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How many users are really getting meals from services like Blue Apron (main focus) every week, and once a month. Meaning, do most of the users click on the "Skip this delivery" option, most of the time, or do the avg. user does want to get/pay for meals every week?
Hello! Thank you for your request on how customers use meal kit subscription services, such as Blue Apron. In short, Blue Apron delivers 8 million meals per month, which resulted in a revenue of over $1 billion in 2016. Half of the customers who order from Blue Apron place a second order the following week; however, retention rates sharply decline after this period. The reasons customers typically cancel orders or subscriptions include a lack of prep time and wanting to eat "what they want, when they want." Below, you will find a deep dive of my findings.
METHODOLOGY
Blue Apron is a privately held company, and an extensive search for annual reports and company financial filings revealed this information is not publicly available through these channels. Despite this, we were able to locate this information in trusted media sites. Information regarding Blue Apron's market share, retention rates, and reasons customers provide for ceasing deliveries were obtained through trusted media sites, industry reports, and market reports. According to Blue Apron's website, the company only offers 2 plans, both of which are on a weekly basis. There is no monthly delivery option available. An extensive search through available sources revealed most meal-kit subscription services also provide plans on a weekly basis. No information was found regarding the differentiation of statistics based on varying time frames.
BLUE APRON MARKET SHARE
Business Insider states Blue Apron delivers approximately 8 million meals per month to subscribers. According to 1010 Data, a big data analytics platform, Blue Apron maintains 71% of the meal kit subscription market, which is worth $1.5 billion. Using these figures, we can estimate that Blue Apron's 2016 revenue was (1.5 billion * 71%) = $1.065 billion. This figure is supported by an article in Recode, where "multiple sources familiar with the company’s financials" estimated over $1 billion in revenue for the year. This represents a 9.8% compound monthly growth rate for the company.
CUSTOMER RETENTION RATES
Research reveals that 77% of customers who place an order for meal-kit delivery over the past two years placed to or more orders, while approximately 48% placed at least five orders. With respect to Blue Apron, 50% of customers who placed an order with the company placed another order the following week, as compared to approximately 40% for Plated and approximately 36% for Hello Fresh.
After the initial two weeks, Blue Apron sees a sharp decline in returning customers for week three, then a steady continued decrease over the next 24 weeks. Declines in returning customers for Hello Fresh and Plated are less severe, remaining gradual throughout the 24 week period.
An article by CNBC notes the early boom of the meal-kit subscription industry may be tempering. Across the market as a whole, only 77% of subscribers retain their subscription after the first month, 48% after six months, and only 29% after one year. Specific to Blue Apron, the retention rate after 6 months is 28%, and 18% after one year, which is significantly lower than the average reported by CNBC. These customer retention rates greatly impact meal subscription services, many of which offer a huge discount or promotion for first-time users to sign up for the service. When customers do not return for additional deliveries, this results in substantial lost revenue.
Customers provide many reasons for canceling deliveries or subscriptions. For example, many say they want to eat "what they want, when they want," meaning it is more convenient to go to the grocery store in order to fulfill this need. Some customers cite the extensive prep time as a reason for canceling deliveries, while others say they feel bad about wasting food when they do not have time to cook.
CONCLUSION
To wrap it up, the meal-kit subscription industry had a revenue of $1.5 billion in 2016, with Blue Apron maintaining 71% of the market share and delivering 8 million meals per month. Fifty percent of first-time Blue Apron customers ordered a second kit the following week; however, retention rates sharply decline after this time period, resulting in lost revenue. Reasons for canceling deliveries include prep time, lack of time to cook, and wanting to eat something different than what is delivered.
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