Blue Apron’s IPO Filing Implies Troubling Customer Retention

  1. I use two hazard models — for the acquisition and the retention of customers over time — to estimate monthly customer behaviors most consistent with Blue Apron’s quarterly disclosures.
  2. There was clear Q4 seasonality to the retention process, so I added a covariate for it.
  3. The estimation procedure is virtually the same as what I laid out in the customer-based corporate valuation paper.
  4. I used “smoothed” monthly estimates of Blue Apron’s marketing expenses based on Blue Apron’s quarterly disclosures to get estimated monthly CAC figures.
  5. I tried adding marketing expense as a covariate to the acquisitions process, but the covariate was rejected (the data are probably too sparse — and in general, this can be risky business regardless).
  6. The model specification outlined here is virtually identical to that used in my customer-based corporate valuation paper — this means that the model is relatively parameterized, given we have less data with Blue Apron than we did with DISH Network or Sirius XM, the examples from the paper. Beware! Long term forecasts may not be as reliable — the support of the data is up to a year for customer retention.

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