Blue Apron Plans to Cut 24% of Staff Barely a Month After IPO

https://www.bloomberg.com/news/articles/2017-08-04/blue-apron-plans-to-cut-24-of-staff-barely-a-month-since-ipo

by coloneltcb • 9 years ago

174 103 9 years ago

this_user2• 9 years ago

This IPO has been a complete disaster: The initially lowered the price range, and then did the IPO at the low end of $10. Stock opened for trading at exactly that level, instead of higher, and has lost around 40% since then.

Normally this IPO would not have been that big of a deal. But since the tech IPO pipeline is largely frozen at the moment, APRN was widely seen as a canary in the coalmine for the sector. The fact that it was this poorly received, only underlines the fact that there is currently sector rotation out of tech going on.

whipoodle3• 9 years ago

Yeah, makes sense. Any ideas what the next place to dump institutional money is? Energy? Transportation?

rm_-rf_slash• 9 years ago

Cryptocurrencies.

toomuchtodo2• 9 years ago

Commodities.

lenley• 9 years ago

Transportation / Logistics (energy is shifting away from carbon-based, populations are shifting to cities -- especially in developing countries).

Food. Moving from traditional livestock to other more efficient sources of protein (plant and insect).

jliptzin• 9 years ago

What makes blue apron a tech IPO?

criddell2• 9 years ago

I'm not certain, but I'd guess it's two things:

1. You interact with them almost entirely through the web.

2. Significant logistics around recipe design, ingredient acquisition, and delivery.

If neither of those qualifies them as a tech IPO, then what makes Uber a tech company?

manigandham7• 9 years ago

This isn't a tech* company. It's a prepared food/grocery delivery business with too much VC and some fancy design.

*there's actually no such thing as a tech company at all

Spivak2• 9 years ago

I think it's more accurate to say that every company is a tech company in some capacity.

hari_seldon_7• 9 years ago

The way that I think about a "tech" company is that it is able to scale its growth non-linearly with its staff (or human resources). This isn't a binary rule, and obviously many successful companies are in a gray area -- but I think that it serves as a good litmus test / starting point when thinking about companies.

For example, an app that is running on a few servers can gain users more quickly than it needs to hire additional workers. A company like Blue Apron has to grow its warehouse staff as it gains new subscribers, effectively meaning that its SG&A and overhead costs scale fairly evenly with growth.

_Codemonkeyism• 9 years ago

Google is a tech company, tech is their core. Or SpaceX. But yes food delivery isn't one. Perhaps if they'd use robots.

metaphorm2• 9 years ago

having interviewed at Blue Apron, I can confirm that they very much view themselves as a tech company even though they are not really in the tech business space. The level of Google envy I saw at what is essentially an e-commerce grocery store was insane to me.

psyc• 9 years ago

There are many companies that just sell software.

kinkrtyavimoodh• 9 years ago

A mistake on one end of the axis (BA is a tech company) doesn't need to be corrected by an outrageous statement on the other end of the axis (there is no such thing as a tech company).

Helmet• 9 years ago

I agree. While pinpointing the exact definition of a "tech company" is a game of semantics, I think it's pretty clear that they're simply a meal-prep delivery service.

Same goes for Casper, which dubs itself a "sleep startup" (whatever the hell that means). They sell and deliver mattresses.

odonnellryan• 9 years ago

I have Blue Apron and largely they're really good. It's surprising to see they aren't doing well, apparently?

this_user2• 9 years ago

Well, a company can provide a good service but be a terrible business. See TWTR or SNAP as examples. Uber would be another. They're mostly burning cash without a clear path to profitability. Given their recent scandals, an IPO seems to be extremely far away.

kec2• 9 years ago

They don't have a great moat (all recipes are available for free online for instance) and the meal kit market has gotten very, very crowded since they invented it 5 years ago.

objclxt• 9 years ago

They're hitting the same problems that Groupon hit. Their margins are extremely low, the cost of acquiring and retaining customers is high, and there's no barrier to entry for competitors.

