Putting Blue Apron to the Test


Food tech is one of the hottest sectors around.  Nearly every week, I am reading about a new company getting funding with many of them getting traction in the market.  My last post was on my experience with Gathered Table and for this one I am going to review my experience with Blue Apron.

First Experience

I had read about Blue Apron and their ‘meal kit’ model before, but did not sign up until my wife and I received the direct mail piece pictured below from them in late March:


This was an impressive marketing piece as it conveyed a high-end brand with quality ingredients while at the same time offering a discount to encourage redemption.  I also liked the ‘As seen in’ mention on the back to signal credibility.  Erin ended up doing the sign-up so I did not go through that experience, but was told we should expect a fish and two meat dishes to arrive at our door.

Package Arrives

The first thing I noticed when the package arrived was that it was shipped from Richmond, CA to my home in Seattle.  This seemed like a long way for products to travel that need to be kept cold (meat, fish, etc.) and also resulted in a lot of extra material to keep items from spoiling.  The inside of the box also featured a link to a page on their site to learn how to dispose of the packaging, which suggests Blue Apron receives a lot of customer feedback on this issue.

Inside the box were all of the ingredients I needed to make the three meals in clearly-labeled packages.  Blue Apron did a great job communicating a gourmet brand through the recipe cards and letter that came with the food:

Recipe cards and letter that came in package

Recipe cards and letter that came in package

Each described some of the more uncommon ingredients (epazote and verjus, in my case) in the dishes that separate the Blue Apron meal experience from what most customers put together on a weeknight.  The recipe cards were printed on thick, high-quality paper and featured very detailed close-ups of the ingredients, steps in the process, and the finished dishes that made me hungry just looking at them.

Cooking Experience

The three meals I made were Chile-Blackened Cod, Pan-Seared Chicken Verjus and Navarin-Style Lamb Meatball Stew that you can see below:


We enjoyed each of them with the cod probably being our favorite.  Each took me around 40 minutes to make with some of that time hands-on and some of it waiting for things to cook.  I was surprised that I still had to do some chopping as that step felt like something Blue Apron could have done for customers to save them time.  40 minutes per meal is approaching my limit for weeknight cooking time, so it seemed unlikely we would be long-term Blue Apron customers even though we enjoyed what we ate.

Replicating Blue Apron Meals

At this point I was curious to learn more about the economics of Blue Apron  so decided to replicate the same meals on my own a few weeks later using ingredients purchased locally from Whole Foods.  The goals of doing this were to determine:

  1. The amount of time saved by using Blue Apron
  2. The cost of ingredients relative to Blue Apron’s price
  3. How the quality of their ingredients and meals compared to a DIY version

Making a list and getting all of the ingredients back to my home took me 45 minutes.  The cost of all of these was $51.26 (vs. a non-promotional price of $60 with Blue Apron).  I was unable to buy everything so made a few substitutions like using broth instead of water + demi-glace as Blue Apron had me use and dried instead of fresh epazote.

My wife and I actually enjoyed the second set of meals better and are speculating that the main reason was the presence of higher-quality ingredients in a few places.  We felt the fish from Whole Foods was higher quality and we were able to use 100% lamb in the meatballs rather than a lamb and beef blend that Blue Apron used (likely to save costs).  We enjoy lots of greens in our meals and in the Whole Foods renditions we were able to amp up the vegetables by using the entire portion purchased (i.e. whole bunch of chard) versus the smaller portion included in the kit.

The end result of this experience left us with this comparison:

  1. Blue Apron: $60, 2 hours of time, 7/10 meal quality
  2. DIY Version: $51, 2.75 hours of time, 9/10 meal quality

What Can We Learn About Economics of Business?

Armed with the cost data, I now sought to determine a hypothesis on Blue Apron’s profitability.

Based on some knowledge I have of direct mail, I am assuming a combined production, list rental, and postage cost of $0.50 per piece for what I was sent and a 1% redemption rate which together lead to a CPA of $50.  With the increasing costs I have seen in some online channels, my guess is places like Facebook are also yielding a similar CPA so $50 seems reasonable for the cost to acquire customers in paid marketing programs.

Even though I spent $51 on ingredients, I would guess that by buying wholesale instead of retail and taking advantage of some economies of scale, that they can get unit costs of $25 per week.  My 15 lb. package was shipped ground using OnTrac and their website tells me it costs $15 to ship from Richmond, CA to Seattle.  A volume shipper like Blue Apron could likely negotiate lower rates, but with all of the packing material and handling needed, I am going to assume a $15 all-in cost of shipping.  This makes total weekly costs for Blue Apron $40.

We received a $20 discount during week 1 and I am assuming many other 1st time customers get that so the revenue is $40 in week 1 and $60 in each subsequent week.

The net of this scenario is then:

($50 Acquisition) + $0 during week 1 + $20 during week 2 + $20 in week 3 + $20 in week 4…

Using these assumptions, customers become profitable during the 4th week of using Blue Apron.  For now at least, we did not reach this milestone and are so far unprofitable customers for Blue Apron.  What strategy might Blue Apron take to change this?  That is the question I turn to next.

Strategic Positioning of Food Tech Market

A key consideration when determining whether customers of services like Blue Apron choose to repeat is how customers perceive the options in the market.  Because this space is so crowded, I created this perceptual map as I see things:

Ryan's view of the food tech market

Ryan’s view of the food tech market

I view the market in terms of the quality of the food (x-axis) and the effort it takes to make it happen (y-axis).

Blue Apron and the other ‘meal kit’ options all seem to be in a similar place with food tending to the gourmet side and the effort also being high since you still need to do a fair amount of work before dinner is on the table.

Lower effort options include the pure delivery services that source from restaurants like Eat24 and Grubhub, as well as those that make their own meals like Munchery and Lish.  Eat Local is a retailer in my Seattle neighborhood who makes frozen prepared meals that you pick up from their store and then heat up in the oven.

