Boxed is more than an Costco delivery app -- it's a mobile commerce platform built by mobile gaming experts

By Erin Griffith , written on August 22, 2013

From The News Desk

Chieh Huang, Christopher Cheung, and Jared Yaman got out of Zynga New York before things got ugly. You remember -- the t-shirt ripping, the people finding out they were laid off over Facebook. The three sold their mobile game company, Astro Ape Studios, to Zynga in 2011 and left on good terms, before even Dan Porter, the CEO of OMGPop, did.

Since then their team of nine developers from Zynga, and Flurry have been huddled in a tiny Soho office, building a new app. They raised $1.1 million from Bessemer's angel group 15 Angels, as well as ENIAC Ventures and Social Start, for what they're characterizing as a moonshot.

That big idea is Boxed, a mobile app for buying bulk goods. (They purchased cheaply from a man in the UK who'd been sitting on it for 15 years.) The original idea was to bring the $25 billion club-shopping market to mobile phones. Plenty of potential customers don't have access to these clubs, like college kids, or people living in cities, or people in remote areas. Today Boxed opened its next-day and two-day delivery in the Northeast and parts of the Midwest. In around three weeks, the company will open a West Coast warehouse and launch an Android app.

And that's a fine enough idea. As long as they can compete on price and shipping costs don't get out of control (certain items are too cheap and too heavy to make economic sense here), they've got a business. Amazon doesn't want to cut into its existing margins by selling things in bulk. Sam's Club, BJ's and Costco haven't invested much in ecommerce and even less in mobile. Their store model -- the free sampling, the refer-a-friend club membership -- depends on getting people in the store, spending the day there, and racking up huge bills.

But while Boxed was building its commerce app, Huang realized that the existing mobile commerce tech out there wasn't very good. "The basic segmentation, targeting and personalization stuff -- all this stuff that would have been required of us at Zynga -- wasn't there," Huang says.

Anyone who's played a good, addictive mobile game like Candy Crush knows how much psychology factors into games. Push notifications, "leveling up," and social functions are engineered to a tee to get you to play more (and pay for it).

But the most sophisticated commerce apps don't have those targeting or customization capabilities. So Boxed built them.

Again, that's fine enough. But what they built that got a whole new wave of investors interested is the ability for any commerce app to use their functionality. Boxed has a user-friendly back-end interface that allows any non-technical person can edit the app. That means a push notification can be edited and tailored to different user segments.

So, if you looked at diapers but didn't buy them, the app can send you a push notification about a sale on diapers that drops you to the landing page for the product, where one tap to buy. This is one of the first mobile apps (that the Boxed guys and I are aware of) that doesn't require the marketing team to wrangle someone from the engineering team to push such a targeted update. Likewise, category pages can be easily rearranged to feature certain sales and products. And it's all measured, analyzed and optimized for next time.

This is 101-level stuff for Web commerce and email marketing, but mobile hasn't caught up yet, Huang says. It's particularly useful for a bulk-shopping app, since users need to be reminded to return regularly.

Huang and his team knew very little about commerce, or bulk buying, or shipping, or warehouses and inventory before they started this company. Common Silicon Valley mythology is that this kind of ignorance is a strength. Others, like Chris Dixon, would argue that you must know an industry before you try to disrupt it. He asks founders, "How did you earn your secret?"

Boxed's team doesn't have a secret about the industry it's trying to disrupt, but it does know a thing or two about mobile. Boxed is a cool result of cross-pollination -- the team has taken lessons from one industry, mobile gaming, and applied them to another, mobile commerce.

Yesterday Huang showed the back-end tools to David Ko, Zynga's former head of mobile and an advisor to Boxed. Ko asked why they were even bothering with the bulk goods stuff.

If this capability truly isn't readily available to other mobile commerce apps, then Boxed's tech alone could be a huge business. But Huang says it's important to be experiencing the issues and challenges of running a commerce app day firsthand. He's spent today in his New Jersey warehouse, making sure orders are properly filled and shipped. If he didn't have that experience, any back-end tool his team built wouldn't be nearly as good.

Huang hasn't decided how it might sell the back-end tool to other mobile commerce apps. In the near term, the company will likely add another $100,000 to $200,000 in angel investment in the near term but wants to stay as lean as possible, he says.

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Image courtesy of nrtphotos