Most meal kit companies like Blue Apron started with a subscription strategy. Part of that strategy was to lure customers with deep discounts. The deep discounts were designed to create long-term loyalty. What actually resulted was customers signing up for the deep discounts and then cancelling when the prices went up.
We have written about the struggles of Blue Apron in the past. As a publicly traded company, we have watched customer growth struggle. As a result, the company’s equity value has also struggled.
In response to these issues, Blue Apron announced a shift in strategy. It is their hope that the new strategy will result in profitability in both the current quarter and year.
To achieve profitability, Blue Apron will stop pursuing less profitable customers and scale back on advertising. The executives expect this change to result in customer losses but an increase in revenue and profitability per customer. As of the fourth quarter, Blue Apron had 557,000 customers with an average revenue per customer of $252.
New Strategy – Knick Knacks
Blue Apron will start its new strategy with a product called Knick Knacks. Knick Knacks will launch with Walmart’s Jet.com. The $7.99 Knick Knacks meal kit comes with the sauces, spices, grains, dairy and recipe for a two-person meal and lets customers use store-bought produce and protein.
Why would this scaled back version work better? For starters, excluding the meat and produce in the meal kit extends the product’s shelf life in retail.
Blue Apron learned from a pilot with Costco that shelf life and shrink can be difficult variables in retail. These new packs also provides more flexibility for customers.
These leanings have caused the company to start their new offering online. That said, CEO Brad Dickerson said that Knick Knacks could eventually work in traditional retail as well.