After Amazon made a shocking announcement about its acquisition of Whole Foods, Inc., analysts speculated about what comes next. Now we know. Amazon has filed trademarks for the meal kit delivery niche, and looks poised to dominate its new market. How big a bump can it be for Jeff Bezos and co? How bad are things looking for Blue Apron?
How Will Amazon’s Move Affect Blue Apron?
The meal kit market is currently valued at $2.2 billion. That’s without Amazon’s influence. Now, the world’s largest online retailer is set to enter the market, and traders can expect that market to explode.
Blue Apron just launched its IPO, and got off to a shaky start. And things are about to get worse for the current industry leader. Fortunately for Blue Apron, they’ve got a little time before Amazon can go toe to toe with them. But is it enough time for Blue Apron to set up any kind of competitive advantage?
While Blue Apron might have a reputation as the industry leader, and even a fair head start, Amazon is one of the most highly regarded and trusted retailers in the world. And on top of that, Amazon has more money than Blue Apron. A LOT more money. And those funds can go straight to marketing and offering free trials to new users.
But Amazon’s BIGGEST advantage is its user base.
While no one knows exactly how many Amazon Prime Members the company has, revenue from Prime subscriptions in 2016 was reported at $6.4 Billion. Which, if you look at each subscriber paying the yearly $99 subscription cost, comes out to about 65 million Amazon Prime subscribers who already know, trust, and pay Amazon.
Blue Apron just can’t compete with that.
Market research suggests about 5 percent of U.S. households currently use meal kit services, despite their growing popularity. Part of the reason for such a low number has been the expensive cost of the kits. However, given Amazon’s penchant for low prices and high service, that’s expected to change, with more people joining the trend through Amazon’s low costs.
Watch the news from Investors’ Business Daily about Blue Apron’s plunge as Amazon eyes meal kit deliveries:
Expect shares of Blue Apron Holdings, inc. (APRN), which tumbled more than 10 percent on the news, to continue DOWN, while shares of Amazon.com, Inc. (AMZN), which spiked on the news, will continue UP.
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