Blue Apron: Kroger's Missing Ingredient?

by Ben Zelinskas

Blue Apron—the ingredient and recipe meal kit service—is the most recent to make headlines. With a subpar IPO and a stock price that continues to decline, Blue Apron may eventually succumb to the Amazon Effect: either closing its doors or selling out well below the $2 billion it was once valued. Or not. What if Blue Apron joined forces with Kroger?   

Kroger, the number two retailer in the U.S. market, has made recent attempts to deliver the convenience shoppers badly want, both with click and collect and home delivery services. While this is a copy and paste strategy from big box retailers in the UK, it’s been a clunky start and many inconveniences have emerged: crowded parking lots, traffic jams in-aisle as shoppers encounter staff filling orders, and a delivery service that doesn’t always deliver (from the Kroger site: “…or we'll deliver (where available), at a time that's convenient.”).

It’s no question convenience is king, and I think Kroger is working to innovate its business in some of the right areas. What’s not working is attaching click and collect services to an interface that’s built for physical shopping – and that’s where Blue Apron fits in.

 

How can Blue Apron help? 

Digital and logistics are at the heart of Blue Apron’s business model, so doubling down on their localized logistic capabilities within Kroger’s footprint could be a huge win for both. Blue Apron has already proven last-mile ‘fresh’ delivery, so merging this with a nimble fleet of dry good units will begin to scratch the convenience itch for more consumers on more occasions. Kroger currently has 2700+ stores, a significant number compared to the 400+ Amazon just acquired. While it’s not a nationwide play (yet), it would give Kroger and Blue Apron a strong competitive advantage within a relatively large market.

Another plus is that Blue Apron could be integrated into the physical environment. Their brand is associated with high quality foods from sustainable sources, so putting Blue Apron on shelf could be a margin play for Kroger – enhancing perceptions of quality and driving higher rates of mid-tier spending.

It would also transform the physical shopping experience. Today’s consumer places a high value on the acquisition of knowledge and unique experiences. Blue Apron knows great cooking, so let them cook! Kroger could repurpose unpopular areas of their stores* to create experiences where shoppers come to learn with the Blue Apron Chefs. This would be highly immersive and drive more foot traffic for a completely new occasion. It’s also a reciprocal play; when you teach shoppers a valuable new skill, they will repay you with higher rates of premium spending.

With public perceptions fading and economics that appear less than optimal, the time is now for Blue Apron to evolve. And as Kroger continues to tinker with digital, it might be time to make a Bezos-like move and revolutionize their go-to-market strategy with the acquisition of Blue Apron.

 

*Retail research suggests that as much as 42% of the average grocery store goes un-shopped.

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