If you have been around on the internet for quite some time, you might remember the big meal kit boom back in 2015-2016. People back then had all the craze for meal kits, and one of the progenitors of its business structure is Blue Apron. You might remember that almost every YouTube ad promoted Blue Apron back then, and it was successful in that regard.
The Success of Blue Apron
The success of Blue Apron was way back in 2015 when meal kits were new, and everyone wanted them. It was already receiving $1 billion in revenues during that year and selling thousands of meal kits every day. Its success was attributed to its good business structure centered on customer acquisition and making customers stay for the next meal kit.
Everything was online back then, and the internet was exploding with new accessible features, and meal kits are one of them. It’s a healthier alternative to fast food choices, and you only have to spend a couple of dollars more and a few minutes of your time to prepare. Plus, you can get a free meal kit to see whether if it’s for you. The customer acquisition cost (CAC) of Blue Apron was valued at $60. That’s easy money if you think about it, especially if you get more people staying in for the subscription. Sadly, it was also going to be the reason for its eventual downfall.
The downfall of Blue Apron is centered on two factors: CAC and competitors. Blue Apron was doing good, but then hundreds of competitors started to join the industry, with Hello Fresh, Blue Apron’s main competitor, just a couple of steps away from taking it down. The fear of losing customers to competitors led the company to spend so much more on its CAC, reaching $120 in 2016-2017. The thing is that, Hello Fresh was already struggling to get customers with its $80 CAC. Blue Apron panicked, and it paid dearly for it.
There is another factor that is attributed to the downfall of Blue Apron. Still, this factor is not specifically attributed to the company itself but the whole industry: no one is interested in buying meal kits anymore. By the time consumers get their free meal kits, there is a huge chance that they won’t be around for the next one, and remember, it’s the next meal kit that pays for the CAC. People also cancel their subscriptions the moment they receive their free meal kit. The reasons for this vary, but clearly, the meal kit industry isn’t as hot as everyone thought it would be. So what can you learn from this?
What You Can Learn From it
One of Blue Apron’s successes is because it was around when the Cloud was being optimized better than before. You’d be shocked to know that Blue Apron actually used the default Google Cloud for running the business. Google Cloud is something that you wouldn’t use in your business today because of how inefficient it is, especially now when brands like PingCo can offer you the same services with new added benefits at a fraction of the price. It’s also not going to sell your performance analytics to other companies. But it’s interesting to think that back then, businesses that Blue Apron relied on Google Cloud so much for their daily operations, and that without it would have failed the moment it started.
If you’re planning to start an online business, you must use the Cloud to your advantage. It makes collaboration so much easier. It also stores your business files safely and without any hassle. The Cloud can help you keep organize and concentrate on running your business efficiently. It is one of the key software you’re going to need if you want to grow.
Concentrate on Delivering Food
People want food, but they don’t want to spend time cooking it. Not even for a minute. If you’re planning to do a meal kit delivery service, you might also invest in a full-on food delivery service. Let’s be honest here. The meal-kit industry will not have more room for a start-up like yours, despite the pandemic bringing its resurgence. Many consumers would rather order from well-known brands like Blue Apron and its competitors than from a startup like yours.
Budget Your CAC Appropriately
We have talked about the CAC earlier and that Blue Apron didn’t do very well in that regard. Well, they did but only for a while. As a startup, you can use CAC to your advantage, but don’t spend more than $50 on acquiring a single customer as a rule of thumb. Spend lower than that because you’re not going to get healthy returns if you spend about $70 on CAC because there isn’t a good chance that they are coming back. Budget your CAC appropriately and don’t increase it as Blue Apron did. That’ll only make you look more desperate.
Blue Apron is believed to have a resurgence this year due to the pandemic. But no one is entirely sure about its state a couple of years from now. Currently, the company is experiencing closures in different states to reduce costs, but that doesn’t look good for its major shareholders. Learn from the company’s mistakes and do better.