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adam keesling
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?
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adam keesling Sep 25
Replying to @adam_keesling
When 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
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adam keesling Sep 25
Replying to @adam_keesling
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*
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adam keesling Sep 25
Replying to @adam_keesling
*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
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adam keesling Sep 25
Replying to @adam_keesling
At IPO, 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
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adam keesling Sep 25
Replying to @adam_keesling
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
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adam keesling Sep 25
Replying to @adam_keesling
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
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adam keesling Sep 25
Replying to @adam_keesling
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?
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adam keesling Sep 25
Replying to @adam_keesling
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
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adam keesling Sep 25
Replying to @adam_keesling
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
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adam keesling Sep 25
Replying to @adam_keesling
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
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adam keesling Sep 25
Replying to @adam_keesling
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
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adam keesling Sep 25
Replying to @adam_keesling
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 🤷‍♂️
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