The other two points are Gathered Table and Yummly.  Both of these aggregate recipes but still require you in most cases to do the shopping and cooking.

With this market in mind, I believe Blue Apron or any provider in its place would do best by seeking out a less crowded space that also matches the values of their target customers.

Two Alternative Positioning Strategies

The second perceptual map shows two alternative positioning strategies that would make me more likely to keep using Blue Apron or an alternative ‘meal kit’ provider:

Two Alternative Positioning Options

Two Alternative Positioning Options

Move to the Right: Becoming more ‘gourmet’ would include adjusting their model to include ingredients on par or better than what I bought from Whole Foods.  This would also require shifting to a more local supplier model so products are not shipped from several states away but are locally-sourced when available.  This is a product I would be willing to pay more for and would keep me a customer longer.  Providers moving this way could also partner with local high-end restaurants to source recipes which would reinforce the fact that customers are making meals in their own kitchen on par with what one would receive from a night out at a $$$$ local option.

Move Down: Reducing the labor could be accomplished by having more of the ingredients be meal-ready.  Produce could arrive pre-chopped and ingredients that are added at the same time could be combined.  This could save 10 minutes per meal which would make a big difference when considering these kind of services for weeknight dinners.


Preparing meals on busy weeknights remains a challenge for my family and many others like us.  It is exciting as a consumer to see the different options in this space and hopefully one will emerge that we find enough value in to use regularly.  Blue Apron did not reach this point for us with their current offering, but could get closer to that point by adjusting their product in a few different ways like I suggested.  I look forward to continuing to follow the food tech market and will be sure to write a future blog post should a competitor win our regular business.

Gathered Table: A New Way to Plan Meals and Grocery Shop

gt logo


One of the tasks in my life most in need for a new technology is meal planning.  Each week my wife or I figure out how many meals we are going to make, sort through our growing collection of cookbooks or bookmarked recipes for meals that week, and then aggregate the list of ingredients needed before trekking to the local grocery store to shop.  This whole process takes at least 2 hours and it often feels like a chore to find inspiring new meals to make.  Because of this, I was excited to learn about and try Gathered Table, a new Seattle startup that promises to bring more efficiencies to this very process.  The food category is exploding with startups lately, but this format seemed a better fit for us than others because it offered more variety than the meal-kit options (Blue Apron, Plated, Hello Fresh, etc.) or the full-service ones (such as Munchery).

Setup Experience

I originally created a Gathered Table account on my PC.  The site explains how the process works and asked me my preferences around the amount of cooking I wanted to do, for which days, and the types of meals I liked to eat.  At the end of the registration I learned that Gathered Table is normally $10 per month but was being offered 6 months free.  Once my account was created, I was shown a list of recipes from Gathered Table and I picked a few of them to add to my account so they would be included in future meal plans.  I also had the opportunity to import my own recipes and did so with one from cookinglight.com. This is a feature I appreciate because it allows us to keep our greatest hits in the rotation.  Gathered Table also offers an app and I downloaded it onto my iPhone so I could see how their service performed cross-platform.

Product Experience

My initial menu and related grocery list arrived several days after setting up my account.  Many of the ingredients were things we already had, so I modified the ‘pantry’ section of the service to reflect this leaving me with a modest grocery list for the 4 meals that were chosen for me.  Three of the four were things I had favorited while the other was presumably based on my preferences.  All sounded very good and I was excited to try them.  Here are pictures of the four things I ended up making (pepper tofu was the best!):


What I liked

  1. Time Saver!: Based on my experience with Gathered Table, I saved between 30-60 minutes of time looking for recipes and gathering ingredients.  The grocery shopping experience was also much easier as I used the app instead of a paper list as all of the ingredients were organized by section (produce, dairy, etc.) and I could check things off as I added them to my cart.
  2. Takes advantage of seasonal ingredients: The recipes on my menu featured many ingredients like squash and kale that are readily available this time of year in Seattle.  I am excited to see how this changes during the seasons as we get into the spring and summer.  This is a welcome change from my old approach at meal planning where I often end up paying top dollar for asparagus from South America because it was in a recipe I picked (to say nothing of the carbon footprint!).
  3. Good recipes: I really enjoyed the pepper tofu, falafel cakes,  and curry that were in my first week’s menu.  The omelette was also fine considering how quickly it came together.  I especially liked how the sides were similar in style to the main courses which led to well-rounded meals that my family all enjoyed.  This was a big improvement over the same old salad that used to be paired with my meals because picking sides was something that often got skipped in my original meal planning process.
  4. Cross-platform: There were several instances during the Gathered Table experience when I went back and forth between the desktop and the app.  Every time I saw changes reflected instantly in the other platform, which is important when taking a list with you to the store (or even with shared accounts between family members).

