Blue Apron is in a death spiral.
After initially seeking to sell its shares for $US15 to $US17 in an initial public offering, the company was forced to lower the range substantially last week. It sold the shares for $US10, and basically went nowhere on day one — Thursday, June 29.
Since then the stock has dropped 22%, and a week later, it’s fetching about $US7.77. That’s half of what the company thought it might get from investors — at the low end — when it first began to pitch them the shares.
There are a few reasons for this. The most cited is the fact that — while Blue Apron was trying to drum up interest in its IPO — Amazon struck a deal to buy Whole Foods. The worry for Blue Apron is that the combination of Whole Foods reputation for high-quality produce and Amazon’s e-commerce know how could dominate the business of selling people fresh ingredients for individual home cooked meals.
But there’s also the issue of customer retention to think about. Even without Amazon in the picture, Blue Apron has only able to keep 23% of customers for more than a year, according to one analysis. About 72% of customers ditch the service after just six months, according to that estimate.
Comparing the company to other subscription services doesn’t paint a better picture. Blue Apron can only retain 1/3 of its customers after six months, compared to services like Netflix or the Dollar Shave Club which retain around 3/4 of their customers.
Blue Apron is currently trading at $US7.77 and has fallen 3.60% on Friday. The company is currently valued at $US1.34 billion, according to data from Google.