For example, during the last 12 months at Blue Apron they spent $178 million on marketing, and acquired 387,000 customers (these figures are from their IPO). That's $460 per customer. Getting hold of customers is not cheap, and many of these customers are not loyal or are stopping the service after only a few deliveries.

Spivak2• 9 years ago

Look, I get that most people are just going to read the headline, hell most people who share this article will probably never open it, but that's really no excuse for writing an 'article' that has no more substance than the headline.

Questions I want answered in an article like this:

* What is Blue Apron's reason for the job cuts?

* What are Blue Apron's plans for the future? Focusing on core markets, expansions, grocery store partnerships, more product offerings?

* What do their finances look like? Things like customer acquisition, subscription length, service costs? How did the job cuts affect them?

* What is the author's analysis of the situation?

* How's the meal-prep market doing overall?

* Is there a downward trend in these kinds of convenience services?

* Was this going to happen anyway or was there increased pressure from the IPO?

* Is this typical for companies that IPO?

whatok• 9 years ago

The WARN notice showed up about an hour and a half ago. It's still a developing story.

tyrust• 9 years ago

that's really no excuse for writing an 'article' that has no more substance than the headline

I don't really agree. This is breaking news and it is unlikely that the distributor has any of the answers to the questions you've asked. Readers of a new distributor (here, Bloomberg) get the convenience of having to only follow one source to get a variety of breaking news.

padobson• 9 years ago

Seems like there's an opportunity for a publishing platform that can pull up answers to rudimentary questions like these and include them in sidebar to breaking new like this.

ProAm• 9 years ago

Does any of that really matter though? Blue Apron is now accountable to the share holder, so they need to be profitable no matter what. The business doesn't matter, they are fast casual delivered to your house, it's a fragile and easily replaceable market to be in, so they need to be profitable to appear strong.

danpalmer• 9 years ago

If the reason is that they improved operations efficiency by 24%, id day that detail matters a lot.

From the context, I don’t think that’s the reason, but the article should probably say.

gozur88• 9 years ago

They may not have the answers to any of those questions yet. It's still news.

whipoodle3• 9 years ago

You want a steak in 15 seconds. I want a pony and a million dollars. We all can want things, but we shouldn't necessarily expect to get them.

jlarocco• 9 years ago

Did you even read the article yourself? The first word in the article links to their stock info, which should answer most of your questions.

The second sentence explains that the laid off employees chose not to relocate to the new, larger facility in a different city, which answers a few of your other questions.

austenallred3• 9 years ago

It's Bloomberg - they specialize in getting info out quickly and filling in the details as they hear about it. Not thorough, but being first is what, you know, gets you to the top of Hacker News and lets you sell ridiculously expensive stock trading terminals.

Now we see some of the future details coming in:

Blue Apron Holdings Inc. is closing a New Jersey facility and moving 1,270 jobs to a bigger site opening in the state later this year.
More than half of the employees at the Jersey City facility have decided to move to Linden, New Jersey, a company spokeswoman said. According to a public notice, the original Jersey City fulfillment center will close by October. Workers notified Friday of the changes will still have the opportunity to relocate to the new warehouse, the spokeswoman said. The move affects 24 percent of Blue Apron’s workforce.
Opening new site in Linden that will need 2,000 or more staff

They're growing and relocating, this isn't a massive downsizing as the headline would have you believe, unless it's PR spin on something I don't fully understand.

The stock is definitely down 5%, so if you figure it out feel free to let me know and I'll buy some options :)

anonemouse145• 9 years ago

More than half of the employees at the Jersey City facility have decided to move to Linden, New Jersey

Fun fact if you haven't experienced it before. A company will close a facility, and say you can have the same job elsewhere usually requiring drastically different travel time. If you refuse you can't draw unemployment or get any benefits because you turned down the job.

It's not all roses.

geofft• 9 years ago

It looks like Blue Apron misspoke to the press and gave numbers that made it sound like massive layoffs, and Bloomberg wrote the initial version of this article based on the CNBC reporting, which was based on the bad numbers. See this Twitter thread: https://twitter.com/jowens510/status/893545938790363139

grandalf• 9 years ago

* What is Blue Apron's reason for the job cuts?