What could be improved

  1. Incorporate feedback loop into menus and recipes: Several times Gathered Table asked me to provide feedback on their service generally, but I did not see a place to do so on specific recipes or meals.  I would like to give each item a star rating a-la Netflix so that future menus can learn from what I like or don’t like.  Collecting feedback like this could also benefit new users of the service as their all-important first meals could be tested with past customers.
  2. Better Social Integration: The current version of Gathered Table has a find friends section where you can get recipes from people you know.  I searched for a few people, but was unable to find anyone I know to test this section out.  It would be great if Gathered Table integrated with Facebook to bring my social graph into their service.  They could provide the option to connect with Facebook upon signup (which can improve signup rates in some cases) and if customers did this in large numbers it could also lead to some interesting marketing opportunities down the line.
  3. Ability to Generate Menu on Demand: When I sat down to setup my Gathered Table account I was expecting to go through the whole process and come out of it with menus and a grocery list.  The current version seems to do the meal planning in more of a batch mode so I did not receive my first menu and grocery list until a few days later.  Because they have a captive audience upon signup, I would like to see an option to generate a menu on demand that would satisfy customers like me who were excited to get started shortly after signing up.
  4. Optimize for email signups: Because of my day job, I spend a fair amount of time optimizing marketing campaigns with landing pages and signup experiences.  I like the amount of signup buttons on the Gathered Table homepage, but would like to see them simplify the registration process by creating a basic account first and then asking people to supplement it with their preferences.  Email addresses are very valuable and can be used for different types of marketing down the road and asking for as much information as they do likely results in drop-off.  I would also remove the coupon code box as I have found that encourages people to stop the registration process to look for promo codes.  This is Iikely done to track marketing campaigns, but there are other ways to do this that I have found more effective (you can also see how often people search for coupons by the fact that Google Instant Search shows  “gathered table promo code” as the 2nd result).
  5. Expand Grocery Shopping Integration:  Half of the challenges my family faces with getting dinners on the table is meal planning and the other half is grocery shopping.  Gathered Table helps with the first and I have also read about efforts to help with the second.  Integrating with local grocery delivery services would be a huge win as a menu could be generated with the food being delivered to my home automatically shortly afterward.  Adding this could also help bring more transparency to how much each meal costs as I could start optimizing towards more efficient menus that make better use of shared ingredients.  This is not available in Seattle right now, but I’d love to see them partner with someone like Instacart to change that soon!

Bottom Line

I was very happy that I gave Gathered Table a shot and will keep using it to see how it holds up as it gets deeper into its recipe database and other seasons.  They are still an early stage startup with lots of potential improvements, including the grocery store integration that will definitely be worth trying once it gets added to the Seattle market.

My Experience Buying a Custom Suit with Indochino


Past readers of this blog will recognize my affection for ecommerce companies trying to disrupt and improve the ways retailers have long sold to customers.  From buying glasses at Warby Parker, to selling diamonds and jewelry online at Blue Nile, to publishing a new website every day customized to your preferences at zulily, I enjoy learning about and shopping at companies who have this objective in mind.  When changing fashion trends and a slimmer physique made it so I needed to purchase a new suit for an event, I was excited to give Indochino a try.  I had read about them and was impressed with how one of the founders struggled with his own suit buying experience and used it as inspiration to bring custom menswear to the masses.

Shopping Experience

My first interaction with the Indochino site was a positive one: the site had a nice layout and was quick to point out “best seller” snipes on several of the items I was considering.  With a purchase of this type, I tend to be conservative with my choices and appreciate hearing what others have selected.  Indochino’s site also had a detailed section on “why custom” which helped differentiate them from other options and moved me closer to becoming a customer.  I ultimately decided on a charcoal suit as it matched the majority of my shirts and ties and seemed to be a good option for the largest number of occasions.

Once I had selected the particular suit, it was time to move on to the customization stage.  For this I utilized the services of my wife Erin who had the unenviable task of measuring me in more ways than I had previously thought possible.

Erin taking measurements for my custom suit

Indochino’s website provided very detailed instructions complete with videos that made me confident I was doing the process correctly.  They also had clear instructions and images for other custom options like cuff style that helped me understand what I was selecting. 

Overall the process of customizing the suit was an enjoyable one as it reinforced their value proposition and made me excited to receive my custom suit in 3-5 weeks.


My suit arrived less than 3 weeks after completing my purchase which exceeded their estimates.  It’s always a good idea to underpromise and overdeliver with shipping times so I was pleased it arrived when it did.  I liked the presentation of my suit when it arrived – it came via FedEx in a box within a box that made their brand look upscale.

In case I lose this...

The fabric and quality seemed consistent with my past suits (purchased from places like J. Crew and Brooks Brothers) and it was nice to see the items I had customized like my name on the inside pocket and the interior color of the jacket.  I was cutting it close to an event where I needed to wear my suit so I tried it on quickly and decided it fit well enough to use.  However after wearing the suit for the evening it seemed like the sleeves and pants were too short.  I would ultimately take the suit in to a local tailor to correct this to finally make my suit the right size.

Overall Impression

Though it was disappointing to have to take my suit in for alterations, I remain pleased with my decision to give Indochino a try.  The experience of buying a custom suit from home was more enjoyable than heading to a brick and mortar store that would have required either a babysitter or distracting an energetic 2 year old.  I also likely saved money in the process and ended up with an item that fits better than one purchased in more traditional ways.  That does not mean, however, that the process was perfect as there were several places where I think they could improve.  I outline these in the next section along with some tips I have for Indochino based on my own experiences working in ecommerce.


  1. Increase number of traveling tailors: the biggest disappointment in my experience was receiving a product that did not fit perfectly and needing to take it in for alterations.  To Indochino’s credit they reimbursed me for this expense, but I still had to take time to visit a local tailor and went weeks without my new suit.  I strongly encourage them to expand their traveling tailor program that would hopefully help customers like me receive proper measurements from the outset.  If the cost of scaling this program independently proves prohibitive, I would encourage them to partner with tailors in major markets to perform this service since the services are complementary and not competitive.  They could also gather data on alteration rates and steer customers to the tailors who take the most accurate measurements.  My sense is the percentage of customers needing alterations is lower if measured by a traveling tailor and that needing alterations has a negative effect on repeat rates.  Testing partnering with local tailors in select markets seems like a quick win and is something I would encourage Indochino to try.
  1. Greater investment in several details of customer experience:  I noticed two parts of the customer experience where a small investment could pay long-term dividends to Indochino.  The first is including a garment bag with each custom suit. The cost is likely low and would likely generate referrals and more word-of-mouth awareness (such as from prospective customers seeing it on a plane or in a hotel room).  This would not be easy to test, but they could provide them in a specific geographic market and see if that market has higher referrals or overall sales compared with a control group.  The second area where a small investment could pay off is in providing complimentary fabric samples rather than charging for a tailor’s kit.  The cost of these is not likely very high, especially considering it’s a large ticket purchase, and they could even include a self-addressed return package to recoup everything but the shipping.  Warby Parker offers something similar and it was one of the things that made me confident in my selection.  I  encourage Indochino to test out free samples to see if it drives up conversion rates and brings down returns as I imagine it could help both metrics in significant ways.
  1. Tone down remarketing and move marketing budget into upper funnel:  ever since visiting and purchasing from Indochino, I have seen many remarketing ads trying to sell me on their products.  These have been on the web with what looks like Criteo and also on Facebook with FBX.

