Boxed.com, or the “Costco for Millennials,” is an online warehouse retailer with no membership fee which began in late 2013 out of two-car garage in New Jersey. The National Center for the Middle Market had the opportunity to speak with founder and CEO, Chieh Huang, to learn how this online retailer has grown to $10+ million in revenue in 36 months.
Boxed Beginnings
According to Huang, Boxed got started in late 2013 out of a two-car garage in the middle of “tropical New Jersey.” The realities of working out of a garage are not as glamorous as start-up culture might lead you to believe, and he remembers those days of being “a 30-something sitting on a stool in [his] garage, it’s not a good look.” 
From such humble beginnings, Boxed has scaled up to over nine figures in revenue within 36 months after launch.
Huang believes “the best ideas are just solving problems that you yourself have, and then [finding out that] millions of other folks have the same problem.” He and his management team grew up in the suburbs of New Jersey where they had access to big box retail stores but were appalled at retail prices when he moved to Manhattan. He remembers thinking, “there’s no way it should be $5.99 for a box of Cheerios!” Boxed was created to provide people with access to a warehouse retail club who didn’t have the physical means of accessing one. Rapid growth indicated that it was not just the lack of a car that held people back from visiting large warehouse clubs, but also the lack of time and patience to access such retailers.
Revenue Stream
Unlike many of the brick-and-mortar warehouse clubs, Boxed does not charge a membership fee. We wondered how their revenue model works without the fee and how they ensure that their customers keep coming back. Chieh says it’s simple: Boxed offers great service and fast shipping, “why would you purchase from anywhere else if you can get product delivered to your door quickly and for the lowest cost?” The company invests heavily in their customer service to ensure that people will keep coming back to Boxed for their everyday essentials.
Boxed has been able to stay competitive by making use of technology built in-house to create a subscription model. Boxed uses a machine-learning algorithm to determine what products a customer needs to restock based on their past purchases and searches. Repeat customers will see a “smart stock up” option which allows Boxed to send them products without ordering. They are able to change their settings if they no longer need the product and returns are free. This functionality is becoming available to their business customers as well, and the algorithm learns consumer preference based on data from millions of customers. Boxed believes the success of this innovation is evidenced by the fact that they have “virtually gotten no returns even though we have taken the liberty of sending people stuff.”
Competitive Advantage
Boxed was one of the only online wholesale retailers in 2013. At the time, no one else believed it was possible to ship consumer goods direct to homes at a competitive price. However, Boxed was successful in this venture because of their bulk-goods model and because they are very specific about which products they carry, and which products they don’t. They keep their SKUs (stock keeping units – unique identifiers for each individual good that they sell) intentionally low in order to increase their buyer power.
Variable costs are high for online retailers because of shipping costs, but selling items in bulk dramatically reduces cost per unit by spreading shipping cost over multiple items. Boxed has competitive prices for their consumers while being able to make a profit because of their strategic decision to sell in bulk. The average Boxed order size is about 10 items for $100 and Huang claims that virtually nowhere else on the Internet can beat the price of a Boxed order.
Boxed ventured into its own private brand in June of 2015, Prince & SpringTM, to deliver more value to their customers and because suppliers were unwilling to work with an as-of-yet unknown retail brand. Boxed was able to create better products without sacrificing on price, and were able to pass reduced costs onto their consumer. Now, Boxed works with nearly every major manufacture, but they still sell their private label due to their ability to deliver a premium product at a good price.
Marketing
Boxed believes strongly in its product and its people, and they have grown mostly due to word-of-mouth. Instead of bragging about their competitive pricing and great customer service, Boxed likes for their customers to explore cost and time savings for themselves. Boxed does not spend millions of dollars on marketing because, according to Huang, “for us it’s all about scarcity of the experience, because word of mouth drives not only new customers for us, but our best customers.” They are very active on social media, and appreciate the ability to learn what customers love, and what they don’t, very quickly through this platform.
A Company with Heart
Boxed continues to innovate by building software and hardware in-house for their warehouses, and they look forward to continuing to grow their market-share in the booming ecommerce industry but Huang says the key to success is his fundamental belief that “the people are the most important.” This is evidenced by his hands-on approach in the company – he personally talks to every Boxed full-time hire and attends weekly operations meetings with each of the departments. He shows his commitment to his team by paying college tuition for the children of Boxed employees and for his employees’ weddings (up to $20,000). If you have a problem and call Boxed, you’re going to speak to a Boxed employee, not an outside hire, and Huang likes to remind his customer service agents that to keep their humanity when interacting with customers. His combination of a strong business strategy with authentic care for his employees and his customers have been a recipe for success. If you’d like learn more about Boxed as an industry disruptor please listen to CEO Chieh Huang on our Podcast, The Market That Moves America: