So the question should now be, do they have a sustainable competitive advantage, or are these high profit margins vulnerable to being competed away?
Re:Tell HN: Unicorns aren't ad-supported
by jon-wood on Monday October 12, 2015 @07:11AM
(#10373737)
The only real advantage they have at the moment is momentum, and lots of VC money allowing them to survive much higher customer acquisition costs than otherwise. Otherwise, they're a specialised variant of online grocery ordering, which at least in the UK is a huge and very competitive market. They even have the advantage of being able to mail orders, because they're not trying to deliver anything frozen, so logistics is essentially just a case of negotiating a decent rate with a courier.
I'd be really surprised not to see quite a few companies pop up in the same sector, there are already a couple I know of, possibly targeting particular niches such as oriental food.
Lets look at their "Classic Box" (https://www.hellofresh.co.uk/food-boxes/classic-box/), which is £39 a week for three meals. I priced up what I could see of the box contents using Hubbub (https://beta.hubbub.co.uk) - largely because I work there, and so know my way around, and it came to a little over £20, and that's without any real effort to match the portion sizes they're shipping, I could probably get it down to more like £15 just by buying just the amount of each ingredient needed for the meals being made, and going direct to the producer rather than via high street shops who are going to be adding their own margin.
That leaves, pessimistically about £20 to cover delivery, and the customer's share of central costs such as recipe development, packing, and the usual business expenses of a web based company. At the sort of volume they're doing, I could see them easily making 40% profit, and potentially more than that.