Companies sometimes increase headcount before a fundraising event to create a signal that growth is occurring, or to maximize one area of visible growth as much as possible. This headcount is not always needed after the raise.

* Was this going to happen anyway or was there increased pressure from the IPO?

After funding the company can focus on essential expenditures and focus its growth and revenue targets on what matters most to investors. It's a good thing for shareholders to cut costs, since headcount can always be increased again when necessary.

digitalneal2• 9 years ago

Didn't Blue Apron and Square Space alone underwrite like half the podcasts in the world last year? Wonder what this means for podcast advertising in Q4/Q1-18

peternicky• 9 years ago

Never heard 'underwrite' used in that context. Can you provide links?

withdavidli• 9 years ago

think they are using it as a synonym for sponsor. it does show up under the definition for underwrite, never heard of it used this way either.

digitalneal2• 9 years ago

I was using the term in a sarcastic tone around the buying of ad space. I'm a weird bird, apologies for the confusion around terminology.

mkmk• 9 years ago

A bit of context:

Due to regulations about advertising on publicly owned wavelengths, one cannot place a 'direct response' ad on a public radio station (think of your local NPR station here). Instead, there is an 'underwriting message' allowed– typically shorter than a traditional ad, and with no direct sales pitch.

Usually somebody that buys podcast ads is also buying radio ads, and sometimes the terms they use get muddy. 'Underwrite' is probably the wrong term to use for podcast advertising, but since it's frequently used for public radio the meaning would be clear if you were in the industry.

cdolan• 9 years ago

This is a great point. Almost every podcast I listen to, from Gimlet to NPR to Mike Rowe, are heavily sponsored by these two firms.

Will be very interesting to see this open doors for other companies who may have been outbid for advertising slots.

thearn4• 9 years ago

Casper mattresses and meundies will have to step up their game.

totalrobe• 9 years ago

and stamps.com

southphillyman• 9 years ago

I've noticed that Bevel ads have dramatically decreased, need to look into how that company is doing.

metaphorm2• 9 years ago

I think it means that podcast advertising is an effective means of raising product awareness but the product itself needs to have value and staying power or else it won't result in a sustainable business model.

silveira• 9 years ago

Audible

seizethecheese• 9 years ago

Just curious, how much are typical customer acquisition costs through podcasts?

cs702• 9 years ago

This is EXTREMELY unusual -- in fact, unheard of -- for a company that just consummated its IPO.

Historically, companies that IPO are in growth mode; they use the IPO to raise more money to fund more investment in growth opportunities.

Think of it this way: in an IPO (initial public offering), a typically young company offers newly issued shares to public-market investors in exchange for fresh money. The investors buy those newly-issued shares if they believe the company can put the money to good use, for example by investing in growth opportunities. If investors believe the company has no growth opportunities or is in retreat, an IPO is unlikely to be successful.

Yet here is a company that consummated its IPO only a month ago and now is firing a quarter of its employees!

forthefuture• 9 years ago

From what I understand of the last 15 years, IPOs are now for cashing out when you've manufactured a solid enough filing to convince normal people that you're worth what the 10 VCs who gave you money say you're worth.

No company IPOs if they don't absolutely have to. It's like conceding that you can't make enough profit privately to recoup your investment on any kind of reasonable timescale.

whipoodle3• 9 years ago

Right, in a certain sense it seems like they filed their IPO at just the right time.

ChuckMcM• 9 years ago

In theory that can't be true. To IPO you don't need to convince "normal people" to IPO you need to convince institutional investors (those that run funds that are called on to fund retirement payouts, people who manage university endowments etc) on a road show that investing in your company will be a 'good thing' because the company is growing. The S-1 and prospectus should tell you all about the risks in clear detail and what is and is not known about the market. These people are not 'normal' people in that they analyze investment opportunities all the time. They usually ask detailed questions and want detailed answers. Usually a representative from the independent accounting firm that audited your financials is along to answer questions as well as the company's CFO to put the best possible spin on it.

