Meal kit delivery providers turn up the heat
A few weeks after Marley Spoon launched Dinnerly, a budget-friendly meal kit brand, rival company HelloFresh has come out with a new range of gourmet recipes, which it says will boost average order value (AOV) and its bottom line.
“We know our customers are interested to add a more adventurous meal to the repertoire of quick and easy recipes that make up our core product,” HelloFresh Australia’s founder and CEO Tom Rutledge told IRW.
“It’s also a positive development commercially, as it allows us to increase our basket size.”
HelloFresh’s AOV is “strong and growing”, according to Rutledge. But with fixed overhead and the cost of fulfilment, this figure is crucial to profitability, which HelloFresh’s Berlin-based parent company expects to reach this year.
Rutledge said HelloFresh now delivers more than half a million meals across the country each week and he estimated that the business is more than five times larger than competitors providing similar services in Australia.
HelloFresh’s scale has recently enabled it to expand into regional areas, which have typically proved challenging and costly for online retailers to service. This expansion in turn is driving further customer insights, which will reveal opportunities to launch new offerings, such as the gourmet range, Rutledge said..
“With that scale, there are a number of contributing factors that allow us to increase our reach, such as more routine delivery runs, extensive delivery window options and high-stop densities,” he explained.
“Our supply chain is hugely complex given the nature of our product, but thanks to our high average basket sizes, scale-driven margin improvement and proven customer acquisition and retention ability, we’re able to continue our growth. With that, we put ourselves in a position to overcome the cost and difficulty associated with serving regional areas,” he said.
“Never been more engaged”
Customer retention has long been seen as the single biggest obstacle facing meal kit delivery providers, many of which offer free or heavily discounted meals to entice consumers to sign up, only to lose the majority of them when the promotions run out.
Rutledge declined to share HelloFresh’s retention rate, but he said customers have “never been more engaged” based on steady increases in recipe scores and the company’s net promoter score.
Marley Spoon Australia’s co-founder Rolf Weber did not reply to questions in time for publication, but he told IRW last year he was “very happy” with the company’s customer retention rate.
“We’re very happy with where we are and have a good return on marketing spend,” he said.
The business, which is 29 per cent owned by German e-commerce incubator Rocket Internet (which also has a stake in HelloFresh), is reportedly considering an initial public offering this year.
Marley Spoon’s German arm recently partnered up with AmazonFresh to offer meals-in-a-box for Prime members in four German cities. Customers can choose from eight Marley Spoon recipes and receive same-day shipping on orders made before 12pm.