Categories: Retail

Fixing Meal Delivery By Ditching The Subscriptions

When Blue Apron announces earnings tomorrow on Halloween, the current speculation is that it will be something of a scary experience for investors in the long-struggling meal kit company. Launched in 2012 and widely imitated in the U.S. and around the globe, the meal kit model was at first widely predicted to be the great disrupter for grocery stores created by eCommerce. But the reality of the disruptive innovation hasn’t quite lived up to the hype.

Blue Apron is still in existence — which is more than a lot of the follow-on meal kit businesses that entered the market in Blue Apron’s wake can say as of late 2019 — but its fortunes have been rocky since it entered the public market in the summer of 2017.  Its share price on the day of its initial public offering (IPO) was north of $140. As of this year, the stock price has not been above $20 a share since February, and hasn’t cracked $10 a share since May.

Some of Blue Apron’s problems are unique — specifically operational and employee relations issues. But many of the problems it faces aren’t unique, they are just uniquely observable due to Blue Apron's relatively large size. Consumers like meal kit services — according to PYMNTS data on the meal kit industry, the market generated about  $3 billion in revenue in 2018.

But consumers don’t stay with those meal kit services: One survey found that while 19 percent of U.S. adults have tried a meal kit service, the vast majority of consumers churn out. Of the entire subset of consumers who report having tried meal kits, only 38 percent are still subscribing. And, the data indicates, most relationships with consumers are fairly short. Among those who have tried a meal kit, the largest segment, 39 percent, only used it once. The second largest segment, at 26 percent, used it for under a month. Less than 10 percent of consumers got to the six-month mark.

As for why, cost is generally the overriding reason, with about half of consumers citing that as a reason. Other popular reasons to bow out of meals on subscription include the service being too complicated to manage, recipes being too limited or having learned how to cook from using the service and no longer needing it.

The trouble, in short, is that customers like meal kits — but only in short bursts as opposed to a long-term commitment, a la Netflix. So Wayne Culbreth was trying to build a better meal kit subscription, and came up with a novel solution to the problems plaguing every other player in the game.

Instead of looking to devise better strategies to reduce churn and keep subscribers loyal, he said, why not just admit defeat and decide that maybe meal kits aren’t as ideally suited to subscription services as initially thought, and drop them entirely? Instead of subscribing to FIX, Culbreth says, customers just shop for meal kits and buy them a la carte when they want them. No minimum number of meals to order, no pre-order dates to keep in mind. As long as the customer can get their order in by 10 p.m. the day before they want it, it will be on their doorstep by dinnertime the next day — or any time. FIX allows customers to pick a delivery time, and commits to delivery by its workers within 15 minutes of the selected time.

“I think direct delivery is one of our biggest competitive advantages,” Culbreth said, noting the service also tries to offer a variety of types of meals, and meals for various levels of cooking skill. On one hand are “Easy Peasy”  family-friendly meals that prioritize speed of prep and cook. On the other end there are “Let’s Explore” recipes meant to reach customers who want to keep expanding their cooking skills — and get guidance through that process.

FIX believes that customers can’t be tricked into being loyal by being locked into a subscription. Meal kits are expensive, and consumers have more than demonstrated that they are comfortable with dropping them pretty quickly. But if the food is varied and meant to meet a lot of cooking levels, and the experience is customizable to a consumer's needs in real time, Cublbreath said, they have a reason to keep coming back that has nothing to do with a fee they’ve paid for access. They just want the product.

Although it has a big ambition to fix what is ailing meal kits, FIX is very small today. So far the only city it has launched in is Memphis — though Nashville and eventually urban areas across the U.S. are planned to follow along. That expansion will take some doing, as FIX’s future depends on masterful management of the very high-touch logistics system it has created, one that is managed from what the company describes as a “state-of-the-art production facility” at its headquarters in Memphis. Expansion will require building a network of such production facilities, which will mean proving it can work in the real world first in Memphis.

But if it works, FIX may have found something bigger than merely a solution to family dinner on a Tuesday — a way to fix a meal kit delivery market that entered the eCommerce world sizzling but has been increasingly fizzling for the last two years.

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The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.