Tuesday, 8 August 2017

Strategy: Blue Apron is spending more than $400 for every new customer — and that's creating a major problem for the company (APRN)

Blue Apron is spending more than $400 for each new customer — and it is taking the company a while to earn that money back.

Blue Apron's new customer math doesn't seem to be adding up.

Blue Apron is spending big to get new customers.

The meal-kit company is spending more than $400 to recruit each new customer, despite making only $236 a customer a quarter, Eater reporter Whitney Filloon said in an interview on Cheddar on Monday.

When Blue Apron filed for its initial public offering in June, the company said its cost of acquiring a subscriber on average was $94. At this point, the vast majority of Blue Apron's marketing costs — which include things like ads to get the word out about the company and free food to get new users hooked — is going toward customer acquisition.

But as Recode pointed out in June, that figure was based on the time frame of 2014 to the first quarter of 2017. If you use the marketing figures from the past 12 months — dividing marketing costs by customers added — the company was spending roughly $460 for each new customer.

Blue Apron told Business Insider that Recode's interpretation of the numbers was "overly-simplistic." For example, the company said, this figure does not correctly interpret how Blue Apron classifies "active" and "inactive" customers.

"The calculation also assumes that our marketing spend is solely devoted to the acquisition of new customers, when in reality our marketing spend is not solely focused on customer acquisition, but also retaining and engaging our customers once acquired," the statement continued.

In the first quarter of 2017, Blue Apron made $236 a customer on average. In Blue Apron's filing to go public, the company said cumulative net revenue per customer for the six months after a customer's first order was $402 for people who joined in 2014, $451 for 2015, and $387 for 2016.

Blue Apron has struggled since its disappointing IPO in June.

When Amazon filed a trademark application on July 6 for "prepared food kits," Blue Apron's stock sank 11%. And, on Friday, its stock dropped 5% after news broke that the company could cut 1,207 positions at its Jersey City, New Jersey, facility, though Blue Apron said employees would have the chance to transfer to a new warehouse.



from pulse.ng - Nigeria's entertainment & lifestyle platform online

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