Citizen Kane's Profile

The entrepreneur in me could not help but wonder as I read this about what other fragmented industries could have their sales consolidated through a tech-only interface like Wayfair. I’ll be honest, I had no idea what Wayfair did (besides make irritating TV commercials) until I read this article.

On one hand, it’s hard to deny they’re delivering some real value here. Many people hate shopping, and there is a great deal of friction involved in roving all over to brick-and-mortar places to look at furniture. On the other hand, I have a hard time believing that Wayfair is successful because it is doing something others CAN’T do but rather was simply the first company to get in this game. Barriers to entry in this space seem so low; I have to imagine that other players will emerge and compete with Wayfair on something (be it price, service, terms for suppliers, etc.). I suppose that maybe their merchandising efforts have essentially locked up the supply?

So, I started off as a Spirit hater. I will admit to never having flown them out of sheer distaste for perceived “nickel-and-diming” over things that other airlines include. However, having read this article and a variety of others, I have come to see the wisdom of the model. Spirit does not have lucrative contracts with corporate travel departments which guarantee high-priced tickets to offset the lower fares offered to leisure passengers. Spirit travelers probably skew much more toward the leisure segment, which means price-sensitivity, which means less room for “included” frills.

The executives at Spirit are delightfully honest about the model and what you will not get with Spirit, which is refreshing in an odd way even when it makes you wince. The truth is that nothing you get on an airplane is really free; it’s merely included in the price of your or someone else’s ticket. For folks who want to move about the country at rock bottom prices, Spirit is a good way to go.

The real innovations here seem to come primarily from the 4 Ps of marketing. The operational focus around standard aircraft types and fast turnaround times may be especially important for Spirit, but they are also strategies of other airlines (such as Southwest). It will be interesting to see how the landscape evolves in the future. Increasingly, carriers formerly known as “low-cost” such as JetBlue and Southwest are finding themselves in the no-man’s land between legacy carriers and ULCCs. I am doubtful this “middle space” will be a viable market segment in the future; these players will need to decide which direction to move and hope they can compete against younger entrants like Spirit.

With a model like this one, I wonder what the maximum market size is. Though it costs less than eating out at many restaurants, $10 per portion plus your time is still a relatively high price point for many people. I would love to know what the customer profile looks like and whether the company believes it is important to bring quality, local, home-cooked dinners to families beyond the upper middle and upper economic strata.

My other thought, given the initial novelty of something like this, is that the growth in subscriptions could be short-lived. I am curious to know what kind of attrition Blue Apron typically sees. If my experience in being part of a crop-sharing alliance is any indicator, I would suspect folks drop off pretty regularly as cooking the food that arrives starts to become less of a hobby and more of a chore.

Any thoughts on these two questions?