And why it might not matter anyway. . .
Amazon filed a trademark for We do the prep. You be the chef., which was widely reported in business news on July 17th. Blue Apron’s stock went tumbling. Then, the stock tumbled again by about 29%, by the end of July, almost 50% from its IPO price. The market reacted to the idea that Amazon, with the pending acquisition of Whole Foods, and a trademark application for what is seemingly a competitive business to Blue Apron, would mean that Blue Apron would not survive. Then in mid-August, the stock price rose 4.3% after news that Jana Partners took a 2% stake in the company. Jana Partners had been involved in the sale of Whole Foods to Amazon.
There are so many points to raise from this six week journey, I’m not ever sure where to begin, but let me break this down.
- Amazon will disrupt everything. No industry is safe. This company has built an engine to understand how to mine mountains of data about everyone who uses their platform and convince most of us to remain loyal to them them through the allure of free shipping and making life easier. The result is that we, consumers, continue to use their engine and they continue to collect data on us. Then Amazon can tackle one industry after another. Every board should be asking, how do they come after us? Amazon just entered the pharmaceuticals industry along with industries it tackled in the last few years including: cloud computing, consumer data, independent production of award winning television and movies, groceries, even bras. Amazon is proving that they can disrupt industries far outside where they began or how others define them.
- Is the market really responding to a trademark filing? A trademark filing is hardly a compelling reason for Blue Apron to call it quits, but perception is everything. The filing by Amazon was an intent to use trademark. It simply means they have an idea and they might want to use it at some time. The way our trademark system works is that the first to file a trademark in a specific category generally has priority rights to use it. Just because Amazon filed a trademark doesn’t mean they will roll out a new business, it just means they are reserving their right to use that name. But, in our 24-7 driven news cycle, seeing this type of trademark registration on the cusp of the Whole Foods acquisition all but ensured to the public that Amazon was coming for Blue Apron.
- Market reaction can’t drive real strategy for companies. Most savvy board members know that day-to-day market value hardly matters unless you are the verge of a merger. Executives know that real strategy requires longer term vision and thinking and not just reacting to a market dip. But this kind of visceral response to something like a trademark filing makes it all that much more difficult for executives to see the forest for the trees. Likewise, is Blue Apron in the clear now because an investor took a big stake in the company and the price rose? No, they have the same problems they had long before Amazon filed a trademark. Technology and consumer behavior will continue to evolve quickly and executives must rise above market fluctuations and focus on what will actually make a difference in whether their company lives or dies.
- None of this may matter anyway. Blue Apron, while a clever idea and a great brand name, may not be a sustainable business model as it currently operates. Much like Webvan tried to build out the concept of deliverable groceries back in the early 2000s and crashed and burned, this concept of meticulously preparing meals (including fresh goods), shipping them to people all over the country and then, most importantly, keeping people hooked on a subscription is not an easy model to maintain. It’s easy to get traction when you give away coupons and free meals. But it’s an expensive luxury to maintain for most households. Even for Amazon, it will not be easy. They just have enough scale they can afford to lose money until they figure out how to do it efficiently, price it to keep customers coming back and then scale it. The fundamental flaw in Blue Apron is that it is likely a fad. A fad that can evolve into something real, but it’s a fad like Vine was for Twitter. I talk with my friends about their use of Blue Apron. Some are busy working Moms like me and others are empty nesters. They all just want to cook a nice meal for their family with less hassle. Blue Apron solved the hassle problem, but then when consumers don’t like the meal they are sent or they realize they could have done this on their own for a lot less money or they don’t want a subscription because they might prefer to do something else that week, then the business model falls apart. If you could just as easily stop in your grocery store and pick up some pre-packaged ingredients, the idea of being tied to a subscription and meal plan from someone else is less appealing. Kroger, Fresh Market and other grocers already fill this void. For example, if I want to save time, I can pick up a package of onions or peppers already chopped up, a spice mix to add to one of my favorites or already prepared meats ready for cooking. The consumer need is real, but the Blue Apron model is flawed. Their key to survival is tackling the model and understanding the future, but sadly all that is reported is that Amazon has a trademark – not even a good one at that.