Boxed CEO takes bulk buying mobile

By Anne D’Innocenzio
AP Retail Writer

NEW YORK (AP) — Boxed co-founder and CEO Chieh Huang is focusing on millennials who want bulk-sized deals on items like toilet paper and peanut butter — but who can’t or won’t drive to warehouse stores. His strategy: Most customers order through an app and get two-day delivery, and there’s no membership fee.

The company’s sales hit nine figures in its third full year of business, and Huang sees an opportunity for significant growth. Only 2 percent of the approximately $200 billion U.S. warehouse club business is now done online. About 80 percent of Boxed customers are age 25-44, whereas he says 60 percent of traditional warehouse store shoppers are boomers.

The average order is $100 total or 10 items, Huang says, meaning virtually all shoppers meet the $49 needed for free shipping. Items are shipped throughout the country from distribution centers in Las Vegas, Atlanta, Dallas, and Union, New Jersey, where the company is based.

Huang, 35, the son of Taiwanese immigrants, is a former corporate lawyer who also founded Astro Ape, one of the first mobile game studios, which was later acquired by Zynga. He has pledged to pay for college tuition to his employees’ children.

Huang talks with The Associated Press about the inspiration for Boxed and why he sees big potential.

Q. How did your experience with starting a mobile game studio affect your move to start Boxed?

Even as forward-looking of a game studio as Zynga was, they were swept away when mobile came and ate all their share. And so we thought that actually might happen in many other industries. And the biggest industry where we thought we could make an impact on was retail.

Q. What inspired you to start Boxed?

I grew up in the ‘burbs and went to Price Club every other weekend with my family, and then I moved into Manhattan and just thought, ‘wow, this stuff is cheaper at a warehouse club.’ The only reason that a ton of stores in Manhattan get to charge what they do is because folks don’t have the access to a warehouse club. So we said, ‘OK. Let’s give it a try.’

Q. Was there skepticism at first?

In the first month we had two days where no one ordered from us. So we had people question us on whether this was going to be a thing. And sure enough it actually became a thing.

Q. When was that moment?

After two months or so, you started seeing a slow ramp and you started to see momentum build a bit. You started to see clusters of neighborhoods ordering from us. You knew people were talking about us. We kind of called it the Gateway Effect. Do you remember the Gateway computers? They had this huge branded cow-spotted box. It was gigantic. You could see it around the neighborhood when people got the Gateway computer. Our boxes are branded, and so I would like to think that contributed to some of the neighborhood virality.

Q. What’s your strategy?

We are not the everything store. There are so many folks trying to be the everything store ... trying to be Amazon. We want nothing to do with that. Amazon is still a great service, but they don’t service the folks that want to stock up well. It’s 1,500 (items). It started off as 200. We won’t carry every brand. But the brands we carry and the items we carry we have a commitment to the customer. We need to be very competitive. Online, it will be a price leader or very, very competitive online. The consumer orders on average 10 items from us per shop. When you take that basket as a whole, it will be the cheapest basket.

Q. Your mobile app?

We make it really easy to browse. A majority of our customers don’t use the search bar. They actually browse the aisles and that’s how they end up finding what they want in a very natural means. We are allowing them to meander the virtual aisles just as they would meander through a Costco or a Sam’s Club.

Q. Who are you taking share away from?

I think we are taking way more share away from supermarket, drug stores and convenience stores than we do the club. If you look at my personal journey, I wasn’t ripped away from the warehouse club after I started Boxed. It was that I stopped going to Duane Reade. I stopped going to Gristedes, and started doing bulk shopping.

Q. Why are you so bullish?

The shift to online is accelerating as time is going. And that makes me feel very bullish. I would also imagine that scares a ton of retailers today. This is not one of the things that the worst is past and it is starting to wane.

But as the dollar amount gets bigger online, the growth is accelerating. And so last year was probably the tipping point, and the tipping point for grocery and (consumer product goods) is probably 12 months away from that.