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Blue Apron Delves into New Channels to Expand Customer Reach

Blue Apron is expanding into the retail and on-demand delivery channels, and enhancing its direct-to-consumer model, as it debuts new products to help propel the company forward. The company hopes to break even by the fourth quarter of 2018, said CEO Brad Dickerson on a second-quarter earnings call Aug. 2. 

“We are focused on serving consumers with specific behaviors in mind, whether they are planning a week of meals, a few days in advance, browsing the aisle of the store, looking for a grab and go offering on their way home, or seeking a product that can be delivered on-demand,” Dickerson said.

The retail channel is the future for the company, as it explores the sector by testing its products in about 80 Costco locations. 

“The important thing for us is continuing pace of increasing exposure and increasing store count overall on a month-by-month basis for Costco,” Dickerson said.

The company believes Costco is the best place for it to learn and be successful, noted Tim Smith, SVP and general manager of consumer products, and he hopes Blue Apron will be able to expand to other retail partners beyond that.

“Getting out there and meeting customers on their terms is a big part of our ability to return to growth,” Smith said. 

In addition, another benefit of retail partnerships is that although Blue Apron has to share margins with the retailer, shipping costs for full trailer loads to retail distribution centers are lower than shipping direct-to-consumers.

With regard to Blue Apron’s core direct-to-consumer model, the company is building a more diverse product selection. Addressing a wide range of cooking, taste and dietary preferences is key, Dickerson said. 

In September, coinciding with back-to-school, Blue Apron will launch recipes that can be prepared in 20 to 25 minutes, and the company will expand its Whole30 meal plan recipes to include three meals per week.

Smith noted that while Blue Apron doesn’t have an issue with driving people to its website, the company is finding it difficult to convert people to actual subscribers. The company hopes the new product offerings will address a wider range of consumer preferences and strengthen the direct-to-consumer platform.

“Doing those things is what we believe is actually going to drive that conversion number up on the kind of consistent number of site visitors that we have, and if we do that, the direct-to- consumer model will return to growth,” Smith said.

Blue Apron intends to expand into on-demand delivery to grow the business as well. The company will test on-demand delivery through its e-commerce platform and third-party delivery partners on the East and West coasts.

The goal is to develop the company’s overall customer reach by adapting to various consumer needs and behaviors, specifically concerning consumers who prefer to make their dinner choices closer to the occasion.

Although Blue Apron offers a distinct value preposition for the customer with its direct-to-consumer model, Dickerson noted many customers reported leaving the company’s subscription service because it didn’t work well with their lifestyle.

“Maybe they have been buying their food physically in a retail location and buying food online is a challenge for them,” Dickerson said. “We believe many customers would choose to access our brand through more of a retail location.”

Dickerson said while he expects expanding to the retail and on-demand delivery channels will cannibalize Blue Apron’s traditional direct-to-consumer model somewhat, the intent is really more about expanding customer reach.

“The purpose of this expansion is more about accessing an increasing number of customers and giving customers access to our brand,” Dickerson noted.

For the full story, go to this week’s Food Institute Report.