    One of many remarketing ads from Indochino

    This compares to the almost zero advertising that I saw prior to visiting the site.  Though the ROI of remarketing might appear to be high, from my experience I question whether funds would be better spent in upper funnel activities.  Since I have already made a purchase, is there that much to be gained from marketing to me (even prior to my suit arriving)?  Being direct response-oriented on large ticket items is not always easy as my time at Blue Nile taught me, but I feel shifting budgets earlier in the funnel would lead to faster growth in the long run and would be a better use of marketing funds than so much remarketing.

  1. Delay mention of referral bonus until product arrives: immediately after hitting “purchase” on Indochino I received notice of their generous referral bonus where I could save $50 if someone I referred became a customer.  The referred person also saved $50 on what is a very generous 2-way referral program.  While referrals are likely the most effective marketing program for a considered purchase like this and Indochino is wise to encourage them, I do not like to be asked to refer something until I have seen the product in person.  The high $ amount also made me feel like I had missed an opportunity to receive a discount of my own and caused me some anxiety about the quality of the purchase I just made.  The referral mention included in the package was a much more timely message and I would encourage them to align all other referral messaging with this moment.

What business can learn from the epic collapse of the Seattle Mariners

For those new to Seattle, it can be hard to imagine that the Seattle Mariners were once successful and an important part of the community.  Rewind to 2001 and the team led the league in attendance, matched a century old record for wins in a single-season, and was the talk of the town for sports fans and non-sports fans alike.  Now a decade later, things could not be more different.  In fact, a recent study showed the team having the biggest 10-year drop in attendance in all of the 4 major sports.

Much of the decline seen by the Mariners can be tied to poor results on the field.  However, as teams like the Cubs, Twins and Rockies have shown, it is possible to draw well despite losing.  I have been a fan for over 25 years and last season did not attend a single game.  The biggest reason for this was not the team’s performance, but was instead some of the actions by the team’s management that made them impossible to support.

Not one to let a learning experience pass by, I decided to identify some of the actions the team has taken and see if they have parallels elsewhere. As part of that process, I identified five reasons why the Mariners have declined that can also offer lessons to the business world:

  1. Too many comparisons to the past: Over the past few years, the Mariners have not been shy about reminding people of successful seasons in their history.  Last season and the one before it featured multiple special events related to 2001, while the season before that commemorated the 1995 season.  While some fans may enjoy reminiscing, I find this a painful reminder of how far the team has fallen.  A business with a once strong product would be wise to learn from this and not remind customers of how great they once were. I can’t imagine Microsoft, for example, giving away a Windows XP tribute magnet with every purchase of Windows 8.  A better approach would be to focus on what the current version brings instead of inviting comparisons the past.
  2. Using a different risk premium than the rest of an industry:  One of the fundamental concepts in business is setting a discount rate that allows a company to compare payouts that happen in different time periods.  A company that uses a different rate than its industry peers will find itself taking unnecessary risks (with a discount rate too low) or playing it too safe and not taking chances that could lead to future success (with a discount rate too high).  A similar process occurs in baseball when deciding when to trade players with high values in the present for those with uncertain values in the future.  Routinely the Mariners have done poorly at this, as they seem to overvalue prospects and undervalue players performing well in the present.  Trading a solid Doug Fister for prospects who have done nothing is one example, as is not being willing to trade prospects like Taijuan Walker and Danny Hultzen who might turn into something, but also carry risk of not succeeding at the major league level.
  3. Becoming distracted by products outside of core: As a casual observer of the Mariners these last few years, it seems like they have been putting an increasingly large amount of marketing resources into promoting events like bobblehead giveaways rather than promoting their core product of professional baseball.  While I was not able to gather data into the resources behind their marketing tactics, the data did show a 4x increase in the number of bobblehead nights with 2002 having one bobblehead night, while 2012 had 4 of them.  Furthermore, a Mariners representative felt it more important to mention fans coming for a bobblehead night, rather than to see the product on the field when discussing transportation concerns with a potential new arena nearby:

    “My nightmare scenario is we have Felix Hernandez bobblehead night against the Red Sox at the same time they’ve got a playoff game and people are sitting on I-90 trying to get here for two hours,” Waldman said.

    I have no problem with a company marketing ancillary products to their core, but when one goes as far as the Mariners have by making this the key tactic it can call into question their dedication to their primary purpose.

  4. Lack of accountability in leadership:  On the heels of one of the worst seasons in MLB history, team President Howard Lincoln very publicly put himself on the “hot seat” if the team’s fortunes didn’t turn around.   For fans like myself, this seemed justified as the team had finished last in 3 of the past 4 seasons and having a President put himself on the line could have been a motivating tactic to the rest of the organization.  However, since that time the team has been in last place 3 additional times in 4 years and Lincoln remains in charge.  The lack of accountability is very discouraging as a fan of the team and makes it very hard to support them.  Leaders of businesses would be wise to hold themselves accountable for performance, particularly when stating publicly that they would do so.
  5. Alienating your best customers: The most obvious lesson for business from the last decade’s Mariners is to be aware of your customers and not take actions that they would find reprehensible.  Sadly, the Mariners acted this way with their short-sighted opposition to the new Sonics arena.  I have no statistics on this, but there must be significant overlap between the fan bases of the Mariners, the Seahawks, and the Sonics.  With the die-hard fans like myself, the overlap is even greater.  By funding opposition and opposing the return of the Sonics, the Mariners are showing ignorance to who their customers are and what they care about.  The stand the Mariners are taking is equivalent to a fast-food chain (like McDonalds) funding public opposition to other unhealthy foods that their customers enjoy (like donuts).  No business would do something like this and I am still amazed the Mariners would do something this harmful to the relationship they have with their customers.

