Homepage / Technology / Blue Apron is stuck in a dangerous cycle that has nothing to do with Amazon
My kids get 'no screen time whatsoever,' says Silicon Valley investor Chamath Palihapitiya I owned bitcoin for a weekend and here's what I learned NYU's Scott Galloway on bitcoin: It shows young people 'have no faith in our institutions' Some Ryanair pilots in Ireland to strike, German union steps up pressure Companies are already paying a tax rate as low as 13%, economist Yardeni estimates Facebook slams former exec Palihapitiya, saying it 'was a very different company back then' 80% of Wall Street economists, strategists believe bitcoin is a bubble: Survey Facebook to book advertising revenue locally amid political pressure Strategist Tom Lee: Young people will drive bitcoin gains just as boomers boosted stocks in the '80s This founder started in his parents' garage—now his company does over $100 million a year Activision shares to get a boost from Overwatch, Diablo sequels, Goldman says Verizon will launch over-the-top service before year-end with NFL as key piece, analyst predicts Chamath Palihapitiya: Apple is 'no different than Louis Vuitton or any other luxury good' Passport's flagship fund to close after 'unacceptable' returns Apple's powerful new computer launches December 14 Despite a deluge of criticism, Mark Zuckerberg had a bountiful year Chamath Palihapitiya says Elon Musk is the 'most important entrepreneur of our generation' Senior Australian politician resigns over China ties scandal Forget bitcoin, one of its biggest cryptocurrency rivals is up nearly 5,800 percent this year Bitcoin futures fall on second day of trading on very low volume as interest wanes Bitcoin millionaire: Don't buy bitcoin Stocks making the biggest moves premarket: PEP, MAT, VZ, MYL & more Tech high flyers could soar 10% or more next year, investor Paul Meeks says Goldman Sachs predicts bumper returns for commodities next year Amazon is not a monopoly but there's no question why it's so dominant, tech investor Palihapitiya says Starbucks customer laptops hacked to mine cryptocurrency Fed Survey: Tax cuts and rate hikes on the way Social Capital's Palihapitiya says bitcoin is going to $1 million in the next 20 years Bitcoin bulls looking to diversify can now put money in a crypto-index fund Ex-Facebook executive Chamath Palihapitiya: Social media is creating a society that confuses 'truth and popularity' More American jobs? Broadcom deal might mean the opposite The bull case for gold as bitcoin captivates America One person reported dead after Austrian gas hub explosion Bitcoin bubble could lead to 'destructive' consequences, UBS says While you were watching bitcoin, the world’s second-largest cryptocurrency hit a big milestone French retail giant to buy mall operator Westfield in the biggest takeover of an Australian company ever Bitcoin futures launch is not taking away demand from gold, Goldman Sachs says Germany outpaces UK for commercial real estate investment, survey finds UK inflation comes in at 3.1 percent, highest since March 2012 Amazon expands its cloud presence in China as it battles the country's internet giants Robert Gates says a North Korean nuclear warhead will soon be an accepted reality European markets set to open higher as investors look ahead to Fed, ECB meetings Cryptocurrencies could be rocked by major hacks next year, expert warns Trump's 'ill-advised' move over Jerusalem has set back peace process, former secretary of defense says Four charts from Google make the argument for a growing, $50 billion e-commerce bloc Corporate deals slowed dramatically in 2017, but at least one country bucked the trend The 'alt-right' created a parallel internet. It's a holy mess Google eclipses Facebook as the top source of traffic for online publishers Cramer Remix: Acadia is the most volatile stock I’ve ever covered — and it’s worth speculating on Topgolf CEO sees 'real growth' in golf, says he's 'winning' with millennials Cramer: Auto parts stocks like O'Reilly wrongly sold off and are buys Asian markets look to follow Wall Street's strong lead, and New Zealand dollar firms Cramer tackles the question of why the market has been so positive for 2017 Electric vehicle demand is driving huge jump in number of battery factories around the world Bitcoin has aspects of a bubble, but it's OK to 'play' with it: Economist Robert Shiller Icahn wages new fight with Xerox with plans to nominate 4 to board Cisco CEO Chuck Robbins thinks he's finally found the key to growing in China Why Apple just spent up to $400 million on song-identification app Shazam Trump orders NASA to send American astronauts to the moon, Mars People are taking out mortgages to buy bitcoin, says securities regulator Here are JPMorgan’s favorite chip stock picks for the next year Ford says hybrids beat electric for self-driving cars Zuckerberg's purchase of Instagram was the perfect 'teen and millennial hedge' for Facebook Shares of retailer-turned-bitcoin-play Overstock.com rocket higher after Morgan Stanley reveals stake Amazon has sharply curtailed hiring in Seattle as it seeks second headquarters Start-up Fuzzy offers house calls for your pets for $468 a year Manufacturing CEO survey shows record high optimism on prospect of tax reform A top VC explains which technologies will change society the most in 10 years American Express is getting rid of signatures for credit card purchases Bitcoin futures up and running but trading is light Apple to buy music recognition app Shazam The smart play on bitcoin: Don't mine the gold, sell the picks and shovels Cramer: Bitcoin's futures launch is a 'very big victory' for the digital currency If Tim Cook is right about AR, Lumentum is a buy On Main Street the bigger you are, the better tax reform looks: CNBC/SurveyMonkey Ethereum creator compares crypto mania to world’s biggest art auction UBS: Cryptocurrencies like bitcoin are ‘the bubble to end all bubbles’ Google's high-end smart speaker, which rivals a Sonos, is now available Bitcoin futures launch could be bad for bitcoin’s price, tech analyst Gene Munster says Bank of America analyst predicts EA will bring back 'Star Wars' micro-transactions despite uproar European finance ministers call for US tax reform rethink Goldman upgrades ADP, says it will be 'outsized beneficiary' of GOP tax cuts iPhone X supply has improved, with most models now shipping in 2-5 days Former Facebook exec Chamath Palihapitiya says social media is ripping apart society Investors 'haven't missed the train' on bitcoin yet, but it could be a wild ride, analyst says Stocks making the biggest moves premarket: ADP, FIT, X, LKQ & more Vladimir Putin orders Russian forces to start pulling out of Syria NFL and Verizon strike a mobile deal to expand live game streaming Fueled by investor taste for liquid alternative investments, hedge fund conversions skyrocket Uber’s fight for survival in London is pushed to 2018 but another key Europe ruling is imminent Bitcoin price jumps $2,000 after Cboe futures launch Contenders emerge for the No. 2 Fed job as search narrows Investors are dumping gold to buy bitcoin, says strategist Currency expert says there's one fundamental reason behind bitcoin's runaway rally Global arms sales rise for first time since 2010 Trader who called bitcoin rally says cryptocurrency will surge above $100,000 in 2018 Chinese drone maker wants to fly people around, and it says it will turn a profit in two years European markets set to start week higher ahead of Fed, ECB meetings New Zealand's central bank just got a new governor How Chinese spies used LinkedIn to snoop on German politicians

