Blue Apron Digital Business - Case Study Example

Digital Business Course Name Course Instructor Date Blue Apron Case Study 1. Product/Service Blue Apron’s value proposition is the delivery of great recipes and fresh ingredients to the customer’s doorstep every week. The company’s value proposition is based on the need to solve a perennial problem facing many of its customers. Most people love cooking but have little time for doing shopping in food stores and groceries, they value the convenience of having food delivered to their homes. In the United States, a combination of several factors including work pressures means that most Americans do not have time to cook their own food in their homes. Other people lack knowledge on how to cook their favorite meals. Blue Apron allows these people to order fresh and high quality meals for home cooking. The company delivers fresh foodstuffs and recipes so that its customers can cook their meals any time. Blue Apron works directly with farmers in local communities to create delivery kits. These kits are capable of reducing wastage and storage risk since most food products are perishable. The kits are delivered to customers at affordable prices depending on the package one chooses (Blue Apron 2016). The unique thing about Blue Apron’s revenue model is that the meal kits are sold as subscription for a two or four-people dinner. The subscription platform allows the company to have an accurate revenue growth and demand forecasting abilities, which helps in formulation of business strategies. With its innovative business and strong market presence, Blue Apron has more growth opportunities especially as online platforms become a critical medium for commerce (Blue Apron 2016). In a way, many consumers prefer the online method of delivering grocery as opposed to making actual visits to grocery stores. This is clearly evidenced by the rapid increase in the number of meals Blue Apron has been delivering each year. The company delivers about 5 million meal kits a month, an indication that its business model has been accepted by customers as an innovative solution to their needs. The digital opportunity has significantly pushed up demand for the company’s services, making it the largest and most innovative meal delivery company in the US. However, new companies have emerged with similar business models, meaning that Blue Apron must take drastic measures to protect its competitive advantages. With its initial success, Blue Apron has opportunities to expand the range of products and services so as to grow further. For instance, the company can venture into snacks, lunches and breakfasts instead of concentrating on dinners only. Such an expansion will work well for Blue Apron because the company has already demonstrated great focus in the grocery supply chain. The company can also partner with grocery stores to enhance sourcing and distribution of products to the market. Its partnerships with local farmers mean that the company is able to deliver fresh products to its customers, which is a great source of competitive advantages. As Wiebe (2015) explains, fresh farm products are greatly valued in the grocery retail industry than processed ones. For this reason, any company that is able to deliver such produce into its customers door step has god chances of succeeding in the grocery industry. The most important strategy for competiveness and effective control in the meal kit delivery market is monitoring of the supply chain, Blue Apron has been so successful mainly because it manages its own distribution system. The company sources products from local markets (farmers) and delivers them in well packaged and refrigerated containers to preserve the freshness. Another key competitive strategy is portioned delivery and bulk purchasing. This strategy is based on the idea of minimizing wastage, considering that food is highly perishable. Bulk purchasing allows Blue Apron to negotiate price discounts with farmers. By portioning deliveries to a limited number of recipes a week, Blue Apron has been able to allocate ingredients efficiently and in a way that reduces wastage. Integration of data analytics is also another important competitive strategy for meal kit delivery companies. Through its subscription-based model, Blue Apron has been able to gather vital data about its customers, which facilitates predictive modeling of market trends and future changes in service demands. Through proactive intelligence gathering, meal delivery companies can develop internal tool suites to more effectively manage vital workflows such as order processing, sourcing of products and ecommerce (Wiebe, 2015). 2. Market/Industry The meal kit delivery industry is a young and rapidly growing industry with potentials to cause massive disruptions in the restaurant and the traditional grocery industries. The industry is dominated by a few companies, most notably Blue Apron, Hello Marley, HelloFresh, Plated and a few others emerging companies that sell subscription-based home cooking meals. These meals are delivered complete with specific meal recipes, portioned ingredients and recipe cards. The services offered are popular among many American consumers because of the convenience and possibility of do-it-yourself style of cooking. The market is projected to generate about $1.5 million in sales revenue in 2016 and likely to grow into a multi-billion dollar industry by early 2020s. These statistics are quite impressive because the companies that pioneered the food delivery services have only been in existence for less than five years. With sustained growth, some meal kit delivery companies may go public, although a few may fall by the wayside due to growing competition. Estimates show that tens of thousands of people in the United States have subscribed to the fresh meal kits and that the number of subscribers will continue growing as the service becomes popular (Johnston 2008, p. 228). Like other players in the food industry, service kit companies respond to the five forces affecting the industry. The threat of competitive rivalry is very weak because the industry is new and existing players are yet to develop enough capacity to tap