Uncovering Facebook’s Massive Opportunity

Many articles have been written lately about Facebook’s need to find new revenue streams.  Once seen as the next Google, Facebook has struggled recently with a falling stock price (down 44% at the time I’m writing this vs. IPO) and speculation they are more an over-hyped Internet company rather than the next dynasty.  Though I do believe they will need to figure out a way to monetize their mobile traffic eventually to fulfill their potential (look for a future post on that one!), I do not share this pessimistic view of the company.  Given that users spend more than 10.5 billion minutes per day on the desktop version of the site, I believe it will only take looking at their user base in a slightly different way for them to uncover billions in new revenue.

The Situation Today

While many compare Facebook to Google given their similar early trajectory, the advertising approaches each uses today is far different.  Google makes most of its money by providing companies with the opportunity to appear in advertising after a search, often times related to something they want to purchase.  Many searchers buy right then and there, allowing advertisers to see an immediate ROI (causing them to bid more and give more money to the folks in Mountain View).  Facebook, on the other hand, has tried to show up earlier in the purchase process by sharing items and companies that your friends like.  While there is some truth to their claim that I trust the members of my social graph more than companies bidding for placement, the main problem I see is these sponsored stories are not relevant in a commercial sense because it is highly unlikely I am in the market for products that my friends like at the time I am on Facebook.  In my view, matching users to commercial intent is the best way for Facebook to better monetize their traffic and take advantage of the unmatched reach and engagement of their service.

A New Opportunity

Facebook knows a ton about all of us from our activities on the site – the fact we are getting married, having a baby, or buying a house are just a few of the announcements that people eagerly share.  It is my view that instead of pushing the “you should like _____ because your friends do” angle, they should pivot and turn these life events into segments that advertisers can target.  To illustrate how powerful this concept can be, I downloaded all of my purchasing history from Amazon over the last decade:

I chose Amazon because they save all of this data and they sell a wide enough variety of items to be used as a proxy for consumer advertisers.  I looked at the spikes and grouped sudden increases into two types:

  • Supply Side (green) – related to marketing activities that Amazon takes to get me to spend more money
  • Demand Side (purple) – related to life events that cause my demand for items on Amazon to increase

For the Supply Side, there were two that jumped out.  First was selling me on Amazon Prime in 2008. This caused a large and noticeable increase in my purchases on the site.  Kudos to Amazon for offering this service as it seems to have been a big driver of their success over the last 5 years for me and many similar customers.  Second was the purchase of my first Kindle device in late 2011.  Amazon was quoted as saying Kindle owners buy 3.3 times as many books after owning the e-reader device and my usage shows I am seeing an increase as well.  This is often used as a justification for the low price of the device and it seems to be a solid strategy, though this did not cause nearly as large an increase as Prime did in my case.

Amazon has done a great job with these two tactics; however my usage shows demand-side effects as being a far larger reason for spending increases.  Having a new baby, in particular, caused the largest increase in spending in late 2011.  It could be argued that the supply-side tactic of offering Prime was a factor and caused the slope of this increase to be higher, but at the time I was about to increase spending Amazon’s competitors could have provided an offer to get me to shop elsewhere.  Facebook was aware we were expecting a baby as soon as we announced it and could have grouped people just like us into a new parents segment they sold to advertisers.  Though not tied to as large an increase, they could have done the same when we got married in 2007, moved back to Seattle in 2009 and bought a house in 2011.

From Advertiser Perspective

I can see many groups of advertisers interested in targeting Facebook customers at particular life events.  To illustrate the point, here are just a few examples I came up with:

  • New parents: This was the biggest reason for an increase in our spending habits.  I would expect specialty retailers like Pottery Barn Kids, Babies R Us, and Zulily, as well as more mass-market ones like Target and Amazon to be willing to pay very high CPMs to reach this audience.
  • Newly-engaged couples: Large amounts of money are often spent on weddings and honeymoons, so I can see photographers, caterers, travel sites, and registry providers being interested in this group of people.
  • New marriage: For many a new marriage is followed by a new home, so I would expect companies like Redfin and Zillow to be interested in this group of people.  Many in this life stage also look at finances in a new way, so banks and investment advisers might also be interested.
  • Moving: With moving comes both the physical move (where moving companies would like to reach you), as well as lots of money spent on new furnishings (where Crate and Barrel, Bed, Bath & Beyond, etc. come in to play).

There’s no question Facebook would have to be careful respecting user privacy if selling advertising this way.  They could start by offering it exclusively as an opt-in feature to customers who shared these events explicitly on their Facebook Timelines and would likely have plenty of customers this way.  Once consumers accepted this type of advertising as a benefit, they could build even larger segments by associating language used in status updates to connect people with life events.  Though Facebook would be wise to allow for customers to opt-out of this type of targeting, I would expect many customers to appreciate the more relevant advertising they would be seeing compared with Facebook’s current ad products and this could be enough to bring back the positive momentum the company seems to have lost.

Putting the Cost of Comcast Cable in Perspective

For many years now Comcast Cable has been a necessary evil in my household.  With few choices for television service or high-speed Internet, I have reluctantly been a customer of Comcast for over a decade.  Knowing what little choice customers like me have for this service, the folks at Comcast do what any monopolist would do and charge very high rates.  Although it might be surprising to some, this is not the part of Comcast I dislike the most.  My least favorite part of Comcast instead is their practice of trying to hide these rates with “specials” that roll off and on with very little transparency into why my bill goes up and down so much.  During the last year, my bill has ranged from $100 to $180 with little change in service.  Having finally had enough, I decided recently to look at my usage to see where my money was going and use the resulting data to re-consider how much money I spend with Comcast.