Technology

Blue Apron is stuck in a dangerous cycle that has nothing to do with Amazon

One of the clouds hanging over Blue Apron since its IPO has been the looming threat of what an AmazonWhole Foods combination could mean for its business.

But when Blue Apron’s stock got hammered on Thursday, falling more than 17 percent by day’s end, that had nothing to do with it; it was the company’s disappointing financial forecast for the back half of the year that was the culprit.

The company is in the midst of a vicious cycle that goes something like this: Blue Apron is experiencing warehouse issues that are causing customer satisfaction issues that are causing retention issues that are causing marketing issues that are causing revenue issues.

More from Recode:
We’ve studied gender and STEM for 25 years. The science doesn’t support the Google memo.
What led to Benchmark’s ‘unprecedented’ lawsuit? Maybe founder-friendly provisions that made Uber founder Travis Kalanick king.
Is Snap having its Facebook stock moment? Or are things really as bad as they seem?

Got that? Let’s go piece by piece, starting at the top.

Blue Apron announced on Thursday that it has encountered “unexpected complexities” with the opening of a new, highly automated warehouse in Linden, N.J., and that the transition from its previous New Jersey warehouse is taking longer than expected. (This probably explains the exit of the company’s co-founder and Chief Operating Officer Matthew Wadiak, which was announced just last month.)

At the same time, Blue Apron has been adding new technology and processes to its other warehouses that require a lot of training.

“[W]e have over 5,000 employees who are all being trained in new processes and new systems that are more advanced than the systems that they are used to working with,” said CEO Matt Salzberg, who will sit for an interview at Recode’s Code Commerce event on September 13, on a call with analysts.

“There is … cost associated with that training of people who are not doing day-to-day proactive work while they’re being trained,” he added, “as well as impact from people who are doing work who are just early in their life cycle of being trained.”

The result has been mistakes that are hurting Blue Apron’s OTIF rates — that is, the percentage of orders that arrive on time and with all the correct ingredients (in full), the company said.

What happens when a new customer tries out Blue Apron for the first time and gets a late delivery or wrong ingredients? Yep, they bail.

And when Blue Apron’s new customers are bailing at a higher rate than before, Blue Apron’s marketing investments become less efficient. Or, said another way, the company wastes marketing dollars.

And when you’re a newly public company spending heavily on marketing as it is, you’re going to reduce marketing spend when you know it’s not going to be as effective as you would like.

But what happens when you plan to aggressively ramp down marketing, from 20 percent of revenue in the first half of the year to around 15 percent in the back half? Your revenue forecasts suffer.

Blue Apron generated $421 million in revenue in the second half of 2016; now, the company is only forecasting $380 million to $400 million for the second half of 2017. Ouch.

When you go from $80 million to $800 million in revenue in two years, stuff is bound to break. And for Blue Apron, it has.

“[W]hen you’re dealing with something like perishable food, it makes it even more complex because perishable food isn’t a widget, right?” Salzberg said on the analyst call. “Quality really matters. The kind of supply chain that you build really matters.”

The good news Blue Apron is trying to pitch to investors is that they believe most of the warehouse hurdles are behind them and that the new facility is taking on more and more of the company’s volume.

That trend will be crucial, since the company’s ability to roll out new product enhancements — like the choice of ordering two meals a week instead of three — is crucial to it building a sustainable business that can retain existing customers and attract new ones affordably.

But if unexpected warehouse issues can so disrupt operations once, how bad would things get if they aren’t fixed or happen again? With a market cap now under $1 billion, Blue Apron doesn’t want to find out.

Source: Tech CNBC
Blue Apron is stuck in a dangerous cycle that has nothing to do with Amazon

Comments are closed.