Blue Apron is willing to lose customers in order to make a profit

As Blue Apron tries to improve its margins, the company is in some tough negotiations.

Speaking to analysts on Thursday (March 16) to discuss the meal kit supplier’s fourth-quarter and full-year 2022 earnings, the firm said it would compromise as it tries to pull the company out of its financial hole by improving profit margins. about customer acquisition and retention to a certain extent.

“Our focus on profitability is expected to put pressure on our bottom line and customer numbers in 2023,” said CEO Linda Finley. “This does not mean we are prioritizing revenue and customer growth, but rather focusing our business goals to support our path to near-term profitability.”

In fact, customer numbers fell 11% year-over-year and 8% from the prior quarter, which the company attributed to lower marketing spending and consumer belt-tightening due to inflation. True, the cost of the rest of the customers was high. Average revenue per customer increased 12% year-over-year and 5% quarter-over-quarter.

Findley noted that the company has shifted its marketing spending from media buys aimed at raising awareness to advertising efforts aimed at alleviating consumers’ initial concerns about the price of meal kits, from which point the company can target those consumers.

“People are very price-sensitive at the beginning of trying a meal kit, and then once they’re in, they’re much more price-sensitive,” he said. “We can say, ‘Let’s target fewer customers with better promotion, bring them in, and then the lifetime value goes up.'”

Once customers are on board, he says, it’s easier to get them to spend more by encouraging them to add extras, top-rated recipes and options to customize their meals to their personal preferences.

Notably, as Blue Apron’s customer base shrinks in 2022, the share of customers purchasing meal kits actually increased, according to PYMNTS’ 12 Months of ConnectedEconomy™: 33,000 Consumers’ Role of Digital in Their Everyday Lives. Lives,” which is based on responses from tens of thousands of US consumers throughout the year. The report notes that the share of consumers who reported buying from online subscription services that deliver meal kits increased from 25% in December 2021 to 31% in November 2022.

Although Blue Apron spends less on media, the company continues to find ways to reach new customers through partnerships with companies such as Walmart, Amazon and DoorDash.

The meal kit provider recently announced Tuesday (March 14) the launch of Blue Apron PLUS through Verizon’s +play subscription management platform — the only meal kit available on the platform to date — offering deals and savings to Verizon customers.

“The partnership allows us to tap into a new and engaged customer base,” Blue Apron Chief Revenue Officer Amber Minson said in a statement.

Findley noted on the earnings call that these types of partnerships have allowed the company to “unlock efficiencies” in marketing, part of an ongoing effort to improve profitability.

However, margins were down slightly year-over-year and were up just 2.7% from the prior quarter, while revenue was down roughly the same amount from Q3 and was flat from last year.