My Plan

To try and put the television part of my Comcast bill in perspective, I wrote down every minute I watched television between May 9 and June 8th (which can be found here).  I am a huge believer in data, using it to monitor my finances and to try and stay healthy, and felt like this exercise would be a valuable way to see how much value I am receiving from my ever-growing Comcast bill.  Once the data was collected, I attempted to answer three questions related to Comcast’s business:

  1. How does the price I pay to watch TV with Comcast compare to other forms of entertainment?
  2. How would my bill change if the current approach of bundling channels were changed in favor of alternative pricing models like a la carte or per episode?
  3. What conclusions can I draw about the future of television and what recommendations do I have for the players in the industry competing with Comcast?

Q1: Comparison to other Entertainment

For points of comparison, I went through a similar exercise with other forms of digital entertainment and calculated the same cost per hour for services like Netflix, Zune video rentals on my Xbox, and Kindle eBooks.  Fortunately these were much easier to track as many of these services provide this data to customers.  I also estimated the time spent at live events I have attended like concerts, sporting events and movies in the theatre, to see what kind of premium these events had vs. Comcast.

While I was going through this exercise, it did not seem like I was watching very much TV, so I expected my $95.60 Comcast TV bill to lead to a relatively high price per hour compared with the other entertainment options and indeed this was the case:

I was surprised, however, to see how high Comcast was to the other services.  A full price movie ticket was only priced at a 20% premium, while the other non-live events were significantly cheaper.  Netflix stands out in particular at $1.09 per hour, which is a full 84% lower than Comcast at $6.80.  Admittedly this picture would look different during football season when I get more value out of subscribing to Comcast, but I would need to watch over 6x as many hours as I did this month in order for the price per hour to match what I pay for Netflix (assuming Netflix price and hours remains the same) and there are not even enough games broadcast to reach that level.

Q2: Alternative Pricing Models

For my second exercise, I looked at what my bill could look like if I paid per episode or paid per network.  Both of these would feature video content being delivered over broadband to alternative devices like an Xbox, AppleTV, GoogleTV or an Internet-enabled TV.  The per episode model is available today via iTunes (to an AppleTV) or Zune (to an Xbox) at $3 per HD episode, while the per network part is not, but demand for this is increasing rapidly and I would not be surprised to see this offered in the future.  For the pricing of per network, I used two approaches and only applied them to cable channels as the major networks are available for free via an antenna:

  1. Took the carriage fees that networks charge Comcast + added 33% based on their 2011 operating margins
  2. Used the $12 that customers said they would pay for HBO when potential customers were trying to persuade HBO to go that route.

Both of these models show the status quo to be extremely costly and the data suggests that I would be much better off pursuing either alternative pricing mechanism.  There were, however, downsides to the alternatives as they exist today that would have to be balanced against the significant cost savings.

With the per episode model, I would be getting HD, commercial-free versions of the shows I watch most but would not be able to watch live shows including sports.  During the spring and summer this is something I could get behind (since my NBA boycott continues and the Mariners have not been worth watching for a decade), but in the fall and winter with football this would be a difficult adjustment to make.  Professional leagues like MLB and the NBA have begun to offer season passes de-coupled from a cable subscription and available on devices like an Xbox, so hopefully this restriction will subside over time.

The per network model is purely hypothetical at this point, but I can also see some adjustments that would have to be made if it were to come to fruition.  First, it is likely that this would only be available with cable networks who are used to the per month, per subscriber model leaving me to obtain the big networks (ABC, NBC, CBS and Fox) through a method like an over the air antenna that could be difficult to implement.  Secondly, this would make it much harder to watch new shows that appear on networks I don’t choose to pay for.  While some of this could be made up for by adding new networks over time or with further reliance on Netflix, the practice of hearing about a show and flipping to it instantly would be no longer and would require some adjustment.

Q3: Business Conclusions and Recommendations

  • This exercise made me re-consider whether the value I am receiving for my Comcast bill is worth it, particularly when compared with other forms of entertainment.  I believe others would do the same if they could see how much they are paying on a per hour basis.  Comcast will never offer this form of transparency (as Netflix does), but I would love to see a company who competes against Comcast directly or indirectly find a way to provide this information.   Companies like DirecTV, Tivo, Netflix, or YouTube all fit into this category and it would be great to see one of them make a web or mobile app that calculates this type of data much more easily than the process I went through.
  • The large gap between Comcast and Netflix is particularly interesting and suggests upside in Netflix’s future prospects as people begin to view them as a substitute for traditional television.  Netflix stands to benefit from customer’s viewing them in this light (as opposed to a replacement for a video rental service) so it makes sense that they are starting to produce their own original content (a move also being pursued by Hulu and YouTube).  I expect more of this to occur in the future and hope original programming on these mediums is successful in order to put pressure on Comcast to be more consumer-friendly.
  • Sometimes overlooked in talk of alternative models like per episode or per network is that they are only possible because the Internet can serve as an alternative delivery mechanism.  Because of this, it is no surprise that Comcast is in the business of providing Internet connectivity as they can raise broadband rates (or institute throttling) to make up for any lost television revenue caused by cord cutters.  For this reason, I would like to see more competition among broadband-providers and hope some of the newer ISP entrants like Clearwire, Lightsquared, or even Google are able to survive and provide an alternative to Comcast.


Letter in Support of Bringing the Sonics Back to Seattle

Those that know me well are aware of how much the Sonics meant to me growing up and how difficult it was to see them leave.

Though there have been moments since the team was sold where it looked like a team could reside here, none have been as promising in my view as the current effort being led by local hero Chris Hansen.

Despite the incredible generosity of Mr. Hansen’s offer and how little would be asked of our local politicians, work still remains to get the deal approved.  To try and help the effort along, I recently sent letters to the city and county councils whose support will be needed to move forward on the arena.

