Boxed Is Latest Ecommerce Brand To Promise Better Data To CPG Suppliers

boxedBoxed, a bulk shopping startup that competes with Costco and Sam’s Club, wants to woo a younger demographic of shoppers to its version of the wholesale club.

The three-year-old company is on a hiring spree and expects revenues to exceed $100 million this year.

Now Boxed is dabbling in brand marketing for the first time following earlier efforts in direct response.

“For us, maybe there are 50 segments we talk to in very different ways,” said new CMO Jackson Jeyanayagam, who was previously director of digital marketing at Chipotle.

Beyond growing its direct-to-consumer business, Boxed sees B2B marketing potential for merchant partners, too.

To speak to a diverse base of CPG suppliers, brands and consumers, Boxed will complement digital tactics like retargeting with above-the-line ad placements in TV, digital video and out-of-home to help increase the brand’s visibility, Jeyanayagam said.

As an ecommerce site and mobile app, Boxed doesn’t benefit from offline data the way a brick-and-mortar competitor might. That differentiator has its advantages.

“In traditional retail/CPG, you could drop some pixels and create a custom audience around someone if they’ve opted in, but there really was no guarantee that that person was a loyal customer or whether they happen to come in once in awhile to buy deodorant or a candy bar,” Jeyanayagam said. 

Boxed believes it can give merchant partners a more direct link to consumers, with better insights into their digital sales than a standard retail store intermediary would.

“As an ecommerce brand, you have a lot more data about your customer at your disposal,” he argued.

Boxed isn’t trying to be Walmart or Jet.com, according to its CEO, Chieh Huang. And it’s certainly not Amazon, which Huang compared to an “endless aisle” of SKUs with the data and algorithms to determine what consumers will buy next.

Boxed only has 1,200 items in stock. Its average basket size is about 9.8 items.

So while Amazon might drive higher purchase volume at a greater frequency over any given interval of time, Boxed aims to capture people when they’re looking to stock up on bulk products.

In addition to consumers who fit that shopper mindset, Boxed has three other targeting considerations: those who don’t own or have access to a car, those in rural areas who aren’t in close proximity to a wholesale club and those without the time or patience to visit a store.

Huang predicts the latter, psychographic attribute will make up the largest segment of Boxed’s business eventually.

In the past, driving value at the retail level was the equivalent of driving low prices and deep discounts.

Now, people value time and efficiency as much if not more than saving money, “which has thrown a huge curveball to the industry,” Huang claimed. “How CPG is sold, consumed and marketed is going to fundamentally change over the next 10 years.”

That shift in purchase behavior is also spurring big investments from legacy CPG brands like Unilever, which dropped $1 billion on Dollar Shave Club last summer.

“It’s not just the Walmarts of the world, but the P&Gs and Unilevers, which want more data about their customer and how they’re shopping,” Jeyanayagam said. “You could argue that toilet paper and paper towels are low consideration, but coming out of the recession … there’s a bigger ecosystem around convenience, price and saving time.”

2 Comments

  1. How exactly does Boxed compete with Costco and Sam's Club?

    Not on assortment (Costco has ~3700 items).

    Not on data--Costco has my club card and knows exactly what I purchase, how frequently and what, if anything I return.

    Costco has has about 85MM members, paying ~$55/year for the the card. Household income is around $156K annually. Boxed has $100MM in revenue (good) but Costco has around $97B. Who actually will be able to get a better price on goods?

    And how is the Boxed model different than the dot-bomb 1.0 business models like Pets.com and Furniture.com? Selling stuff for low margin, dearer than that of the competition and then shipping it for free doesn't seem to give a lot of runway to the VC dollars invested here.

    Reply
    • Justin Ed

      Think their target market is different.

      I'm both a Costco and Boxed customer, and you're right on available items...Costco obviously has a bigger selection and data they've garnered from past purchases.

      But being a mobile first user, Costco lacks compared to any mobile commerce app out there. I think they're app just redirects to their website...pretty bad.

      I still go to Costco for certain items, but honestly, I can order basic household supplies through Boxed, and the mobile experience and branding is something you can't put a price on...it's great!

      I also use my Amex a ton, which Boxed has a partnership with. And Costco really messed up the transition to Citi cards. I'm sure Costco will be fine, but it's not always about the numbers. Customer experience, and adapting to the modern era / next gen is huge!

      Reply

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