-person signature offering, essentially the same two-person menus that are available on a subscription basis,” CFO Tim Bensley told analysts on the firm’s Q1 earnings call Tuesday.
“If they order by noon, they're going to get it delivered to their home between 4-6 pm, so it's a true opportunity for them to order for that evening dinner on-demand same day. We have a local third-party logistics company that's doing the delivery.”
While the on-demand service is designed to attract a new customer base, president and CEO Linda Findley Kozlowski, who joined three weeks ago, predicted that it could also generate incremental growth from existing customers:
“A lot of our subscription customers have asked for supplementary ability to do on-demand. So we think it actually helps drive the entire business forward, not necessarily split it in two different directions.”
‘Increased acquisition efficiency and better quality customers’
Although Blue Apron – which generated revenues of $668m in 2018 – posted a net loss of $5.3m on net revenues of $141.9m in the first quarter of 2019 (vs a loss of $31.7m on revenues of $196.7m in Q1 2018), some key metrics have been improving, with average revenue per customer up from $236 in Q1 2017 to $250 in Q1 2018 and $258 in Q1 2019, she said.
And while customer numbers have dropped significantly from over a million in Q1 2017 to 786,000 in Q1 2018, to 550,000 in Q1 2019, much of this was due to a deliberate reduction in marketing spend as the company has focused on attracting high quality, more profitable customers, added Kozlowski.
“We are seeing increased acquisition efficiency and better quality customers coming in.”
So-called ‘highest quality customers’ currently account for around 30% of the customer base, but each new wave of customers signing up for the service features a higher percentage of these potentially more valuable customers, she said, noting that an analysis of these account holders had helped Blue Apron develop more effective marketing strategies.
“We can start to look at psychographic profiles that will help us target more easily, understand the other properties that they're actually participating in, and really much more clearly identify how we can actually look at those particular segments and bring them in, as well as retain them and engage them for the longer term.”
Bensley added: “In 2019, we're really excited about the new cohort that we brought in… the quality of those customers has actually been higher than in previous cohorts.”
Strengthening our customer base and driving toward profitability are critical steps for building a healthy sustainable business.
We're happy to report that our approach unfolded as planned. In Q1, we delivered our most efficient operational performance to date, had positive operating cash flow and free cash flow, significantly improved our net loss and achieved profitability on an adjusted EBITDA basis.”
Tim Bensley, CFO, Blue Apron
Knick Knacks, strategic partnerships
Blue Apron did not go into detail on its in-store meal kit strategy, but said its new shelf-stable Knick Knacks kits – which feature pre-portioned spices, sauces, grains, and dairy ingredients that shoppers can pair with meat/protein and fresh produce - address retailers’ demands for products with a longer shelf life.
“In February, we launched new Knick Knacks product on Jet, adding to the rotating selection of Blue Apron meal kits available," said Bensley. "In the next few weeks, we will once again expand our presence on Jet platform by launching a shop, which will include an additional suite of culinary tools and marketplace items such as seasonings and spices available through same day or next day delivery across most of New York City.”
Another key part of Blue Apron’s strategy moving forward is strategic partnerships, he added: “We continue to be pleased with our WW [formerly known as Weight Watchers] offering and since launch have seen strong interest in the Blue Apron WW menus from both new and existing Blue Apron customers.”
Who uses Blue Apron?
According to an email survey of 6,000+ Blue Apron account holders conducted in December 2018, 29% of respondents are cooking for children under the age of 18 and 19% select family plans. 82% of account holders are female within three key age brackets: 25-24, 35-44, and 55-64. 56% have household incomes of $100k+, 33% are in the $50k-99k bracket, and 11% have household incomes of below $50k.