I encourage everyone reading this to do the same.  Details on the process can be found by visiting KJR and a copy of the letter I submitted is embedded below.

Letter in Support of Seattle Arena

My Ideas to Accelerate the Growth at Blue Nile

Author’s Note: Though I spent several years with the company I’m writing about and keep in touch with a few current employees, I do not own any stock in the company and the ideas I have are 100% my own and any connection to directions the company goes are entirely coincidental.

One of the jobs I learned the most from was in the marketing department at Blue Nile from 2005-2007.  The company was growing rapidly at the time and executing very well on its mission to make diamond and jewelry buying a better experience by utilizing technology and transparency in the process.  I took many lessons away from this role and applied them in important ways in the jobs that followed.   What I gained from that experience plus my belief that they offer a far superior value to consumers has made me surprised to see some recent changes at the company caused by slowing growth.  I am rooting for Blue Nile and thought I’d come up with a few ideas for how the company can accelerate its growth.


Before proposing any ideas, I decided to take a look at how the company has been performing relative to the competition.  To determine this, I pulled quarterly revenue growth for Blue Nile (NILE) as well as two other publicly-traded competitors: Tiffany & Co. (TIF) and Zales (ZLC).

When I left in 2007, Blue Nile was growing even faster than Tiffany.  Data were not readily available for Zales that far back, but I would wager Blue Nile was also growing much faster than them as well.  All three struggled with declines from Q3 FY08 – Q3 FY09 as the larger economy fell into a severe recession, but each returned to growth for many of the quarters to follow.  Things began to change for Blue Nile relative to the competition in 2011, however, as Tiffany grew faster in all four quarters and Zales grew faster in three of the four.

Ideas to Grow

Of the ideas I came up with, I narrowed them to down to three: creating an iPad app, investing more in targeted and measurable brand-building and opening a retail store.  I chose these three because they were no dependencies between them and they ranged in difficulty and upside from relatively easy and modest (iPad app) to much more challenging and high (retail stores).

iPad App

When visiting Blue Nile’s mobile application page, I was surprised to see they do not have a dedicated iPad app.  This seemed like low-hanging fruit as development of a dedicated app would not take that long and the product and buying experience seem perfect for a tablet-buying experience: the site features great photography and a diamond search that allows customers to build custom diamond rings from an unmatched selection of choices.  I can see many customers sitting on their couch and completing an entire purchase from a tablet computer.  One of the greatest ecommerce success stories recently is Fab.com, who generates 25% of their revenue from their iPad app.  Although most Blue Nile purchases are much more considered than the more impulse buys on Fab.com, I can still see a sizeable portion of revenue coming from an iPad app.  Creating one could also lead to a few PR stories, which have historically been a successful source of customers as well.

Targeted and Accountable Brand-Building

Back when I was at the company, a sizeable portion of growth was generated by incremental improvement in paid and organic search.  For customers looking to buy diamonds and jewelry online, Blue Nile showed up early and often and offered the best experience among the companies featured in results pages.  Success in that area was one of several reasons why they became the largest pure-play Internet retailer in the category.  However, growth from monetizing customers shopping this way can only take them so far as they are limited by the number of customers beginning the jewelry buying process with a search. Looking at Google Trends for the terms “Diamonds” and “Diamond Earrings” back up this claim:

Both charts show a decline in search impressions since 2006.  My suspicion is revenue from search at Blue Nile was still able to increase through 2007 while the overall economy remained strong, but growth from search has been much harder since that time as it is difficult to continue to improve once you’ve reached the top in an area with shrinking overall demand and macroeconomic headwinds.

To address challenges in search, I would invest more heavily in offline brand-building campaigns.  With narrower margins than many competitors, the Blue Nile I knew was reluctant to go in this direction instead preferring marketing activities that featured an immediate payoff and positive ROI.  To protect from the downside, I would do this in a very targeted manner and pick a few markets to run tests to see which vehicles were most effective.  Before any programs began, I would run a brand awareness study in each market (which Google now offers very inexpensively) to see a baseline and evaluate the success based on direct purchases, as well as increases in subsequent measurements after brand-building programs were kicked off.  The more closely programs can be targeted at specific customers (educated males in this case) the better, making radio, TV, and event sponsorships as a few of the first that come to mind.  Getting momentum behind the brand like this could lead to a multiplier effect as new customers have a great experience and tell their friends, which would lead to continued growth even after the aggressive marketing had stopped.  Going in this direction is definitely taking a risk, but in my view is a good way to counteract the struggles I suspect they are seeing from search and other programs that no longer have as much upside as they once did.

Retail Stores

One of the concepts I am most excited about in ecommerce is blending physical and digital together with the strengths of each making the shopping experience better.  You can see this with the rumored Amazon Kindle stores, Nordstrom investing in Bonobos and other digital initiatives, or Sephora encouraging the use of mobile apps in stores.  In each case this allows shoppers to have the close and personal contact in the physical world to make them comfortable with the more robust information and inventory made available by an ecommerce backend.  This blending of the two worlds could be carried out spectacularly by Blue Nile: customers could see the settings and example diamonds in person, get the same great service they are known for over the phone in a more intimate setting (having its own version of the “genius bar”), and then have access to the unmatched diamond selection and finely-tuned building process that have been making customers happy for all of these years.  Customers could move between shopping in store and on the website and those buying in store could connect to the web inventory using their mobile phones, a tablet PC or other kiosk system provided by Blue Nile.  Gone would be any worry over how to get a ring re-sized, seeing the item in person (or a close representation of it), or any stigma over such an emotional purchase being made over the Internet.  I bet that many customers who have considered, but ultimately decided against Blue Nile would give this new hybrid model a shot and moving the business in this direction would bring back growth in a big way.

