How does a startup like Boxed.com compete against juggernauts like Amazon and Costco?
The New York-based wholesale retailer has come a long way since Chieh Huang started the company from his garage in 2013, but he still remembers single-handedly fulfilling toilet paper roll orders in those early days, long before bringing in nine figures in annual revenue—back when people were still wary of entering their credit card information into a website.
Six years later, Huang, who is still CEO, recalled how one of his early investors said the reason for helping to fund the venture was to help Huang move onto the next idea. Now, the company builds its own robotics for distribution centers, develops its own front-end platform for shoppers and is building out a growing advertising business.
“We can not only show you who clicked, who they were, what they bought and what the real-time ROI was on that spend,” he said at the Brandweek: Challenger Brands event in New York. “For us, a large part of our revenue comes from non-potato chip sales, including ads.”
This year, the company is looking to partner with other retailers, brands and others on how to better compete more directly with Amazon and Costco. And while the New York-based company’s budget began at zero, it now spends in the millions on marketing—with a mix of search engine marketing, out of home, social and even TV.
“We’re not going to fight fire with fire,” Huang said. “We’re not going to outspend the big brands out there. And so we have to be really smart with how we spend it, smart with how we segment our customers, why they shop, what really motivates them to shop.”
For some shoppers, it’s buying something based on a promotion. For others, it’s having the right item, or making sure their delivery arrives on time.
According to Huang, the U.S. is behind on data privacy laws. And while the company is growing its online advertising business, he said it’s focusing on better understanding what motivates customers to shop with them rather than larger competitors like Amazon or Costco.
“For us, [it’s] to really look at that and get prepared before the law actually says we need to be compliant,” he said.
Since two-day shipping is not as unique as it once was—Huang said it’s now table stakes—retailers are forced to think of new ways to keep customers happy and stores profitable. That means keeping less inventory in stores, which is a good thing for companies like Boxed.
“Now, all the retailers have woken up,” he said. “It’s no secret that everyone is trying to upsize their assortment. Upsize the assortments they carry, and to curtail the assortment horizontally because it’s unwieldy to have 100,000 items. So it’s really interesting because obviously we’re trying to think about the same things, and as other people move in, how are we starting to differentiate ourselves.”