Amazon versus Blue Apron: Who will gain the upper hand?

Produce
The key for Blue Apron and Amazon to continue their success will be personalization.

Meal kit delivery service Blue Apron has been forced to cut its valuation ahead of its initial public offering. Over the course of the last few weeks, the company announced plans to raise up to $510 million at $15 to $17 a share. However, Amazon’s recent acquisition of Whole Foods may shadow the deal and resulted in Blue Apron lowering initial IPO shares to be priced between $10 and $11.

The more than $13 billion deal for Whole Foods has plummeted Blue Apron’s stocks, and now management is stressing that its prepared ingredients are different than a grocery delivery service. 

In order to receive full value at the IPO, Blue Apron will need to convince investors that it’s a lifestyle retailer, not an e-commerce grocer. As of March, the company announced its revenue was up 133% from the same period one year prior. 

But will the merger of Amazon and Whole Foods ultimately shatter Blue Apron's business model?

"As experts in customer loyalty, we can’t speak to the IPO pricing, but we do know that customer loyalty is driven by convenience and specifically, the ease of doing business with your brand," Kate Hogenson, a strategic loyalty consultant at Kobie Marketing, told FierceRetail.

Kate Hogenson

"It will be difficult for Blue Apron to compete with Amazon’s ease of doing business once Whole Foods’ prepared meals are available for speedy delivery to the large and very loyal Amazon Prime member base. Blue Apron has a traditional subscription service, but Amazon Prime members receive a more complete and custom package—such as suggestions for the best movie to go with their dinner. It’s been extremely successful."  

So what does this Blue Apron cut in valuation mean for the grocery industry at large? According to Hogenson, neither the Amazon-Whole Foods solution or Blue Apron will entirely satisfy consumer needs, as some shoppers will always prefer to inspect or pick out their own foods in-store. And services like Blue Apron will continue to provide competition to brick-and-mortar stores for those customers when they don’t have the time to both shop and cook and for those who want a more upscale experience.

"But even those high-involvement customers don’t want to do all that shopping and chopping every night. That’s where prepared meals, conveniently ordered and delivered, come in. The brick-and-mortar providers who survive will be the ones who amp up the experiential side of their stores without losing convenience, specifically the ease of getting in and out of the store," she said. 

Therefore, the winning models of the future are omnichannel and provide elements from all of these grocery options. 

"Personalizing offers and options to individual customers will be the ultimate differentiator in this kind of competitive environment," Hogenson added. 

Still, Amazon’s convenience does potentially threaten Blue Apron due to the market's easy payment system and “last mile” delivery, combined with Prime’s loyal customer base who are already in the habit of going to Amazon for their needs.

The key for Blue Apron and Amazon to continue their success will be personalization. 

"Customers are loyal to the brands who go beyond price and convenience to form a human connection, especially when it comes to making meals," Hogenson said. "The most successful loyalty programs solve problems that customers didn’t even realize they had. To stay competitive against Amazon, Blue Apron will need to discover and implement those solutions."

And the future is uncertain for how Amazon's acquisition of Whole Foods will affect the retailer's grocery markets, now a direct competitor with Blue Apron. Right now, Whole Foods has mastered the personalization element with on-site staff who can help suggest meal preparation and Amazon has the convenience factor cornered. 

"However, if this merger relies on only convenience, they may gain momentary loyalty but struggle with delivering the kind of emotional connection that is critical to the overall experience that wins genuine loyalty," she added.