Opening a few Blue Nile retail stores to accompany the online experience would certainly represent a big shift in strategy and would require a decent amount of capital.  However the company spent $40 million buying back its own stock in 2011 and moving in this direction in a deliberate and careful way could be done at a fraction of that amount.  I would start with a store in Seattle and possibly a market like Washington DC to minimize sales tax disruption and take the lessons learned from these experiences to a broader retail presence in other locations.  A move like this would create a wave of PR stories and a larger halo effect that could position the company for long-term success with increases in sales coming both from purchases originating in stores and through the website.  Online competitors who are all smaller and do not execute as well would have no way to match this new delivery model and brick and mortar stores would also struggle to compete with less diverse supply and the inability to create a custom ring in only a few days like Blue Nile has been doing for years.


Secret Weapon for Seattle’s NBA Return

With the return of an NBA looking more promising than ever, I couldn’t help but think about the possibilities of once again cheering on a local team.  No matter what team would play here, the first few years of professional basketball in Seattle would be an amazing time and would fill a noticeable gap in the winter entertainment landscape.

After the honeymoon period ends, however, it’s important for the team to show some level of success or risk a loss of fan interest like another team playing in the SODO area.  The team moving here will most likely be pretty bad, so this is a very real possibility.  This got me thinking about an advantage that might make it easier for a new NBA team to succeed in the Seattle market.

The advantage I came up with was what seems like a large number of players from the Seattle area. However, I had no easy way of knowing if the number were actually large or if this was a case of local media disproportionally covering its own.  To answer that, I analyzed player and hometown data using Tableau and developed the dashboard below.

Click on Image to View Interactive Tableau Dashboard

Besides being a really fun tool to play with (click here to try it yourself), this analysis showed that Seattle provides a disproportionate number of players to the NBA. The easiest way to see this is to zoom in and click on Seattle. This shows the 6 players, as well as a scatter plot of Seattle’s population ranking vs. its number of players ranking. I find the scatter plot particularly interesting (with a few notations added):

Population Rank vs. NBA Player Rank

I added the grey diagonal line that highlights cities that had disproportionally more players than their population suggests (bottom right) and those with less than their population suggests (top left). This shows 4 cities that stand out: Indianapolis, Washington DC, Dallas and Seattle.  Besides being irked that Seattle is the only one of the 4 without a team, this also confirmed my belief that Seattle contributes more than its fair share of players.

The 6 current players from Seattle also seem to be very loyal to their hometown. Whether it be Spencer Hawes shaving the space needle in his head or Nate Robinson taking it a step further by getting a tattoo of the city’s skyline players from the 206 definitely seem to put large value on where they came from.  The NBA lately has been a league where players go where they want to play, so this could play into the new Sonics’ hands.

Could a starting 5 of Jason Terry, Jamal Crawford, Rodney Stuckey, Spencer Hawes and Nate Robinson be successful?  Not likely on its own, but add in the likes of Avery Bradley, Isiah Thomas (Tacoma), Jon Brockman (Snohomish), Marvin Williams (Bremerton), and whatever talent already exists on the team and you could have a pretty competitive team even if it started off with subpar talent.

An Analytical Approach to Being Healthier

With the New Year upon us, it seemed like a good time to reflect on steps I have taken over the past few years to be more healthy. Though I never considered myself that overweight, I did spend a few years recently living in Chicago – not exactly a place known for its healthy local delicacies. Add in the lifestyle of an MBA student at a school known for its active social life and I found myself 10 – 15 pounds more than I should have been.

Phase I – Increase the Exercise

It was February 2009 when I decided to try and be healthier. I had a job in hand and about 4 months left in Evanston before I moved on to the next chapter, so it seemed like I could be successful. Because I tend to be an analytical person, I decided to track how often I exercised and weighed myself periodically to see if I could find any correlations:

The blue line connects my periodic weight measurements, while the red is the number of “exercise units” over the past 30 days. One mile running = 1 and other types of exercise that I did are weighted based on their intensity level (0.6 miles hiking = 1 mile running, for example).

When looking at the data, it seems increasing the volume of exercise didn’t have much effect. Even with huge increases in April and August (turning 30 and not working yet for those still reading), my weight stayed in the 180-185 range. I also moved to Seattle in the summer of 2009 and felt like I was starting to eat healthier and drink less, but this only had a marginal effect as I remained in the 180 range until late in 2010.

Phase II – New Focus on Diet

In September 2010 (the end of the graph above) I decided to also track the food I was eating in hopes of seeing better results. Around that time I read In Defense of Food by Michael Pollan and decided to incorporate more plants and less meat into my diet. I decided to track the % of vegetarian meals (lunch and dinner only) along with continuing to monitor how often I exercised and how much I weighed:

This approached worked far better – you can see the blue weight line drop as the green line is increasing (% vegetarian prior to my tracking are estimates as I rarely ate vegetarian). When I took the vegetarian % from around 50% to 60 – 70% this summer, the blue line dropped even further as I have dropped far more weight than I was expecting. This approach took me to below 160 for the first time since early in my high school years. If you look at exercise vs. weight loss (dropping veggie % due to the need for a 3rd axis), I was not increasing exercise during this time and often was exercising even less:


From my experience, eating a healthier diet with more vegetarian meals and less meat has been the secret to becoming healthier (along with maintaining moderate levels of exercise). I still enjoy a great burger, pork sandwich, or slice of pizza, but make sure to limit the number of times I do so.

Beyond being healthier, I really enjoyed the exercise of analyzing the data and seeing the correlations that resulted. The process of doing this, though, was far more difficult than it should have been. I had my data in 3 separate places with my food log in Office Web Apps, my exercise in RunKeeper and my weight in HealthVault. I then had to do some gymnastics in Excel to format the data so I could compare all 3 data series. With the number of people trying to lose weight through similar methods, you would think an app would exist to make this far easier. Since Google has dropped their health product and Microsoft’s HealthVault is not the most user-friendly, hopefully there is a startup somewhere working on a multi-faceted health app to take advantage of what could be a huge opportunity.