These investors are not going to buy your initial stock and then turn around and dump it because that would kill the value of any stock. Instead they have to believe that they can buy your stock and hold it for 12 - 36 months and it will become more valuable so that if they chose to they could sell it into the market over enough months to not disrupt the price and make a return on the money they invested. They need that return because the people who pay them to manage the fund demand a certain standard of performance or they get fired.

If the goal was to just 'cash out' you have to convince all of these people that you're not really going to cash out in order for them to buy into your IPO. That is hard to do with dozens of new investors.

losteverything2• 9 years ago

<cutting 1,270 jobs from its New Jersey facility according to a public notice Friday. It had 5,202 workers as of March 31.

Doesnt that seem like a lot of employees?

I know an average walmart non supercenter store has around 210 total employees.

There tasks must be very labor intensive

pavel_lishin2• 9 years ago

There tasks must be very labor intensive

If these are the folks doing the food prep, almost certainly. Have you ever used something like Blue Apron? All the ingredients have to look good, and be packaged into little individual servings - think two cloves of garlic in a vacuum sealed bag.

Times six for the five other ingredients in the bag, many of which are probably more fiddly than "put two cloves of garlic into bag, and place into vacuum sealer."

Times, say, five thousand packages that have to go out and get delivered tonight so people can make their dinner.

losteverything2• 9 years ago

So.. Their orders won't decrease 24%

The remaining employees will have to work faster and harder.

beager• 9 years ago

From the article, they purport to be gunning to automate the function of most of the folks who will be cut, but whether the cuts are based on some dire condition of Blue Apron or are just part of getting more efficient is obfuscated by the site move and clever explaining.

More to the point in the comments here about Blue Apron and other underperforming IPOs, and the sense of IPOs being cash-out schemes for VCs and founders: Is there a growing climate of such IPOs that would elicit a feeling that tech IPOs are a means to extract money from the public/an exchange by IPO'ing high and letting the share price slide to something real?

lamename• 9 years ago

"... the meal-kit delivery company shifts operations to a bigger site opening in the state later this year...the cuts reflect employees who chose not to make the move."

Sucks for employees who can't make the move, but from the company's perspective, this just precedes growth, no?

shampine• 9 years ago

Yes it seems that way and the headline is extremely misleading.

ControlledBurn• 9 years ago

Seems a bit clickbait-y to me, as the article implies the 1,270 cuts are employees that chose not to move to a new facility that's only 15 miles away.

bbarn• 9 years ago

A bigger facility, at that. Sounds less like trouble and more like growth.

leothekim2• 9 years ago

That headline is misleading. CNBC is reporting this:

"The company's employees were given the option to transfer to the new facility located in Linden, New Jersey. The 1,270 cut jobs indicate those who decided not to transfer, the company said."

https://www.cnbc.com/2017/08/04/blue-apron-to-cut-more-than-...

leothekim2• 9 years ago

And now the Bloomberg headline for the same link changed to "Blue Apron Is Closing Jersey City Facility and Moving 1,270 Jobs". This is irresponsibly different from the original "Blue Apron Plans to Cut 24% of Staff Barely a Month After IPO" headline.

ProfessorLayton• 9 years ago

Looks like this isn't true: https://twitter.com/mdudas/status/893540763921002496

victor106• 9 years ago

Blue Apron sucks. This week was the first time we ordered from them. The garlic they sent was spoiled and rotten. It took quite sometime to make and the instructions are unclear. We will trying other services but never Blue Apron

jajern• 9 years ago

We've been through most of them. I liked Hello Fresh but that wasn't amazing either. Even though ingredients are mostly prepped the preparation and cooking can be pretty time consuming. Lately we've been working on recipes with small ingredient lists that share ingredients. It's cheaper, easier and bigger portions. I like having leftovers to take to work the next day. We don't like grocery shopping but most of the stores near us are doing either at the door pickup or even delivery.

wonder_bread• 9 years ago

Title is absurdly click bait once you actually read a couple of articles about what they are actually doing

Blue Apron Plans to Cut 24% of Staff Barely a Month After IPO

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