into all markets. In fact, there are many explored markets within this industry. In addition, the business model is new and has not been fully adopted by most customers. Service providers are still developing their competencies to effectively attract many customers. Because competitive rivalry is low, the threat of entry of new industry players is very high. The industry is not saturated as is the grocery industry. The only factor that may discourage many potential new market entrants is the high initial capital outlay required to effectively venture into the industry. According to Vasconcellos (2003, p.26), the perishable nature of food products makes businesses in this industry a high risk venture. Therefore, potential investors must have enough resources to cushion off any risks. The bargaining power of customers remains high. Despite the convenience brought by delivery of meals to door steps, most customers are still skeptic about these services. Others prefer to go to the stores to pick their favorite foodstuffs. For some customers, they can easily switch to substitute services or the traditional groceries, implying low switching costs in this industry. In addition, customers have the necessary information that they can use to evaluate the effectiveness of various services, meaning that the bargaining power of customers is strong. Therefore, customers have the capacity to influence trends in the industry including market growth in both the short-term and long-term (Wiebe 2015). The power of suppliers (mainly farmers) is moderate in this industry. The number of food suppliers is very large. Besides supplying to meal kit delivery companies, they also supply to groceries and other food retailers, which reduces their bargaining power in any single industry. Moreover, most suppliers are not able to deliver truly non-GMO or organic foodstuffs, hence that they cannot impose strong demands on their customers (meal delivery companies). The few suppliers who have specialized in organic food exercise strong influence in the market. Blue Apron capitalizes on this opportunity by expanding its supply chain to dilute the bargaining power of suppliers further (Johnston & Szabo 2011, p. 303). Lastly, the force of substitutes is very strong because of the widespread availability of alternative products and services. Substitute products (especially in grocery stores) are sold at significantly low prices than what delivery kit companies charge. This, together with the fact that switching costs for this industry are weak makes the threat of alternative products high. Most industry players have not developed any meaningful mechanism for locking in customers. Blue Apron uses its fresh produce appeal and convenience as a strategy for preventing customers from switching to alternative products. However, this strategy is not all that effective in holding back customers (Vasconcellos 2003, p. 16). Like any other start-up business, all meal kit delivery companies have one key goal in common –to cause disruptions in the food retail industry. For many years, the food retail industry has been dominated by grocery stores, restaurants and chain stores, which sell a wide variety of fresh and processed food. The meal kit delivery services are a paradigm shift in the manner in which food is delivered. Companies operating in this new industry seek to fundamentally change the way in which customers access food products. Instead of customers aging to the stores to purchase food, the the meal delivery companies allow customers to make order and wait for the meals in their homes. Among other disruptions, this business model will significantly reduce the exclusive profits traditionally enjoyed by food retailers (especially grocery stores and supermarkets) (Konrad 2015). 3. Protection Strategy Blue Apron treasures its intellectual properties as a key driver of competitive advantages (Blue Apron 2016). Being a successful start-up company, it is determined to protect its intellectual creation from competitors. Blue Apron uses copyrights, trademarks and trade secrets to protect its intellectual properties. The copyrights protect the company’s original works of computer software and design packages. Trademarks comprise of the design, symbols and word phrases used by Blue Apron. These trademarks have been registered with relevant regulatory agencies and have been effective in protecting Blue Apron’s IP rights. The company uses trade secrets to protect important business information. Generally, the company’s business model is very imitable and hence there are lots of companies that have come up with similar models as that of Blue Apron. Conclusion Blue Apron’s meal delivery business model is causing significant disruptions in the food sector. Thousands of consumers who prefer to eat fresh farm products cooked at home have a convenient option to have their favorite meals delivered to their doorsteps. Being a pioneer in the industry, Blue Apron has done a good service of delivering fresh ingredients and offering innovative recipes for a variety of dishes. This has made the company very popular among its consumers. Blue Apron’s business model has been heavily imitated by several other companies and thus there is growing competition in this emerging market. References Blue Apron, 2016, About us. Viewed October 4, 2016, https://www.blueapron.com/ Johnston, J 2008, ‘The citizen-consumer hybrid: ideological tensions and the case of Whole Foods Market’, Theory and Society, vol. 37, no. 3, pp. 229-270. Johnston, J and Szabo, M 2011, ‘Reflexivity and the Whole Foods Market consumer: the lived experience of shopping for change’, Agriculture and Human Values, vol. 28, no. 3, pp. 303-319. Konrad , A, 2015, Blue Apron's Got Big Plans For Dinner -- But So Do Its Hungry Rivals. Viewed October 4, 2016 http://www.forbes.com/sites/alexkonrad/2015/10/14/inside-blue-apron-and-the-meal-kit-rush/#2b72d0057af9 Vasconcellos, J A 2003, Quality Assurance for the Food Industry: A Practical Approach. Boston: CRC Press. Wiebe, J 2015, Is Blue Apron the Future of Home Cooking in America?, Viewed October 4, 2016 http://www.eater.com/2015/6/26/8839791/blue-apron-review-pros-cons-environment Read More