Boxed, “a mobile commerce company focused on delivering the big box club experience to mobile devices” according to Crunchbase, has recently been making headlines. Boxed is, next to Wish, one of the more promising e-commerce startups in the US. With a total of $132 million raised in 4 rounds since 2013, Boxed is still rather modest.
One big difference between Boxed and the e-commerce giant [Amazon]: the startup sells only about 1,500 products, mostly household goods, compared with Amazon’s roughly 350 million items from books to televisions to mixed nuts. Now Boxed has spent tens of millions of dollars on a new automation system, launching this month, to triple the output of its 140,000-square-foot warehouse in Union, New Jersey, without needing more space or workers.
Huang is betting that elaborate system helps keep costs down and lets Boxed thrive in the sales battle for household goods, a $700 billion category dominated by supermarkets and big-box retailers.
“By having a smaller number of products, Boxed can get stuff out the door more cost effectively by reducing the warehouse footprint and the complexity of the operation,” said Clint Reiser, director of supply chain research at ARC Advisory Group. “It becomes a competitive advantage.” […]
Boxed said it had sales of about $100 million in 2016, up from about $50 million the previous year. The average order size is about $100 and includes 10 items, meaning most orders meet a $50 threshold for free shipping, the company said.
This makes sense. But will Amazon allow this to thrive in its home market? What is keeping Amazon from introducing a subsystem /-service to its portfolio building out the same?
Amazon Pantry is in parts the opposite (everyday sizes instead of bulk) to Boxed, but it solves the same need. And arguably, Pantry may have the better proposition for Prime members than Boxed does.
That is the question: Why should Prime members choose Boxed over Pantry?
If the answer is that in general they shouldn’t, Boxed’ addressable market in the US decreases dramatically.
Boxed has an automation plan that flips that process: smaller items will be brought to the pickers by a warehouse-scale vending machine, who will then transfer them to a bin on a conveyor belt. That bin snakes down the two miles of belt, and larger items are placed inside by other pickers who stand beside specific items and load bins as they pass by.
“Really what we’ve done is eliminated the need for travel,” Zumpano says. “Those pickers in the old world still pick.”
Employees will also be switching to an audio-based information system, where items and order numbers are called through a headset. […]
And by turning the workflow around, the fulfillment center expects to see a 300% gain in productivity.
The last e-commerce startup that sold similar goods and operated famously an unusually highly automated warehouse was Diapers.com. Well.
It may come down to this: In a world without Amazon, Boxed makes perfect sense and makes everything right. But the company is operating in world with Amazon. And it is operating in the home market of Amazon, where the latter is utterly dominant. (At least when it comes to online.)
Boxed, more so than Wish or even Walmart, will be interesting to watch, not least because it is not clear how exactly Amazon will respond. Because acquisitions of US online retailers don’t seem to be the MO of Amazon anymore. But Amazon will respond. At the latest when Boxed has reached a certain size.